At RSR, we use a chart to visualize what we mean by 360 degrees of visibility in retail. On the left side of the chart is all the information that retailers have long used to plan and track their businesses: product info, purchase orders & receipts, sales and financial plans, sales movement — essentially everything to do with products and locations. On the right side of the chart is information related to the customer: loyalty, purchase history, preferences, and digital behaviors. Although it might have been accidental, the left vs. right aspect is apropos to an analogy about how retailers have managed their businesses according to left brained vs. right brained thinking.

As the popular psychology theory goes, left brained thinking is all about facts, being logical, and getting things done. Righted brained thinking is about visioning, creativity, and empathy. How does this relate to retail strategy? One way to think about retail is to look at the dichotomy between product-oriented and customer-oriented strategies. As it turns out, all the stuff on the left of our 360° of Visibility chart is the information that is needed to optimize the buy side (the supply chain side) of retail, while all the stuff on the right is about the sell side (the customer facing side).

That brings around to the results of a study that RSR will publish this week called Executing on the Promise: Retail Fulfillment 2012. The report is our 2012 look at supply chain execution, and the bottom line of the study is that the supply chain side of many retailers’ businesses is very slow to respond to the challenges and opportunities created by innovations on the customer-facing side. While retailers are quickly learning how to interact with customers who use several “channels ” (both digital and physical) to make a single purchase decision, they are also holding back on any dramatic changes to their supply chain designs, waiting for an ROI to become clear before making a big move.

It’s a classic case of left brain vs. right brain. Almost everyone associated with retail knows that up until now, profitability in the business is defined by how well retailers buy; in other words, a supply chain that is optimized to deliver products at their lowest cost to the point of consumption is the key to success. In that model, it isn’t so much about what consumers want to buy as much as it is about what a retailer wants to sell. The left brain model is the essence of mass merchandising that has so dominated the retail landscape for generations.

Highlights of The Study

Particularly with the massive consumer adoption of smart mobile technologies and social media, consumers have driven retailers to get creative on the right side of their businesses. For many retailers, this agenda is being driven by the chief marketing executive, and it’s all about serving the customer no matter how she chooses to interact. In this model, it’s not so much about what products a retailer wants to sell, but what and how a customer wants to buy. But many retailers, and especially the ones who have historically won at mass merchandising, are fundamentally uncomfortable with the notion of changing what has served them so well on the supply chain (left) side for something that is still so loose on the customer-facing (right) side.

But of course it has to impact the left (buy) side of the business eventually. And although the study shows that retailers are aware that the challenge looms, they aren’t jumping on the bandwagon too quickly when it comes to supply chain execution. Here are some highlights of what we found:

• Retail Winners report feeling more pressure than their peers from the business challenges of erratic consumer demand, and from fast-paced digital growth.
• Winners have opted to sacrifice service levels as the preferred alternative to carrying too much inventory — they are half again as likely as their peers to report they suffer from out of stocks than that they have too much slow-moving inventory.
• Flexibility to adjust quickly to deviations from forecast appears to be too hard of an opportunity to grasp for almost 70% of this study’s respondents, although more Retail Winners continue to invest in those capabilities than do other retailers (36% compared to 24%).
• Retailers don’t think that a supply chain redesign is a prerequisite to improving performance, turning instead to better coordination between supply chain, merchandising, and channels.
• For Winners, the top issue isn’t that the supply chain can’t support cross-channel. Instead, they are targeting better integration between inventory and order management systems, and taking on channel-specific systems and processes.
• Retailers say that they need to rip out the current incentives and metrics alongside a major reorganization of the internal structure, but that they need a hard business case and return on investment before they can do it.

Read The Report

Of course, the human brain doesn’t work exclusively on the left or right side. And the retail business model isn’t all about buying or selling — it’s about both. The quandary for retailers who are trying to deal with new consumer behaviors in the omni-channel is serial thinking; letting a standard way of doing business on the customer-facing side before addressing the impact of those behaviors on the supply chain side will doom a retailer to being an average performer or even a laggard.

The report, Executing on the Promise: Retail Fulfillment 2012, will be released this week on www.rsrresearch.com — you’ll find it on our home page tomorrow. In it, we highlight where retailers are vs. where they need to be, and we make several recommendations for moving towards a more integrated approach to supply chain in this complex, complicated cross-channel world.