Strategy

How to Design Supply Chains for Omni-Channel Agility in Asia

How-To-Design-Supply-Chains

How-To-Design-Supply-Chains

HOW TO DESIGN SUPPLY CHAINS

FOR OMNI-CHANNEL AGILITY IN ASIA

By Tim Foster, Managing Director of Asia Pacific, Chainalytics

Omni-channel strategies around peak season holiday shopping are still achieving mixed success globally. In the US, retailers must plan not only for peak season, but also pre- and post-holiday “incentives” shopping days that affect all aspects of omni-channel planning.

But in Asia, omni-channel peak season planning is an entirely different ball game. Asia has the largest density of megacities in the world. Many Asians shop online or via their smartphones, and are impatient to receive their goods. Urban areas have clusters of wealth, but e-commerce purchases and delivery extend far into rural areas, wildly skewing consumers’ overall purchasing and delivery requirements.

Meanwhile, the APAC region’s religious diversity drives multiple holiday shopping “peak seasons.” Add Alibaba’s popular “Singles’ Day” online shopping event into the mix, and you have one very large supply chain challenge on your hands.

What is the best way to get started in segmenting Asian consumers? Is it by how they shop, buy and return products and can you still achieve accurate forecasting and network-wide visibility into inventory? Mastering the following steps is integral to ensuring that inventory is in the right place in the supply chain at the right time and with long-term omni-channel success.

In order to develop keen insight into consumer buying behaviour, any successful omni-channel strategy depends on understanding who consumers are and how they select, buy, pickup and return merchandise. This has never been a simple feat, but Asia’s complicated omnichannel environment makes the task even more difficult.

Research shows that many retailers plan to develop an omni-channel strategy that consistently delivers more personalised experiences with customers and prospects across multiple touch points. This is the only way they can successfully increase conversion rates, customer acquisition, cross-selling and up-selling, as well as ensure customer retention. Since Asian consumers and their shopping approaches vary so markedly, at the micro level, shoppers must be treated uniquely, in terms of marketing and sales approaches, returns approaches and incentives which drive them to action.

It is equally important to keep a finger on the pulse of the macro environment–the large, connected universe that includes relevant events, trends and attitudes that impact what, where, and how consumers shop and buy. This can be accomplished by monitoring (and influencing) social media channels and pop culture. The scope of this ecosystem is large and eclipses any single industry or demographic; there are no shortcuts to get out of taking a deep dive into data capture and analysis.

Creating a cohesive omni-channel strategy with predictive analytics and shared KPIs is a must.

Changing Asian trends offers a perfect opportunity for both retailers and consumer goods firms to develop supply chains and omni-channel practices from the endpoint back to origin.

Asian consumers, as diverse as they are, will continue to accelerate their use of digital channels for both product research and completing shopping transactions, increasing the amount of consumer information coming from disparate sources.

Omni-channel fulfilment—in-store pickup for online sales, shipping items from store shelves, or funneling orders from phone, catalog, store, and website through a single DC—requires full inventory visibility. The road to success begins with the ability to not only assess historic sales data but accurately forecast demand, which requires using predictive analytics in tandem for more efficient planning and multiple benefits:

• Clearer supply chain insights through shared KPIs. The notion of omni-channel retail has blurred lines between brickand- mortar stores and e-commerce channels, which often causes a diverge in the KPIs that are most important to them, making it difficult to track revenue by channel. Aligning KPIs across operations by customer segment instead of retail channel is critical, since most modern consumers are omnichannel shoppers, touching many points in both physical and digital channels during their purchasing journey.

• Better peak demand planning and logistics network decisions to meet consumer requirements. Analytics also plays an important part in helping retailers define cycles for seasonal items ahead of time, ensuring those interested in optimising inventory, service and sales to become experts at merchandising, inventory, and operations execution (MIOE). Better advanced planning supports better market-specific logistics network decisions. For example, by depending on market needs and requirements, it may make sense to lease additional warehouse space, secure transportation or logistics support, or locate fewer items in smaller distribution centres near population centres or a few large DCs outside of town to master DCto- consumer, DC-to-store, ship-fromstore or even ship from flagship store approaches. Likewise, reliable, shared KPIs provide insights into the potential value of sharing infrastructure or consolidating warehouses and DCs, for example.

• More effective outsourcing decisions. Some retailers simply lack direct control, cutting-edge technologies, or internal, Asia-specific competencies to achieve the supply chain visibility they need to plan and operationalise effectively. 3PLs with Asian business experience can provide outsourced fulfilment services to handle complex order types, shipping windows, transportation modes and delivery schedules for same day or next day at the best cost. They can also provide services like distribution or warehousing, packaging or value added, transportation management and logistics system deployment.

Plan well in advance for border regulatory and trade compliance issues. Supply chains in Asia frequently involve transporting goods across provincial, interstate or cross-country borders, which can introduce layers of timeconsuming complexity. With several regional and global trade agreements already in place and others in various stages of development, all trade routes are definitely not created equally in Asia. The keys to navigating them successfully are trifold:

1) know all relevant trade agreements

2) know all customs laws

3) know the security agreements

At best, delays at border crossings and other checkpoints impact customer experience negatively; at worst, they cost big money when products spoil or depreciate while they are held up in customs delays or in warehouses due to lack of paperwork or other minor infractions. Many countries are getting more vigilant at enforcing import and export regulations and the financial penalties for noncompliance can be large. Border crossing complexity needs to be considered in every supply chain to smooth transportation across country lines as well as to avoid lanes that are too expensive, time-consuming, or unpredictable.

A final thought for supply chain success in Asia is to segment markets in addition to consumers. What works in South Korea is different from what works in Indonesia or China. Asia is a collection of multiple markets that each contain their own idiosyncrasies to consider.

 

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