Infor South Asia - Pacific and ASEAN vice president and managing director Helen Masters shares her insights on how to prepare your supply chain for the new era of millennial consumers.
Today’s millennial retail consumers are causing the biggest disruptions to the fashion industry since the industrial revolution. These younger customers prize convenience and authenticity above all else; they want innovative new products, instantaneous information, choice, flexible returns and they’re always on the lookout for the best deal.
Globally, millennials will spend more than US$200 billion this year and more than US$10 trillion during their lifetimes. In Australia there are more than 4.2 millennials and by 2021 they will account for more than a third of all retail spending.
Not only will they be amongst the fashion industry’s biggest spenders they are also fundamentally changing the way we think about shopping for clothes. As digital natives, millennials are interacting and creating with technology in ways we’ve never seen before.
Around three-quarters of millennials e-shop locally; predominantly using smartphones to browse and buy from nearby stores. With an almost limitless number of online shopping options to choose from, it seems almost counterintuitive that younger shoppers would want to limit purchasing decisions to local areas.
They’re a generation that’s driven by speed. They love the convenience of online shopping but are less enthusiastic about having to wait weeks or even just days for clothing they’ve purchased online. Instead, they’re likely to start their shopping journey but favor in-store pick-up.
The impact on local fashion retailers and their supply chains is profound. They need to better anticipate potential millennial demand for goods and be able to supply them in record time. The demand has reignited the need for an omnichannel approach.
For a long time omnichannel, the ability to simultaneously provide online and traditional retail environments, was seen as the holy grail for fashion retailers. Yet for many businesses it proved a difficult area for success. Many local retailers find it difficult to maintain one retail platform, let alone two or more in any meaningful way.
Inventory management and supply chain had typically been a significant hurdle.
However today supply chains are evolving from a linear push into a global value chain network of different companies that are working together to innovate, respond to orders, fulfill and deliver on customer commitments, and react to disruptions in supply.
Here are five tips on how Australian retail manufacturers can optimise their supply chain to stay relevant and create a seamless omnichannel experience for tech-savvy millennials by 2020:
1. Create the best of both worlds
According to the Commonwealth Bank of Australia’s (CBA) Retail Insights Report, 40% of retailers are looking to open at least one more channel in the next 12 months. This rapidly converging marketplace is forcing retailers to re-strategise their approach to customer service, redesign distribution networks, develop new return policies and streamline supply chain operations to best serve customers through their desired channel.
One way this can be achieved is by using their brick-and-mortar store as a ‘showroom’ where customers can see, feel and try on items before they make a purchase online. A third-party logistics provider could then fulfill the order using the manufacturer’s distribution centre, or by working directly from the manufacturing plant to offer fast home delivery.
Alternatively, retailers can use online channels to drive customers to stores through targeted loyalty programs, or offer customers the convenience of click-and-collect services to pick up goods ordered online. It all comes down to knowing what your customers want and how to get it to them.
2. Stop, collaborate and listen
It is important for retailers to ensure they are engaging with the best suppliers a market has to offer. While retailers may opt for a cheaper supplier to reduce costs, be wary that the lowest-cost supplier is often the slowest. Not only does geographic distance add lead time, but manufacturing centers in low-cost countries often compensate for low margins with full capacity utilisation. That’s risky behavior. Rather, retailers should look to source components where they can be created for best cost, without compromising quality, flexibility or reliability.
Ensuring there is a constant communication channel between networks will help retailers achieve better quality and results. Inventory visibility and timely information are also key to meeting demand. With this visibility, retailers can better understand inventory locations and fulfillment times, leading to lower inventory carrying costs, faster deliveries and satisfied customers.
To maintain pace, retailers should be making the investment to introduce the technologies that will assist them to collaborate with their value chain in real-time, look to bring these components together for assembly in a place close to their markets and engage suppliers that are willing to be connected into their network.
3. All for one and one for all
To supply all of the right channels, you must look beyond the traditional notions of fulfillment. Make-to-stock or make-to-forecast aren’t going to cut it when consumers want so much more.
Retailers need to optimise inventory management for multiple channels and integrate purchasing information into a single operational plan to match merchandise to demand. To make your inventory flexible, retailers need to factor in their fulfillment rates, service levels, air freight costs and more. All parties along your value chain need access to the same information across all of your interaction touch points, from print catalogue, to web, to order entry screen, to manufacturing and distribution centre—and even social media.
Capturing and analysing high volumes of data in near real-time is vital. With an omnichannel presence, retailers can optimise the connection of demand to supply by using customer data to inform the manufacturing processes. This pipeline data can offer up-to-the-minute inventory accuracy and dramatically improve your speed of delivery, demand planning, stock replenishment and price competitiveness.
4. Hand over the reigns
In the world of millennials, the consumer determines what you’re doing, not the other way around. No matter which industry you belong to, one element ties us all together – data. The growing influence of meaningful data is the driving force behind success. When customers interact with online channels, retailers have a natural advantage to track and record every customer action, then use it to create better strategies for meeting their needs.
One strategy retailers are adopting is identifying a starting point for a new product, for example the cut or fabric of a new clothing item, designing a style around this, and simply putting it out there through your channels for customer feedback. With the technology to capture and analyse social media feedback and a flexible value chain, your customers can lead you to better designs and you can adjust your manufacturing processes in real time to satisfy new demands and get closer to the consumer.
Another strategy is to utilise 3D design and sampling technologies to ensure the proper fit of a garment. You can shorten the time to the consumer, reduce the number of physical samples, and save on your costs.
5. Big Data, better results
Sometimes all it takes is a change of colour, fabric or trim to catch a trend or extend the run of a dwindling style. How can you know? The operational data you need is likely already there, but perhaps you aren’t using it as well as you could.
To resolve this, create a central data repository for your entire organisation; track, collect and analyse the data generated between your design teams, among product developers and sourcing managers, suppliers and buyers to help you create the next new thing your customers are after. You should also create a growing library of reusable designs, together with the specifications, BOMs, sourcing, costing and construction details to minimise the lead time for introducing variations on a style or bringing an extra contractor up to speed when you need added capacity.
These five steps are merely highlights to a path of becoming a true omnichannel brand by 2020. One size does not fit all, nor can a cookie cutter format for modernisation be prescribed and expected to be followed precisely; each industry will undoubtedly have variations and this will be largely influenced by their audience.
With Amazon Australia on our heels and millennial demands continually changing, the most important thing is to get underway and use these guidelines as a starting point for discussion and planning.