Future of retail operations: Winning in a digital era

Future of retail operations: Winning in a digital era

This compendium explores the breadth of change and risk throughout the modern retail industry.

January 2020

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Contents

Store operations

Cologne

Supply chain

Hamburg

Berlin

Munich

Same-day coverage of relevant population, Amazon vs d

5 A transformaotimonnicinhasntnoerel fashion retailer Brick-and-mortbayrtryeptaeilosftcooremspneetietidonto, %up their game.

Technology cou2ld8 sgtiovreesthacermossaGseigrmniafnicy,acnotvberoinogs5t.of

Germany's 20 biggest cities

Ongoing testing an ship-from-store ca

Reta Competition area Area at risk mon

(Amazon and retailer) (Amazon only) (reta

11

Smarter schedules, better budgets: How to improve

store operatiPoonpsulation

22

16

Through activity?based labor scheduling and budgeting,

retailers can bePcoumrcehamsoinregefficient service and empploowyeeer scaotviesfraacgteion.

while

im23proving

custome1r7

16 22

1 Relevant population areas de ned as high density (>750 inhabitants/k coverage de ned as area within 30 minutes driving time from respecti

Bending the cost curve in brick-and-mortar retail

Source: Alteryx; BKG; ESRI ArcGIS; MB-Research; McKinsey analysis

Retailers can achieve next-generation store efficiency by breaking down silos and optimizing total cost across the value chain.

Viable market coverage for same-day delivery via ship from store %

60

Supply chain of the future: Key principles in building an omnichann50el distribution network

As omnichannel shopping is becoming the new norm, consumer and r4e0tail companies must be ready to deliver fast, impeccable omnichannel service. Doing so requires a new supply chain ne3tw0 ork approach.

31 A retailer's gu2i0de to successfully navigating the race for same-day delivery

Same-day delive10ry: Consumers' expectation for same-day

delivery is rising and putting pressure on retailers' supply

chains.

0 0

10

20

38

Better servic1 Reewleviatnht pcoopunlanteiocn taeredasindevennedtoasryhigh density (>750 inhabitants/k

coverage de ned as area within 30 minutes driving time from respecti

It is not just the customer experience that manufacturers and retailers enShoaunrccee: Ablyteeryxxt;eBnKdGin; EgStRhIeAirrcrGeISa;cMhBto-Rtehseeaernchti;rMetcyKinsey analysis

of stocks in the market.

1

Supply chain (continued)

Procurement

44 The invisible hand: On the path to autonomous planning in food retail It's not news to food retailers: sometimes your stocks are too high, sometimes they're too low. Advanced planning now gives them entirely new options for solving the expensive problem-- and cuts costs in the process.

50 Automation in logistics: Big opportunity, bigger uncertainty As e-commerce volumes soar, many logistics and parcel companies hope that automation is the answer. But as this second article in our series on disruption explains, things are not so simple.

62 Next?generation supply chain--transforming your supply chain operating model for a digital world In a digital age, most supply chains run on old principles and processes. A few leaders can show us how a new operating model can answer the demands of today--and tomorrow.

67 Beyond procurement: Transforming indirect spending in retail If retailers treat indirect costs as an opportunity for business transformation rather than just a procurement matter, they can boost return on sales by as much as 2 percent.

76 Rethinking procurement in retail For retailers, procurement is no longer solely a matter of negotiating "A" brands. Private labels and verticalization are trending. Advanced approaches and tools help get procurement in shape for the future.

82 Six emerging trends in facilities management Outsourcing, workplace strategies, and technology innovations hold immense potential for companies seeking to reduce costs and improve productivity in facilities management.

Tech

94 The end of IT? Retailers who want to stay ahead of the pack and drive business results through technology innovation are rethinking the setup of their IT departments.

2

Future of retail operations: Winning in a digital era January 2020

Introduction

Heightened customer expectations, massive advancements in technology, and the rise of omnichannel commerce are just a few of the trends reshaping the world of retail. In an industry already known for thin margins, these changes can increase cost pressures and uncertainty for retailers--all while opening the door to significant opportunities. Traditional approaches will no longer work in the face of change; now is the time to clearly define new aspirations, make fundamental changes to operating models, and rethink MretcaKil. TRheotsaeitlhcaot mmapkeenmdoivuems no2w02m0ay enjoy a sustained advantage for decades to come. Introduction EInxthhiisbpitublication we examine some of the most pressing challenges retailers face and the transformative journeys many are on right now. You will find a range of new perspectives across retail operations, including, store operations, supply chain, procurement, and information technology (IT). As the rules of retail are being redefined, these fundamental areas of retail operations are in need of fresh thinking.

Retail operations

Store operations

Supply chain

Procurement

Information technology (IT)

We provide a new take on store operations--while flashy technology attracts and engages customers in the "store of the future," the make-or-break technology is actually behind the scenes. That's the technology that gathers and connects data for a seamless customer experience. In our own "store of the future" this includes dwell sensing, RFID, heavy investments in the data lake, and the logic needed to map the customer journey. But technology is only one piece of the puzzle; solving the operations equation also involves analytics, new store processes, and upskilling the store team. Such a transformation can add several points of profitability to the average store.

Introduction

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