Jim D’Addario, Sr. Director Product Marketing, Oracle SCM Cloud
Not so long ago, supply chain management was an unlikely candidate to have corporate rock star status. This was a discipline where, in many cases, a status quo mindset and an aptitude for cost control was a reliable recipe for success. In fact, supply chain was rarely spoken about unless a problem arose.
Those days are long gone. Today, SCM professionals increasingly find themselves tasked with guiding their businesses through a perfect storm of hyper-competition, technology transformation, struggling business models, and shifting customer expectations and market demands. Supply chain leaders are now familiar faces—and influential voices at the strategic planning and business leadership levels. When supply chain leaders speak, they typically command the full attention of their CEOs and executive colleagues.
Supply chain budgets and spending authority have expanded, as well. And while cost is still a factor in supply chain spending decisions, cost-cutting increasingly takes a back seat to a firm’s sales, revenue, and customer-value objectives. The big discussion is now that the end-to-end supply chain is at the heart of the business operating model and the organization’s competitive capabilities.
Omnichannel Demands Transform the Supply Chain
What’s driving this revolution in supply chain roles and responsibilities? The answer to this question could (and probably does) fill a good-sized book. One of the most important factors, however, comes down to a single word: omnichannel.
A few data points help to explain why the concept of an omnichannel supply chain—i.e. the ability to deliver a differentiated customer experience with real-time, channel-agnostic inventory visibility, fulfillment, pricing, stock management, ordering, and other supply chain functions such as predictive analytics—has achieved compelling strategic importance for so many organizations.
1. Omnichannel has a disproportionate impact on growth.
Among retailers, for example, online sales during Q4 of 2015 represented 7.5% of total US retail sales and 66.4% of all retail sales growth.
2. Omnichannel is “ground zero” for the customer-expectations revolution. Customers have embraced technology to redefine how they find, compare, assess, and purchase all sorts of products, and how products find new customers. They expect these capabilities to remain consistently available across both online and offline channels: A customer might place an order online, pick up their order at a retail outlet, and request a return authorization using a mobile app, while expecting a single, integrated end-to-end experience.
3. The B2B market reflects the same rising expectations.
Studies have shown consistently that B2B buyers carry their expectations as consumers into their business dealings: 78% say next-day fulfillment capabilities are very important, for example, while 74% expect omnichannel visibility into product information and 73% want omnichannel fulfillment options.
4. Omnichannel is driving a radical shift in supply chain priorities.
According to one study, just 20% of respondents said their SCM strategy going forward would prioritize cost control. A much bigger group said their top priorities now center around speed of delivery, omnichannel fulfillment, visibility and insight analytics, and other initiatives—all of which reflect a strategic shift away from cost control, and toward flawless execution of customer-centric growth capabilities.
By any reasonable standard, supply chain management has completed a truly remarkable journey from cost center to strategic source of business value. What’s even more remarkable, however, is how much farther it needs to go to find success.
Finding Success with Cloud SCM and ‘Opti-Channel’ Supply Chains
Most supply chain leaders understand why omni-channel capabilities are so important, and many are working diligently to achieve them. In too many cases, however, success is proving to be elusive. Too many omni-channel supply chain initiatives, for example, treat channels as largely interchan
geable elements, each of which receives equal emphasis in terms of optimal service levels, alignment with customer-segment requirements, operational performance, and other areas.
It’s an approach that misallocates scarce resources and makes poor use of valuable customer insights. But it’s also often the best that a supply chain organization can do, given the limitations of legacy, on-premises applications such as SAP ERP. Today’s analytics enable the pivot from supply-driven to demand-driven, and therefore better segmentation and execution across all channels
The solution, believe it or not, involves doubling down on key omnichannel supply chain capabilities—and on implementing an SCM technology strategy that is capable of supporting them. The goal is to execute an omnichannel strategy based on more detailed and timely insights into how and why customers use a given channel; how to allocate resources more efficiently; and how to close the loop with optimized ordering, fulfillment, transportation and logistics, and other supply chain process improvements.
We refer to this as an “opti-channel” approach, given its emphasis on refining and optimizing the omnichannel supply chain. It taps into a multifaceted set of new or upgraded SCM capabilities, many of which we explore in greater detail elsewhere. At a high level, however, opti-channel elevates its game in several key areas:
- Moving from backward-looking forecasting methods to forward-looking, predictive techniques based on true demand sensing and shaping.
- Tapping into and extracting insights from a much wider variety of enterprise and social media data sources—many of them previously unavailable to SCM analytics tools.
- Evolving from partial customer snapshots to 360-degree profiles and continuous analyses.
- Leveraging cutting-edge advances in areas such as machine learning and Internet of Things environments.
- Using comprehensive, closed-loop data-gathering, reporting, and metrics to make business decisions faster and with much higher confidence.
- Making timely and accurate resource-allocation decisions that manage costs without sacrificing customer experience and operational excellence.
As we pointed out before, these capabilities aren’t available using legacy SCM applications. Many of them would be cost-prohibitive to achieve using existing SCM architectures, data structures, and integration models. These traditional architectures are complex to maintain and hard to transform. For many firms, a comprehensive, “rip-and-replace” approach to modernizing a firm’s SCM applications simply isn’t a realistic option, especially for SAP ERP customers sitting on massive, long-term legacy system investments that are embedded into the business operating model.
This is where Oracle SCM Cloud enters the picture with some surprising, and often very badly needed, end to end capabilities that complement and can co-exist with a firm’s legacy SAP ERP environments. If your firm’s omnichannel supply chain journey has taken a similar path, and encountered similar challenges, it’s worth taking a closer look at how Oracle Cloud SCM clears the path for opti-channel success.