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Retail Customer Order Management Blog Series: Part 2 – The Retail Order

My last blog finished with Joe Shmoe finding out that despite all his research and time spent deciding on which TV to buy, the store is out of stock for that particular model. The retailer is now in the unenviable position of losing the sale despite having invested a lot of resources in advising the customer and facilitating his Find, Decide and Buy decision. 

The ultimate objective of the retailer is to provide an environment and processes which facilitate the customer in buying products they want i.e. convert the need or intent to buy into a sale. Product availability is one of the key drivers for making this happen. However the supply chain mantra of keeping it 'lean and mean' implies that ensuring product availability is always a balancing act where the retailer juggles with the conflicting principles of lowering inventory carrying costs while preventing loss of sales due to unavailability of stock.

In such circumstances many retailers are looking to leverage their inventory as efficiently as possible. As the traditional brick and mortar retailers have experimented with the online model, they are using the learning’s from that process to improve their traditional store selling models. They have realized that in case of stock out situations in the store, if they can reassure the customer that the product would be delivered to them in a timely and low cost manner, they would most likely not lose the sale.
 
This then leads to the retailers attempting to offer different means of fulfillment from within the store. This started with merchandise locate systems which helped a sales associate determine if a certain product was available in the backroom or another store in the neighborhood. They could then pull the product from the back room or ask the customers to drive to the nearby store and pickup the item. With improving systems and visibility to available inventory, this feature was enhanced to lookup availability in warehouses and shipping/delivering the product from the warehouse to the customer.
 
With the explosion of choice in product categories such as books, movies, music etc, the online concept of 'endless aisles' became very relevant. Now the retailers wanted to offer the same variety and choice in a store environment without holding large amounts of stock which it would otherwise entail. The first stage of implementing this in the stores was based on pragmatic decisions of costs - since the online channel already had the mechanisms in place to manage these endless aisles, why not bring the web into the store and so emerged the 'kiosk'. This started off with basic desktops and later standalone kiosks in the stores which allowed the customer to browse the retailer's website and get products delivered to their homes through UPS or FedEx.
 
This simplistic model of bringing the website into the store obviously has its disadvantages in today’s highly competitive retail environment. More profitable product categories such as furniture, large electronics and appliances cannot be kept in large quantities in the store and also cannot just be shipped using UPS. They not only require specialized delivery but also installations and setup.
 
Retailers are also looking for high margin revenue streams from the selling of services. There is an increased emphasis on selling a complete package or project which includes consulting services, installation & setup, maintenance services in addition to the delivery of products. These services require different operational models which involve scheduling appointments and then executing on them through service & capacity management, in home payment options etc.
 
Also as retailers target small and medium sized businesses, the interaction model required does not match that for traditional B2B or B2C customers. It lies somewhere in between where a small business owner may go into the store and buy 10 laptops and an annual maintenance plan. He wants to be treated like a business with special pricing and benefits but cannot justify the retailer dedicating a separate channel and disproportionate resources for his volume of business.
 
This convergence of new opportunities within the store environment is really challenging the traditional store systems. As these opportunities and challenges have emerged at different points in time, they have led to a multitude of stop gap processes and systems which provide a fractured & often time broken customer experience.
 
One of the major reasons the stores organization is still struggling with it is the inherent lack of understanding of the differences between their core cash and carry fulfillment model and the order based fulfillment model. The cash and carry model is based on the here and now - pay for the product and walk away with it.  This has and will remain very successful for a large part of the stores core business but it also leads to an inherent bias. Every interaction with the customer is looked at from a transaction by transaction basis and the life of each transaction is very short ranging from a few minutes to a few hours. On the other hand, an order is a promise of services performed which ranges from days to weeks or even months. Look at each of the scenarios described above. All of them involve a promise which is not fulfilled immediately but extends over a period of time.
 
The question which arises now is - how does viewing a customer interaction as an order vs. a transaction help the retailer provide a better customer experience? The order as a construct has been around for many years especially in the online and catalog businesses. An order has a well defined lifecycle from its creation to its fulfillment. One customer order can enable the shipment of multiple products at different points in time from different partners which include warehouses, vendors, stores and wholesalers. An order can be the single source of truth about fulfillment statuses for both the customer and the retailer. An order can handle fulfillment of services which require scheduling and capacity handling. An order has an inherent work flow which helps orchestrate and stream line the very complex tasks required over an extended period of time to satisfy a highly discerning customer. 

At this point somebody may justifiably ask as to why the stores organization has not embraced this concept wholeheartedly? The answer lies in my earlier assertion that stores have a 'here and now' mindset and when you try to force fit an order into that mindset, you find many challenges.  My attempt in the next few blogs would be to identify some of these challenges, demystify them and provide suggestions on how these can be addressed. Managing the life cycle of a store or retail order is what I refer to as retail customer order management.

Comments

Good analysis of a transaction at a retail store.
If possible, it would be better to delve on Post-Sales experience too, especially for Goods which require After Sales Services

Prashant - this is a series in which I propose to cover the complete life cycle of a retail order including returns and after sales services. A subsequent post will cover those scenarios - so look out for them

Good analysis Guneet.

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