60 Seconds With: Chris Cunnane - ARC Advisory Group

Title:

Senior Analyst, ARC Advisory Group

Location:

Dedham, Mass.

Experience:

Senior analyst in the retail and supply chain industries for the past eight years

Duties:

Responsible for research in the omni-channel supply chain and transportation management systems (TMS)

Modern: Chris, it seems as if we have all been talking and writing about the omni-channel supply chain forever. Yet, we still talk to retailers who are just now rolling out their online strategy. Where is omni-channel today?

Cunnane: The biggest thing about omni-channel today is that there’s still a long way to go. Fulfillment is a big part of it. Right now, the customer has all of these new demands, such as same-day and next-day shipment, and they want a seamless experience regardless of whether they’re buying it in the store or online or from a computer or a mobile device. Retailers are struggling to meet these demands. In many instances, the inventory they set aside for e-commerce wasn’t available for store fulfillment and vice versa. Each channel had its own structures. Now, retailers are trying to merge these channels, and they have a long way to go to deliver what the customer wants.

Modern: Based on your research, how do you characterize the state of the art?

Cunnane: Well, from a fulfillment standpoint, we think brick-and-mortar retailers are improving the customer experience. Many are now looking at their stores as mini warehouses, where they’re picking and shipping orders or holding orders for customers, or picking at the warehouse and sending it to the store for pickup. That is happening. At the same time, one of the technologies we’re talking a lot about is distributed order management, or DOM, which provides the ability to share inventory across these different channels. While the year-over-year adoption rate is higher, not enough retailers have invested in DOM. There is still a technology gap.

Modern: What’s holding them back?

Cunnane: The fear of investment. DOM is relatively new, and as a rule, retailers are hesitant to invest in new technologies that don’t have a long history in the market. What’s more, companies with a lot invested in their legacy systems are reluctant to rip and replace to adopt new technologies. And, I think there’s a lack of understanding of everything that needs to go into DOM. At the same time, the process of choosing and implementing a new technology can be long, which could explain why we’re starting to see an uptick now. For some, the potential benefits are outweighing the fear, and the early adopters are seeing tangible results. That may spur other retailers to get on-board.
Modern: Are retailers trying to tackle this all at once or taking it one step at a time?

Cunnane: A lot of retailers are rolling out one program and measuring the results to see how it goes before they jump in with a full omni-channel strategy. For instance, Macy’s is often thought of as a leader in this space, but until recently, they didn’t have a program to buy online and ship to the store. And, of course, every retailer will tell you that what they’ve chosen is the smarter path and that’s what everyone should do.
Modern: At Modern, we focus on what happens inside the four walls of the distribution center, but since you also cover TMS, what’s happening on the transportation side of omni-channel?

Cunnane: Transportation is the tricky part. It’s the whole Amazon effect because customers will go to Amazon if they can’t get shipping free from the retailer. We’re seeing a lot of interest in last mile. In my neighborhood, I’m now seeing a number of Amazon-branded vans fulfilling the last mile. It’s that pull to keep control over the order right up until the package gets to the door. Amazon is also looking at crowd-sourced deliveries; they’re leasing their own vans and developing their own fleet, and they’re still working with UPS and FedEx.
Modern: Do you think last-mile delivery is where the omni-channel battle will be fought in the future?

Cunnane: Interesting question. I don’t think last mile is going to be the end-all-and-be-all for what will be commerce when we drop the omni-channel buzzword. It’s top of mind now, and we’re seeing investment into companies trying to roll out an Uber model for package delivery. But, retailers still have bigger issues to deal with.