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Survey: 83% of Retailers Feel Supply Chains ‘Not Optimal’ for Omnichannel

With today’s tech-savvy and always connected consumer, omnichannel offerings have become the new way of retail. The shopping experience must be effortless, availability constant, and the transition from one retail channel to the next completely seamless. And retailers know they need to adopt this new model of retail in order to retain consumers and foster loyalty.

But the majority of retail CEOs feel their supply chains are ill equipped to accommodate the shift to omnichannel.

According to a report released Monday by PricewaterhouseCoopers (PwC) for supply chain company JDA Software titled, “CEO Viewpoint: The Strategic Role of Supply Chain in an All-Channel World,” 50 percent of global retail CEOs recognize that their supply chains can be a strategic differentiator, however, 83 percent believe their supply chains are currently “not optimal” for today’s retail environment.

“The rise of omni-channel is one of the most transformational shifts that has occurred in retail in recent times,” Baljit Dail, chairman of the board and interim CEO for JDA Software said. “Retailers who don’t understand the strategic alignment of their supply chain with consumer expectations are in danger of becoming non-competitive. This isn’t about making a tweak to the operating model, it requires a massive change. The good news appears to be that there is an emerging group of visionary CEOs who understand that staying competitive during this inflection point requires a dramatic shift of their current operating models to deliver operational effectiveness and top- and bottom-line growth.”

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In a survey of 400 retail industry CEOs, JDA uncovered what these leaders are doing to adapt to the shifting landscape and establish a foundation for growth.

First and foremost, retail CEOs said their top priorities center around more traditional areas of growth like tapping into new regions and markets, accelerating store openings or mergers and acquisitions. According to the report, “These priorities highlight potential missed opportunities for more than two-thirds of CEOs who failed to consider enhancing distribution capacity and supply chain as a key contributor to drive profitable growth.”

Competitive threats were also at the forefront of executives’ minds, with 41 percent citing increased competition as the risk most likely to impact their organization over the next three years. Thirty-nine percent cited margin erosion and cost reduction as a potential threat, and 24 percent were most worried about attracting and retaining customers.

While there are always exceptions, JDA noted that maintaining a strong customer value proposition is key to supply chain proficiency.

Foot Locker president and CEO Ken Hicks, said, “Our Foot Locker supply chain is changing in the face of multi-channel shopping. We’re making it more responsive and faster.” He added, “We are looking at new ideas and new ways to distribute goods, not just to get them to the store, but also to the customer.”

The survey also revealed that CEOs who have focused on supply chains optimization have 15 percent lower supply chain costs, less than half the inventory levels, and more than three times shorter cash-to-cash cycles than those who haven’t.

“Supply chain has moved from the back office to the store front as consumers seek to seamlessly shop across virtual and brick-and-mortar channels, Bruce H. Rogers, chief insights officer for Forbes Media said. Our research highlights both the opportunities and challenges today’s retail CEOs face in mastering this all-important discipline. To do it well, CEOs are shifting their capital investments and business priorities as well as applying innovations to drive a more strategic supply chain that’s aligned with their business growth,” according to the report.

Only 15 percent of CEOs feel their existing supply chain is resilient enough to withstand external disruptions and, according to JDA’s findings, while some have invested in their supply chains and seen results, there remains opportunity for additional investment in the space.

“Taking a cautious, incremental approach to this kind of market disruption can be a deadly course of action,” Dail said. “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. 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.”