Study: ‘Staggering’ 83% of CEOs believe supply chains are not up to omni-channel challenges
Survey indicates optimized supply chains have 15% lower costs, less than half the inventory and more than three times shorter cash-to-cash cycles.
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In a global survey of more than 400 retail CEOs, only 34% of the respondents considered the rise of omni-channel shopping as an external threat, while only 22% said it would impact their organization.
These are among the results of a survey by PwC titled “Retail’s New Imperative: Supply Chain Optimization as a Growth Strategy” and commissioned by JDA Software. Titled “CEO Viewpoint: The Strategic Role of Supply Chain in an All-Channel World,” CEOs indicated what they are doing to adapt to this changing environment and establish a new foundation for growth. The survey also revealed that CEOs who focus on optimizing their supply chains have 15% lower supply chain costs, less than half the inventory levels and more than three times shorter cash-to-cash cycles.
Perhaps most telling is what the report calls a “staggering” 83% of CEOs who believe their supply chains are not optimal to meet omni-channel demands. “Herein lays the irony,” the report continues, “because the fact is a retailer’s supply chain is going to be the biggest enabler to meet the omni-channel customer’s fulfillment needs.”
The report featured comments from some CEOs who have already begun to reap the benefits of omni-channel capabilities. Ken Hicks, president and CEO of Foot Locker, said his company’s supply chain is changing in the face of omni-channel shopping, which is the company’s fastest-growing sector. “We’re making it more responsive and faster,” he said. “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.”
Foot Locker’s business model suggests that revenue growth no longer relies on traditional expansion, but requires redefining the role of the store in omni-channel retail, supported by a responsive supply chain. However, when asked about the top priorities for revenue growth, CEOs cited classic expansion: into new regions and markets (48%), by opening new stores (40%), and through mergers and acquisitions (32%). There is a traditional way of thinking, the report suggests, among the retail chiefs who fail to see supply chain as a differentiator or put omni-channel at the core of their future strategy.
That said, more than 50% of retail CEOs see the supply chain as a strategic differentiator. Baljit Dail, chairman of the board and interim CEO, JDA Software, said the process of capturing those advantages will not be easy. “The rise of omni-channel is one of the most transformational shifts that have occurred in retail in recent times,” said Dail. “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. Taking a cautious, incremental approach to this kind of market disruption can be a deadly course of action.”
Dail’s concerns are not entirely out of sync with the fundamental risks the CEOs identified: increasing competitive threats (41%), margin erosion and cost reduction (39%), and attracting and retaining customers (24%). “But these answers reveal a potentially sizable gap between recognized risk and a strategy to address that risk,” the report stated. “While there are plenty of exceptions, maintaining a strong customer value proposition is directly tied to supply chain proficiency.”
About the AuthorJosh Bond, Contributing Editor Josh Bond is Senior Editor for Modern, and was formerly Modern’s lift truck columnist and associate editor. He has a degree in Journalism from Keene State College and has studied business management at Franklin Pierce University.
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