Setting Sights on Omnichannel Profitability: Why Supply Chain Visibility is Essential to Calculating True Cost to Serve

As many countries grapple with a second wave of the pandemic, retailers are continually challenged to adjust to shifting consumer habits, anticipate spikes in demand for specific items, and meet delivery expectations. Additionally, in the U.S., e-commerce growth has jumped to over 30 percent, which represents a level of online shopping sales not previously expected until 2022. In the face of such extraordinary growth and changing shopping behaviors, blending traditional retail strategies with e-commerce can help retailers navigate dynamic conditions more nimbly — but only if brands are prepared to address major, costly roadblocks within their supply chains.

Supply Chain Data Oversights

In many retail settings, an organization’s retail and e-commerce teams are segmented into silos, and the essential data used by each team to measure and optimize business success isn't shared or unified. For example, for many retailers, reporting on transportation performance is mode- and channel-specific. This means that teams are managing multiple data sources that require time-intensive manual efforts to consolidate into a more useable format for effective analysis and valuable insights.

In many scenarios, with limited visibility into overall transportation performance, it's impossible to accurately calculate the true cost to serve customers (e.g., e-commerce fulfillment free shipping thresholds, multi-modal omnichannel transportation). This leaves some retailers to base decisions upon market assumptions as opposed to data. Without bridging this type of departmental gap, individual data sets hold significantly less value and are more difficult to act efficiently upon. Therefore, how can retailers take better advantage of supply chain data to drive business success? 

Spotting Opportunity in Collaboration

To drive greater omnichannel profitability, retailers need to tap into the potential inherent in managing transportation holistically and providing cost visibility across sales and fulfillment channels. This requires a combined approach between teams in the classic retail discipline and those engaged in e-commerce. For example, by utilizing a data source that aggregates carrier data throughout every step of the supply chain, retailers are better positioned to track end-to-end transportation performance and gain insights to determine new strategies for reducing operational costs. What’s more, this approach also holds significant benefit for customers. Increased visibility enables retailers to predict delays downstream in their supply chains, facilitating updates to consumers in real time and, ultimately, driving improved customer satisfaction.

With the ability to not only track key transportation metrics (e.g., cartons/order, touchpoints/order, origins/order), but also performance-based metrics on distribution channels (e.g., DC to consumer, ship from store to consumer), retailers can leverage insights generated from combined data sources to make more informed business decisions. With accurate, real-time data at their fingertips, including SKU-level information, organizations can even validate decisions and, for example, better account for product markups or shipping fees associated with different service levels. Furthermore, they can better understand profitability by product category and make adjustments to individual lines of business as required.

Looking Ahead

These are only a few examples of the value of having greater visibility into the supply chain. While COVID-19 continues to force retailers to rethink and reshape their omnichannel strategies, having the tools and technologies in place to evaluate cost and revenue by categories such as carrier, geography, product category, SKU and service level can help companies find opportunities to optimize transportation performance — and drive revenue and lower costs. How are you incorporating transportation into your omnichannel strategy?

Alex Sampera is vice president, product management at Descartes, a logistics technology company.