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Omnichannel Logistics and Supply Chain Management – Opportunities or Challenges?

In the fast paced world of connected people and devices, Simon Peter Nadeem, a PhD student at the University of Derby’s Centre for Supply Chain Improvement, discusses the need for new methods of doing the same old business.

By Dr Simon Peter Nadeem - 22 February 2018

In the logistic and supply chain management (LSCM) sector, the demand pattern is changing from traditional to more advanced ways of shopping and getting products to consumers.

As great as it is, alongside the advantages of unique selling propositions, it also brings unique challenges and can make things even more complicated. The LSCM sector is faced with a similar situation in the context of Omnichannel LSCM.

What is the Omnichannel?

LSCM operations have evolved from traditional ‘single channel’ to ‘multi-channel’, and now ‘Omnichannel’. This evolution has been made possible through technological advancement and the connected world through the internet.

The Omnichannel system offers consumers a holistic perspective and allows them to use any or all channels available in the overall supply chain. In such a system, the customer being the central person of the business, takes control and decides what they want to buy, from where they want it, how to get it delivered and when they want it. Therefore, it is correct to say that the borderlines between channels are blurred or even eliminated with the possibility to easily switch between different channels to choose, buy, and collect/deliver the product, for both the customer and the seller.

How the Omnichannel works?

A customer who sees a product online, might want to try or see it in-store and then get it delivered to home by ordering online. Likewise, a customer might want to order a product online but decide to pick it up in their nearest store. Similarly, a customer might order a product online, collect it instore, then decide to return it via pre-paid return provided by the seller. There can be many other variations in switching between channels.

Why the Omnichannel?

Increased awareness among consumers, through smart technologies, has led to a changing demand pattern. Thus the seller needs to ensure that all possible channels are available to the customer or else a business opportunity might be lost. Product availability, with its full information across all channels and ease of getting it ordered and delivered as per the customer’s desire, requires the LSCM systems to be highly integrated in real-time across all channels.

Opportunities and Challenges

Availability of technology and the possibilities it can bring is definitely a game-changer for all businesses. However, as much as they are useful, they equally pose challenges for businesses, especially for the LSCM sector which needs to cope with variability, uncertainty, time constraints, inventory management, etc.

Two major challenges are predicting and managing customer-driven delivery and return decisions, such as shopping online or in-store with home delivery options and click and collect in-store pickup. The second biggest challenge is to not fall into the trap of having too much inventory to get stagnated. It requires highly integrated management of inventory across all channels, centrally or decentralised.

As the door of opportunities broaden through the Omnichannel, it also requires redesigning the whole supply chain management technical and physical infrastructure, capital, human resource, and skills. Bigger businesses might cope with it easily but small and medium-size enterprises (SMEs) could have difficulty due to constraints in resources.

The way forward

There are a few ways to cope with the challenges and create a win-win business opportunity for all the players in this supply chain, including the customer. Businesses can transform business management and processes through utilisation of low-cost technologies such as a web-based ERP system, compete with other companies while collaborating with them, and look at developing cost effective, yet efficient, LSCM services so that the SMEs can benefit as well.

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About the author

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Dr Simon Peter Nadeem

Simon is a Lecturer at the University of Derby. He has earned his PhD from the University of Derby, UK; an Executive MBA from Preston University; and an MBA from American University of Central Asia and is now pursing his PhD with focus on Circular Economy. As a growing researcher, he has published in scientific journals, international conferences and a book chapter.

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