Companies leverage multiple channels for business like their own brick and mortar stores, e-commerce on the web, franchise operations etc. These are called multiple channels or multi-channel strategies for business. In addition companies also grow by acquisitions of same or similar businesses and many times retaining the multiple brands and individual identities.
Each of the channels as well as the acquired companies and brands run as individual businesses of their own which execute their growth strategies individually. These cause many inefficiencies which can be removed with modern technologies and improve the profitability and growth profile of businesses.
The potential inefficiencies are:
- Separate sourcing and procurement of their supplies in spite of many common components
- Separate warehousing and logistics of supplies many times having warehouse in the same city or close proximity.
- Separate manufacturing facilities where many subcomponents could have been common or realized in the same plants with similar machineries.
- Separate warehousing and distribution for each of the channels
- Separate pricing and P&L for each of the channels.
All of the above inefficiencies if addressed through business transformation and information technology can leverage significant margin improvement, lowering the cost of procurement, manufacturing and distribution as well as shared cross services among channels. For example:
Sourcing and procurement could be combined for all channels whereby lowering the cost of procurement by bulk purchases.
- Common warehousing and logistics of supplies could reduce the number of inbound warehouses and reduce the total inventory of raw material in hand thereby reducing the cash-flow requirements of business and improving inventory turnaround.
- Manufacturing subcomponents together in common factories could potential reduce the manufacturing capacities or increase the total throughput of manufactured goods in the same plants.
- Common warehousing and distribution could reduce the number of warehouses as well as improve the cost of distribution and outbound logistics.
- Potential exist for price optimization between stores, franchises and e-Commerce to improve and maximize revenue and/or margins. There is also a potential of significant cross selling among brands through all channels as some of the products go through single channels.
Best way forward for CXO’s of the organizations to leverage these is to identify opportunity areas within their organizations with the help of consultants and implement end to end changes, from operational process to reorganizing procurement, warehousing, logistics, manufacturing, sales, distribution and IT transformation across each of the channel integration initiatives. The initiatives as such pay for themselves and the saved funds could be reinvested till completion of multichannel integration in all of the potential areas for any organization.