Bringing It Home: The Omni-Channel Fulfillment Opportunity

© 2018 Retail Systems Research & Hortonworks. All Rights Reserved.
An exclusive RSR Webinar sponsored by Hortonworks
Bringing It Home: The Omni-Channel Supply
Chain’s Fulfillment Opportunity

2
Bringing It Home: The Omni-Channel Supply
Chain’s Fulfillment Opportunity
Brian Kilcourse
Managing Partner,
RSR
Brent Biddulph
GM, Retail Solutions,
Hortonworks
Featured Speaker Host, Moderator

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Before We Begin: About RSR
• Founded in 2007: Retail Systems Research (RSR) quickly became a leading source
of insights for trends in retail and retail technology,
• Mission: To elevate the conversation about retail technology to a strategic level
within the retail enterprise. Our differentiators:
• Objective Insights - no competitive intelligence nor system selection
• Pragmatic Advice - to both retailers and solution providers
• Extensive Retail Industry Experience - lifelong retailers
• A Deep Bed of Research into retailers’ technology investment plans and the
business opportunities and challenges that drive those investments

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What Are The Forces Driving Change?
1. Rapid Consumer Adoption Of
New Techs
2. Accelerating
Technology
Innovations
3. Tech-savvy
Competition

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Where Should The Focus Be?

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Omnichannel Fulfillment’s Effect On the Supply Chain
• The “last mile” of the Supply Chain has
gotten very complex
• New Fulfillment processes are not
optimized
• Returns– a culture & inventory shock for
those who have never sold DTC before
• Inventory becomes distorted, and lack of
visibility and accuracy create
inefficiencies, profit leakage and
disappointed customers
• Retailers see better forecasting – with
pre-demand signals – as a way to get
their arms around consumers’ buy
anywhere/get anywhere mentality

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Recent RSR Research Underlines Today’s Challenges
42%
51%
59%
New fulfillment strategies are adding new costs to the
supply chain
The pattern of consumer demand and how we fulfill it has
changed
Pressure from competitors to achieve faster fulfillment to
consumers
TOP THREE (3) business challenges your company faces around supply chain
management
Source: RSR Research, November 2018 **PRELIMINARY**

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Enabling Anytime/ Anywhere
Most retailers are offering one or more of the following “omni-
channel” capabilities:
• Order online, pickup in a store
• Order in-store for direct delivery
• Order in Store A to pickup in Store B
• Order online for direct delivery
• Return online orders in any store
Which of these is your company offering?

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Importance vs. Competence
67% 78% 80% 81%
81%
29%
46% 50% 47%
51%
Order in store A to pickup
in store B
Order online, pickup in a
store
Return online orders in
any store
Order in-store for direct
delivery
Order online for direct
delivery
Customer Order & Fulfillment Options: 'Very Important' vs. 'Perform
Very Well"
Important Perform Very Well
Source: RSR Research, 2016

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New Costs Erode Profitability
26%
33%
40%
47%
51%
Handling the current volume of direct to consumer
orders from our warehouses
Handling the new volume of customer returns
with our current systems and processes
Shipping direct-to-consumer orders from our
stores
Shipping direct-to-consumer orders fast enough
Quantifying labor & shipment costs for cross-
channel fulfillment
What Are Some Of The “Top Three” Operational Challenges
Your Company Faces Around Supply Chain Execution?

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Pressure On Direct-To-Consumer Is Increasing
47%
40%
26%29%
21%
35%
Shipping direct-to-consumer orders fast
enough
Shipping direct-to-consumer orders
from our stores
Handling the current volume of direct to
consumer orders from our warehouses
Direct-to-Consumer Challenges
2018 2017
All
Apparel &
Brand
Managers
FMCG
General
Merchandise
Hard Goods
and Other
Shipping direct-to-consumer orders fast enough 47% 38% 55% 50% 47%
Shipping direct-to-consumer orders from our stores 40% 35% 40% 46% 40%

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Looking for New Leverage
32%
36%
38%
41%
Optimize our returns processing
Optimize fulfillment based on the most profitable
inventory opportunity
Redesign our supply chain / distribution network
to better leverage inventory
Increase service levels without over-investment in
inventory
What Are Some Of The “Top Three” Opportunities For Improving
Supply Chain Management Within Your Company?

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Retailers Are Making Steady Progress To Enable
“Click & Collect”
49% 52%
55%
48%
37%
40%
32%
29%
33%
In-store inventory pick for consumer in-
store pick-up
In-store reservation of inventory for
consumer in-store purchase
Online visibility into in-store inventory
Steady Progress
2018 2017 2016

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The Winning Hand (part 1)
24%
16%
45%
37%
45%
49%
51%
57%
60%
64%
Same-day ship
Same-day delivery
In-store reservation of inventory for consumer in-store purchase
In-store inventory pick for consumer in-store pick-up
Online visibility into in-store inventory
Fulfillment Processes: Implemented And Satisfied
Retail Winners All Others

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The Winning Hand (part 2)
42%
32%
21%
37%
42%
26%
51%
53%
55%
57%
57%
60%
Ship from store direct to consumer
In-store purchase of online inventory for shipment direct to
consumer
Drop ship from vendor direct to consumer
Ship to store from "Direct" DC for consumer in-store pick-up
Store-to-Store transfer for pick-up in-store
Direct to consumer fulfillment from our DC
Winners Are Far Ahead On "The Last Mile"

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“Science” Can Help!
53%
64%
72%
44%
38%
49%
Sourcing algorithms for locating the
optimal inventory for customer order
fulfillment
Near real-time Supply chain analytics
(alerts, exceptions, etc.)
Distributed order management/customer
order management
POTENTIAL VALUE Vs. STATUS Of Technology Enablers Related To “Profitable”
Customer Order Fulfillment
A Lot of Value Implemented & Satisfied

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18%
29%
26%
29%
21%
29%
24%
21%
45%
26%
45%
49%
49%
49%
51%
53%
60%
62%
64%
68%
System-based methods of capturing missed sales opportunities due to local out of
stocks
Item-level RFID
Supplier drop-ship management system
Product Lifecycle Management
Near real-time Supply chain analytics (alerts,exceptions, etc.)
Store perpetual inventory management
Real-time updates to inventory from transactional systems
Sourcing algorithms for locatingthe optimal inventory for customer order fulfillment
Store picking & shipping of customer orders
Distributed order management/customer order management
Supply Chain Tech Enablers ("Implemented & Satisfied")
Winners Are Far Ahead When It Comes To Modernizing S/C
Techs
Source:RSRResearch,November2018**PRELIMINARY**

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Getting Fulfillment Right
• ‘See’ Inventory across the enterprise
• In the stores, in the DC’s, in-transit, on order
• Put the right amount of Inventory closest to the points of demand, at the right time
• Forecasting and assortment planning need to consider those non-transactional signals
that consumers leave along their digitally enabled paths-to-purchase
• Fulfill non-store orders in a way that maximizes profitability
• Identify your criteria
• To avoid a markdown?
• Based on lowest shipping cost to customer?
• Based on lowest cost, most available labor?
• Closest to the customer’s location?
• Optimize Non-Selling Store Processes
• To cover the new costs associated with handling non-store orders
• Don’t forget… Returns & Reverse Logistics

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What About “Better Forecasting”?
37%
37%
50%
38%
53%
64%
We have inaccurate
inventory levels in stores
We only track where
demand is fulfilled from,
not where it originates
from
We consistently stock out
on fast-moving
categories/products
Top Three (3) Supply Chain
Management Challenges
26%
41%
40%
45%
46%
60%
32%
58%
59%
61%
64%
72%
Weather data
Sentiment analysis as an early-
warning to sudden changes in
demand
Trade area data such as new stores
and events
Automatic feeds of competitive data
(pricing and promotions)
Space data (shelf & fixture) for
forecasting and replenishment
Data from past promotions
Impementation Status Of HighValue Technology
Enablers For Improved Forecasting
High Value Implemented/Satisfied
This…
…Is Being
Addressed
With This!

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Hortonworks: A Connected Data Platform
That Solves for All Data
Store
data forever
Access
a multi-tenant data lake
Model
with machine learning
DATA AT REST
Hortonworks Data Platform
DATA IN MOTION
Hortonworks Data Flow
ACTIONABLE
INTELLIGENCE
Perishable Insights
Historical Insights
C L O U D
ON-PREMISES
Capture
streaming data
Deliver
perishable insights
Combine
new & old data

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Omni-Channel Fulfillment Excellence
Requires Connected Data
Connected DCs,
Stores, Vehicles,
Drivers, Third-
parties
Demand
Forecasts
Route
Optimization
Edge
Analytics
Exceptions that
impact product
availability
(shrink, in-stocks,
returns)
360 view of
Inventory and
Transactions
Machine
Learning
Stream
Analytics
Deep
Historical
Analysis
notionalarchitecture
External
Signals
(weather, local
events, traffic)
Consumer
Demand
(all channels)
Machine
Learning
- Improved online fulfillment
demand forecast accuracy by 3%
- Reduced number of trips by 5%
whilst serving 0.7% more orders
- Reduced total distance covered by
7.2%, having a significant impact
on fuel spend and CO2 emissions
- Improved overall logistics, driver
and customer experiences
BUSINESS
OUTCOMES

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Brian Kilcourse
Managing Partner,
RSR
bkilcourse@rsrresearch.com
https://www.linkedin.com/in/bekilcourse/
Brent Biddulph
GM, Retail Solutions,
Hortonworks
bbiddulph@Hortonworks.com
https://www.linkedin.com/in/brentbiddulph/
Your Turn…
Questions
and Answers

Thank You!
info@rsrresearch.com twitter.com/rsrresearch facebook.com/rsrresearch/ RSR Research

Bringing It Home: The Omni-Channel Fulfillment Opportunity

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