Omni-channel supply chain challenges

Retail CEOs underestimate omni-channel supply chain challenges

By Tom Ryan

JUNE 24, 2014

nOver 50 percent of retail CEOs see the supply chain as a strategic differentiator, but many are not making the required transformation to take advantage of the pace of change, according to report from JDA.

In a global survey of over 400 retail industry CEOs, conducted by PwC for JDA Software, 83 percent said they believe their retail supply chains are currently "not optimal" for today's changing retail environment.

Despite this, only 23 percent (30 percent of the top 250) graded supply chain management as a "top priority." Top priorities were instead centered around expanding by opening new stores and acquisitions, investing in new product technology, upgrading the employee base, and spending capital on creating new customer experiences.

The majority (51 percent) graded supply chain management as a "high priority but not a top priority." Among those, reasons were given for not upgrading it to a top priority:

• Thirty percent believed their supply chain system is in better shape than other areas of their business;
• Nineteen percent said it would require too much change across their business, i.e., retraining staff, upgrading technology;
• Thirteen percent cited behavior/attitude or lack of board sponsorship;
• Fourteen percent said it was too tactical;
• Six percent said it dilutes attention from shareholder metrics and shareholder concerns.

The study also reported that only 15 percent of CEOs believe their supply chain today is resilient enough to address the threat of external disruptions; only 25 percent consider their supply chain operation a competitive differentiator in its market; and only 24 percent see investing heavily in supply chain management solutions as a critical area for investments for the next five years.

According to Baljit Dail, interim CEO, JDA Software, the findings particularly underscored that many stores don't "understand the strategic alignment of their supply chain with consumer expectations" amid the rise of omni-channel retailing. In fact, only 34 percent of CEOs consider the rise of omni-channel shopping to be an external threat, while only 22 percent believe it will have a direct impact on their organization, according to the study.

"There seems to be a clear disconnect between the actions required to make the transformation to today's retail environment with what is being currently done by many of these companies," said Mr. Dail in a press release. "With speed as the new currency, accelerating time to market and responsiveness through an agile, connected supply chain must be closely aligned with growth priorities to successfully compete and defend profit margins."