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Eindhoven University of Technology MASTER Supply Chain Capabilities Eindhoven University of Technology MASTER Supply chain capabilities in an omnichannel strategy enabling customer fulfillment services for Brick-and-Click fashion retailers Snoeren, W. Award date: 2016 Link to publication Disclaimer This document contains a student thesis (bachelor's or master's), as authored by a student at Eindhoven University of Technology. Student theses are made available in the TU/e repository upon obtaining the required degree. The grade received is not published on the document as presented in the repository. The required complexity or quality of research of student theses may vary by program, and the required minimum study period may vary in duration. General rights Copyright and moral rights for the publications made accessible in the public portal are retained by the authors and/or other copyright owners and it is a condition of accessing publications that users recognise and abide by the legal requirements associated with these rights. • Users may download and print one copy of any publication from the public portal for the purpose of private study or research. • You may not further distribute the material or use it for any profit-making activity or commercial gain Eindhoven, August 2016 Supply chain capabilities in an omnichannel strategy: Enabling customer fulfillment services for Brick-and-Click fashion retailers By Wesley Snoeren BSc Chemical Engineering Student identity number 0629633 in partial fulfilment of the requirements for the degree of Master of Science in Innovation Management Supervisors: Dr. M.M.A.H. Cloodt, Eindhoven University of Technology, ITEM Prof. Dr. A.J. van Weele, Eindhoven University of Technology, ITEM Ir. L.N. Nolet, Deloitte Consulting B.V., Supply Chain Strategy TUE. School of Industrial Engineering. Series Master Theses Innovation Management Subject headings: Omni-channel, Supply chain management, Channel integration, Fulfillment, Return, Fashion, Apparel, Retail, Capabilities, Service quality, e-Commerce, Brick-and-Click Abstract Omnichannel retailing, where the boundaries between different channels of the multi-channel approach are blurring and are getting integrated, is seen as the new standard and retailers are struggling with implementation of this new model. One of the areas of this struggle is the impact of omnichannel retailing on the supply chain in order to enable customer fulfillment services like ‘same day delivery’, ‘reserve in-store’, and ‘weekend delivery’. This research sheds light on this topic by discussing four parts of this topic in relation to Brick-and-Click fashion retailers: 1) the components and implications of an omnichannel strategy, 2) the current state of customer fulfillment services offered by retailers, ranging from the moment of ordering until possible return, 3) the desired preferences of consumers regarding customer fulfillment services, and 4) the supply chain capabilities needed to enable the services consumers desire. Main findings include that omnichannel retailing is not a strategy that is constraint to the firm, but could be extended towards network retailing, where wholesale channels, franchise channels, and retailer’s own channels are integrated. In addition, retailers that originally sell through wholesale channels only should build direct-to-consumer interaction to get closer to the consumer from a selling and fulfillment point of view. Also a more agile supply chain is an important strategic pillar for omnichannel. Regarding services, it is found that dynamic fulfillment, where consumers can see or reserve in inventory of other channels, can significantly reduce out-of-stock no-sales and this reduction is further established with seamless fulfillment, where the retailer can fulfill from anywhere. These services show the importance of the capability of inventory visibility. In addition, delivery and return shows different preferences for the standard option and added value services, where a standard delivery or return option should pursue a cost-leadership approach and premium added value services are offered on top of this. To enable this, a hybrid model of efficient and flexible warehousing and logistics is proposed. To obtain these results, an industry benchmark is used in addition to multiple company management interviews and a conjoint based consumer survey. i Management Summary From multichannel to omnichannel: the need for research Seen as a marketplace disruption, omnichannel retailing is starting to become the new norm. Consumers are getting more demanding and the boundaries of retail channels are blurring. These increased demands call for action among retailers if they want to win, or even survive, in a dynamic and competitive marketplace. However, the concept of omnichannel is still hard to grasp for those same retailers and the need for research is definitely there. This research offers an initial, exploratory research in one of the areas of omnichannel retailing: customer fulfillment. When the consumer has decided to purchase a certain product, the customer fulfillment starts and it ends as soon as he consumer is either happy with the product, or has returned the product to the retailer. Strategic components of omnichannel fulfillment are investigated, the current state of fulfillment services are mapped, the desired customer services are researched, and necessary capabilities to implement these services are examined. The research is performed in light of Brick-and-Click fashion retailers with sales options in the Netherlands and consists of an industry benchmark, management interviews, and a consumer survey. The omnichannel strategy Interviews with 8 fashion retail managers show that there are six pillars that identify the omnichannel strategy: - Creating a seamless experience, where the consumer can order from anywhere, and let the product be fulfilled from anywhere, unrestricted by the location the consumer is or bought the product - Channel integration, where the retailer enables full interaction between the different channels to be able to enable the seamless experience - An agile supply chain that enables more flexibility to fulfill cross-channel in a convenient, fast, and flexible manner. - Downstream verticalization, where fashion companies extend their wholesale channel distribution model towards direct-to-consumer retailing in addition to their wholesale model. - Single customer view, where data from the consumers is captured at all contact points to be able to create a total view of preferences of this consumer - Increased buying intent, where retailers try to convert an interaction into actual buying intent Pursuing these pillars helps as initial guidance for omnichannel retailing Current state of offerings Currently, customer fulfillment is performed in varying ways by different retailers (Figure 1). An industry benchmark of 57 retailers indicates that the services can be split in four categories: ordering and payment, availability, delivery, and return. It shows that a lot of services are currently offered, but there is only a little amount of consensus among retailers. This indicates heavy segmentation or the fact that there is no solid view on preferences of consumers. In addition, there seems to be a little actual implementation of omnichannel services as in-store delivery (35%), return channel integration (33%), or store-inventory visibility (14%) currently in the marketplace. ii Figure 1: Summary industry benchmark Desired state of offerings A consumer survey among 608 respondents, representative for the Dutch population shows the desired state in the four customer fulfillment service areas (Figure 2). The main conclusions of the consumer survey consist of: - Brick-and-Click is the most desired purchasing model for consumers - Mobile purchasing channels (mobile site and app) depend highly on target group: more progressive users will be more likely to use them than conservative users. - Payment after purchase is highly valued, but not much offered - Dynamic fulfillment can increase sales in stock-out scenarios with 45% for online and 23% for offline purchases - Standard delivery and return is mostly preferred with low costs, which is between 3 and 12 times more important than other attributes (e.g. delivery speed) - Added value delivery services offered as extra options for an additional fee are desired by consumers - Return as a sales option is accepted mediocre, so only using it as an option instead of a standard action is advised - Standard delivery and return is barely affected by segmentation patterns, while added value delivery and return options are much more affected. iii Figure 2: Summary consumer survey Capabilities to enable To enable the services desired, capabilities need to be in place (Figure 3). Capabilities need to be addressed across the entire supply chain to be able to enable the customer fulfillment services. However, the most interesting findings are: - Capabilities are not stand alone functions and interact with each other. Therefore, careful thought for positioning of capabilities in the organizational structure is important - Supply chain capabilities mainly enable customer fulfillment services, but there is spillage where supply chain capabilities support non-costumer fulfillment services and non-supply chain capabilities support customer fulfillment services - End-to-end inventory visibility is the foundation of the fulfillment, where the retailer knows of all stock where it is. It enables dynamic fulfillment directly and improves the execution of a lot of other
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