 Welcome everyone, and thanks for joining the second webinar of this series. I'm Laura Llege, I'm the course lead for the MITx MicroMaster in Supply Chain Management, and today we're fortunate to have here Dr. Eva Ponce with us. She's the director of the MIT Omnichannel Distribution Strategies and the executive director of our program. We are very happy to have you joining us today Eva. Thank you for having me Laura. Awesome, so for the next 20 minutes and just for you to have the agenda for the session, Dr. Ponce will be sharing her insights on the changing landscape of Omnichannel fulfillment. She will also give us an overview of the major challenges that retailers face when implementing Omnichannel distribution strategies. I must say that we've just started and we've mentioned the word Omnichannel several times. So based on that, I would love to have you explain us a bit more on what we mean with Omnichannel distribution and Omnichannel fulfillment, just to set the floor for the upcoming questions. Excellent, Laura. So to explain what Omnichannel means, let's start having a look to the Omnichannel customer experience. Let's see what this means from the customer perspective. So if we have a look to this Omnichannel customer experience, one of the first thing or options that most of the customers have when they are planning to buy, let's say any new pair of shoes or any product is of course to go to the store and buy in the store. This is an additional in-person experience. And I wanted to highlight here that still in the US retail sales space, 85% of the shopping still occurs or happen in a store. So it's important just to give that in mind. Second thing is we also have the option as a customer and many retailers are offering this option to us now to buy online and pick up in the store. And almost about 70% of all shopping events start now online, searching, comparing, looking online. So this is another option that also retailers are offering to their customers. And third, this is kind of a new business model, but many companies are also moving into that so you can go to the store and buy online. So you go to the store just to try to test the product. These are called showrooms or guide shops. There are companies like Bonobos that they born with this new business model. They are companies like Nordstrom that they are also trying to offer or Warby Parker, many examples of companies that are offering this space that you can go just to try and test the product. And third, the stock they have in the store is just for that purpose. You cannot buy the product there. You need to buy online and receive at home. And there are also traditional brick and mortar like Adidas that they are offering you the opportunity to go to the store and offer items they have in a stock in that store. But in addition to that they are using the technology is called endless sale in order to offer to you also items that they have in their fulfillment center and they can send to your home. So as we can see from the customer perspective, there are multiple options, multiple channels that you can use in order to buy your product in order to pick up your product. And in addition to that, you can also use multiple devices, you can use mobile devices, you can use your desktop or laptop in order to buy these products. One more thing I want to add in terms of the trends is that 70% of customers still identify faster home delivery as the main expectation for retail stores. So this is also bringing some challenges to the supply chain. Now what they want to do here is let's think about what does only channel means for the supply chain. So if we have a look to the buying process from discovery the need to find something search by delivery and also think about the returns, what happened now is that customer expectation is almost to search by return from anywhere. And from the supply chain perspective, this brings a mess. It's really a mess to manage these different channels that these retailers, only channel retailers are offering to their customers because there are many different options in every single stage of the buying process. So these connect very well with the only channel definition. When we are talking about only channel retail, we are talking about the combination of digital and physical channels. We need to have at least these two components and then of course all of the hybrid modes that we just mentioned. Also, only channel retailers are trying to provide a customer seamless experience. And in order to provide this seamless experience to their customers, they need to integrate on the back end of their supply chain, the different channels. So channels integration is one of the big things that companies from the supply chain perspective need to have in order to provide this seamless customer experience. And this has many implications from the, let's say, inventory perspective, companies need to know where they have the inventory and have inventory visibility in order to be able to provide this customer experience. So this has many different implications from many different angles. I hope, Laura, I have answered at least your question about what this only channel and what does this mean. It's been super clear. And it's also I think been super interesting to all our audience to see how you have this visual image on how only channel behaves. So it's super interesting. Thank you. We are ready, I think, to go straightforward to our main topic for today. And just to begin with this, I was thinking on e-commerce. E-commerce was already showing a growing trend back at the end of 2019. But the search in e-commerce caused by the pandemic itself went beyond what we expected originally for the short term, I would say. So as you've mentioned before, former in-store traditional retailers were then moving to hybrid strategies, incorporating e-commerce, and getting into this road to only channel. However, there's also your comment on how in some industries and some countries like retail in the United States, most of the purchases still happen in physical stores. So considering that, I wanted to ask you, how are the former online pure player facing this omnichannel challenges to improve customers' experience and to grow or even to at least keep the market share? This is a very interesting question, Laura. It's really interesting to see how pure players like Amazon. Amazon started in 1995 selling 100% online. I want 100% online marketplace. 1995 selling books. Now Amazon is selling almost every kind of different products for sure. In 2017, they started their journey to moving to being also omnichannel retailer. They bought Whole Food in 2017. This represents about 400 supermarkets, physical brick and mortar retailers. And they did that was more to compete in the grocery industry, was also to be able to fulfill online orders from these physical brick and mortar retailer stores, being able to provide same day delivery, two hours deliveries to the prime members in just two hours. So the strategy was to be present in the brick and mortar retailer space, but also to be able to use these stores in order to fulfill online orders. Recently, in last September 2021, Amazon announced that they are planning to roll out about 80 physical stores. These are a physical clothing store. They are also pushing out their new brand, their own brand of clothes. And they are also trying to capture this in-person shopping and those customers that, as you mentioned, still they are going in store in order to buy their products. So let's say in analyzing the reasons behind this strategy of moving into the brick and mortar space for pure players like Amazon. I could say that reaching new customers is one of the reasons and you also mentioned that the second one is also to provide to their customers this omnichannel experience. And we are observing this coming from the digital world like Amazon, but also coming from the traditional brick and mortar space like Walmart and Target and Tesco and many other traditional brick and mortar space that are moving into this digital world. Another reason is important to highlight that is also to test out technology. Scan and Go is one of those examples. Amazon started with Amazon Go some years ago. They pilot this convenient store in Seattle just to test also this Scan and Go technology just to provide a different in-person customer experience without the need of going through the cashiers just to avoid the cashier line and trying to avoid this or provide this cashier free experience to their in-person customer. Virtual dressing is something, is a technology based on augmented reality. What they are trying to do is combine digital information with actual information. So while the customer is in the store testing and trying out new clothes, the app is offering them additional items that they can try and they can combine and trying to somehow to increase their sales in that way. But it's also a way for them with these physical stores to test out this kind of new technology that they are investing and developing. To raise the brand awareness is another reason to try out a fit before trying the clothes, before purchasing them. And this is something that also connect with the showrooms or guide shops that we are also observing a trend in the industry with Nordstrom, Target, Bonobos and other companies. And also I want to bring here the returns because especially in the apparel industry, especially in the fashion industry, returns represent 35 to 40%. So it's truly a high number and the returns percentage is growing with the growth of e-commerce. So it's also a way to reduce these clothing returns. So I would say that these are the main reasons probably for pure players to move into that space. And what is really interesting to me is to observe this movement from digital world to the brick and mortar space from pure players. And at the same time, observing how the traditional brick and mortars already started and most of them started this journey before the pandemic, in order to be able to compete in the online world, is a good example of that. However, the pandemic has accelerated this need for a traditional brick and mortar in order to be present in the digital world and in order to be able to sell online also. Thank you Eva this is super interesting news that you share and I also love the fact that we are showing here what was it like before the pandemic and what is it after the pandemic or almost there. And it's very interesting to see that the trend is the same as just going much faster and it's changing probably the reasons why things are going on. So thank you for bringing all that to the audience. I also know that you have been running a survey for research purposes in this field and already have some preliminary insights that you can share with us. So I would love to have our supporting team, thank you Chan for that. To share the survey in the chat in case those in retail want to participate after closing the event. So I'm really curious to know Dr Eva what's the most surprising fact that you have served regarding the change in landscape of omnichannel fulfillment, and if there was any unexpected results. Yeah, good question Lora. Yeah, this is, as you mentioned preliminary results. This is a survey we run last fall. We analyze the results by the end of December 2021. So we were asking companies about, hey, how are the growth of e-commerce changing your strategies and how is this impacting your supply chains. We receive about 40% of our sample are retailers. Retailers, an important part of those are retailers working on the food and grocery industry. About 40% of the respondents are companies with more than 5000 employees. And one thing that is really interesting is about 80% of them are implementing or planning to implement in the short term, omnichannel distribution strategies. So we asked them about which are the top areas that are having more impacted by the growth of e-commerce. So what did not surprise me is that distribution logistics and order fulfillment are in between these top areas that has been more impacted. And this makes totally sense. Of course, the distribution channel, they need to decide how many channels they are going to offer, how they are going to distribute or fulfill those orders in order to meet their customer expectation. Network design was also on the top list. The reason is that, as we mentioned before, when we are talking about omnichannel, we need to have this integration between the online and the offline channel. We need to design our network in a way that we can provide this integration in between the different channels. So I was not surprised to see that almost 60% of the responses highlight network design as one of the top areas. And I believe that the reason is this need of integrating the different channels. Of course, inventory management and demand forecasting was also very highly rate in the responses and makes totally sense. And this connect with the seamless customer experience. We need to have this inventory visibility and know exactly where our inventory is in order to provide different options to our customer. What I was a little bit surprised is that returns was a knowledge by 35% of the respondents. However, it was expected probably a higher percentage of responses in that area. And I'm saying that because the returns in the e-commerce or digital channel represents in average 20-25% versus the 7.5%, 10% that represents in the BRICA mortar channel, the offline channel. And this is growing in the apparel industries about 35-40%. So it's an area that I believe is going to, or I think that companies are going to pay more and more attention to that area as the growth of e-commerce is also a trend that is currently happening. And one thing that surprised me is that we also asked the companies about which distribution channels are you offering. What we have here is that about 40% of them said home delivery, but about 60% mentioned click and collect. Click and collect is one of the options that is growing. And more specifically, I would say Carp site pick up, especially in the grocery industry. So I was surprised to see how click and collect is gaining market share in this area. Thank you Eva. So I would like to connect all this you have just shared with our second poll, so I'm launching it right now. I hope everyone can participate. We love to have your perspective on our topics. And as you highlighted before omni channel is not just about integrating online and offline channels, but it refers to creating the seamless experience. So the audience today is what are the challenges that they think that companies are experiencing when offering a customer this seamless experience. So some of the option include the integration of the systems as you just mentioned, or deciding where to keep the inventory or where to fulfill from. And also managing inventory redundancy that probably we can talk about more at the end of the event on that if any questions from the audience. So while you all respond, I would like to go back to Dr. Ponson. So here at MIT CTL, you know that we love to think on solutions every time we analyze challenges. So based on that, and while we start seeing the results, I would like to ask you, how do companies deal with the challenges that omni channel strategies bring to their daily operations. Laura, many different ways, I would say there are certain things that are helping companies in order to face these challenges. I'm going to connect this with some of the key pain points we have identified this study. One of the first pain points companies is bringing is to position the right item in the right location where to locate the items, how to fulfill the orders, how to ship the orders. So this is, and this definitely connect with what you just said with the mess of integrating the different channels and how to manage these different channels in every single stage of the buying process. So companies are doing different things. We have examples of those companies that are heavily investing in automation. Ocado in UK is one example, they have fully automated fulfillment centers. They are able to prepare in two to three minutes at 45 to 50 items online order. This is truly fast. They are doing an efficient way in order to be able to also have fast deliveries. However, we need to say here that they are just focused on the online channel. This is just the online channel and they are trying to do a very good job gaining efficiencies about how to prepare this based on automation. Another thing I'm also observing is the use of dark stores. This is a trend that also started in the UK some years ago Tesco was one of the first companies and Ocado that they were playing with this new format to fulfill online orders. I'm observing also this trend growing here in the United States, especially in the grocery industry. However, other industries like apparel industry are also playing and piloting this kind of way to fulfill online orders. Dark stores are basically stores that instead of being designed for customers are designed the layout is optimized for pickers. So we don't have customers in these darker stores. What we have is pickers just preparing online orders. So this is a model I'm also observing and typically they are close to the final customers so they are also able to provide fast deliveries. This is another trend that is also growing. These are a small spaces typically co located in the in the store or very close to the store location fully automated. Another way to prepare in an efficient way online orders and also in a fast way just to meet this fast deliveries that customers are asking so micro fulfillment center is another trend and then the last mile delivery the last mile delivery. How to ship these online orders is definitely a challenge because the last mile delivery represent an important cause of the total logistic cost when we are talking about e-commerce. So companies are here also looking for flexibility and all of the disruption in the supply chain related to the lack of drivers lack of funds is also affecting the last mile delivery is also affecting the e-commerce space. So companies are also looking for solutions here. Autonomous vehicles is definitely some innovation and some of the technologies that companies are exploring especially for the mid mile more than last mile deliveries. But definitely also something that we need in order to be able to complete the entire process. So I would say this is one of the areas just to design and think and rethink their fulfillment strategy and how they are going to fulfill including automation or including new formats and ways to meet that goal. The second thing that was identified is companies are struggling with keeping up with relevant technological advances. So in that sense some companies are very actively in implementing new initiatives and let's say it is one of the examples we have here examples like Adidas that they are offering to you through their stores also their items that they have in the fulfillment center just to also allow you to buy in the store or line and receive at home. Real time inventory visibility is another thing that some companies are investing now we have here the example of Zara. They are able to identify every single item using RFID technology, and this is helping them to know where their inventory is. They know exactly in the store where the inventory is. They also know where is in any stage of the supply chain store distribution centers, intermediate, etc. Mobile point of sales is another trend that is specially for brick and mortars in order to provide a better in person experience. And I would say also automation, new generation in fulfillment center, this is one of the trends I'm observing more in those companies that really are trying to compete in this space and trying to face some of the challenges that we just mentioned Best Buy is one of the example recently they modernized their supply chain in order to be able to prepare their online orders in a more efficient way and a faster way. The second picture is an example is the example of the new generation in fulfillment center that Bonobos, these showroom or guide shops is using. The location they have to fulfill all of the worldwide online orders, they have their 2.5 million items, and they are using 70 robots, these are collaborative robots, these are robots that are helping pickers to prepare their online orders. So I'm seeing more and more companies investing in automation or these collaborative robots that still combines manual labor with some assistance in order to automatic assistance in order to prepare the online orders and make that in a more efficient and fast way. Thank you Eva. So, you already started us answering questions from our audience, while you were presenting because we had questions on the difference between Darkstore and Micro fulfillment center. And we also have in the pool that most people answered that integrating online and omni channel and offline channels is the main challenge they have identified so the technology you shared is super helpful for them to connect with their observations so thank you for that. Yeah, so we are running short of time so before jumping to the Q&A with the audience I'd like to have one last question if you permit. So as it happens with many supply chain topics and considering the additional complexity driven by recent global disruptions. I can imagine you'll tell us there's no one size fits all answer for these questions but I will give it a try anyway. I want to know, and for our audience, what would be your best advice to those working on implementing omni channel distribution and fulfillment within their company for the first time. Where should they start. Okay, definitely this is a complex a question that requires a complex answer. I would say the first thing is to redefine their strategy to think about which are the channels they are planning to offer and which is their fulfillment strategy. I would say this is kind of the very first thing to think about. The second thing is IT system. Companies need fast and integrated IT system in order to being able to provide the seamless customer experience. The third thing and probably this is more for brick and mortar traditional brick and mortar is also to rethink and redesign their physical space, how they are planning to offer or offer a new in person experience to their customers and recently a couple of days ago, Walmart announced their new concept for their in person experience, the new concept of their store. So companies are actively rethinking how to use the physical space in order to provide a better in person experience for their customer. And at the same time they also need to think how they are going to use that space to prepare or fulfill or ship the online orders from that store, because those stores are close to their final customers so this allowed them also for fast deliveries. They also reduce some cost here. So this is the three things and the last but not least, I also want to bring once more the importance of think about how to manage their commercial returns because this is something that with the growth of the commerce is also growing a lot. I think companies should also pay attention to that. Thank you for your recommendation I'm sure the audience truly appreciates that advice. So I want to run the last poll, and then we will keep it open while we answer a couple of questions from the audience. So we want to know what was the most interesting part of today's session for you all. So, we would love to have your answers on that. On the questions from the audience you mentioned click and collect detached. So some of our members of the audience would like to know the details on what does it mean. Yes, these are the lockers. So some companies are offering you the option to pick up your online order. Using these detached devices or detached space. These lockers sometimes are companies that they have inside the store, sometimes is outside the store. In Europe, they are also using this kind of lockers in condominiums or they are using in the metro stations. So these are another pickup point that companies are offering to their customers in order to pick up their online order. And some companies also are using these detached space for returns as an option to drop off the returns and also for some more convenience to their customers for return their items or their products. Thank you Eva. So there's a member of the audience that is asking about the specific impact of the omnichannel changes affecting the 3PL companies. Do you have any comment on 3PL impacted by e-commerce growth and omnichannel? Yeah, of course, definitely. So, yeah, the growth of e-commerce is definitely impacting 3PL companies. There are companies like Amazon, they heavily invest in their own fleet. They already celebrated one billion package using their own fleet. But this is not the case for most of the companies. Most of the companies are using third party logistic providers for their online orders delivery. So this is a growing area also for third party logistic providers. And at the end of the day, what this is bringing, this last-mind delivery piece is also more fragmented now because we need to reach out to the final customer destination. So we are fragmenting this last leg or last part of the total delivery network. So it's challenging because it also connects with the cost that last-mind delivery represents. So shippers are also dealing with the challenge of these last-mind deliveries and the cost associated to that. But definitely a growing area, most of the companies are having kind of agreements, a partnership with third party logistic providers in order to being able to deliver these online orders. And connecting to that, I also want to add that another trend is delivery as a service. Some companies also in order to add flexibility are having agreements with crowdsourcing solutions like Instacar or DoorDash, or some companies like Walmart are building their own delivery as a service solution. And this is also a trend that is being in some flexibility for just this last-mile delivery part of the process. Awesome. Thank you Eva. And I would like to make just one more quick one. One of the members of our audience is asking if you think that omnichannel initiatives help in case of disruption that could be caused by extreme weather, hurricanes, or flooding, how does having an omnichannel supply chain or fulfillment mode or strategy overall would help a company to be more resilient, for example, or to face disruption in case it happens? This is a very good question. I would say that in general, omnichannel is adding complexity to the network. It's adding complexity because companies need to manage the multiple channels and do it in an integrated way. So at complexity is always more source of issues and challenges and problems. But having said that, they also need to have inventory ready in many different locations. So some of them would have redundancy in their inventory. This redundancy at this way to have different nodes able to deliver the orders might help with disruption because somehow add more options to your network. So in that way is in the only way I can see that these omnichannel strategies can help with disruptions because you also are able to deliver through multiple channels so you can also compensate one issue in one channel with another one. But in any case, we need to be aware that implement this kind of strategies being complexity. However, you need to compete and companies definitely I believe that they need to be present in that world. Also disconnect with integration of the online and offline channels, what I'm observing is that companies that are able to use and integrate facilities are also able to reduce the total logistic cost associated to the network and also are able to reduce the lead time associated to those orders. So I truly believe that this integration of the network is helping in all sense, and also probably with disruptions. However, this depends on the kind of disruption we are talking about. Of course, thank you Eva for that answer. So I'm sharing the results of the last poll. Thank you everyone for answering. So most people said that it was very interesting to expand their knowledge on omnichannel, and also to understand the impact of the commerce growth. So thank you Eva for sharing that with us. I don't know if you want to add anything on that otherwise we are going to wrap it up. This is an exciting topic. I truly encourage supply chain professionals to learn more about this topic and to be ready to help the industry in this excited area. Thank you so much Laura for having me today. Thank you Eva and thank you everyone in the audience for joining us today. Remember this is just the second webinar of a series of three that we will have at the MicroMaster in SEM these days. So we're looking forward to seeing you all in the next webinar by the end of February. And stay tuned to our LinkedIn post, course, dashboard and emails to register. Thank you everyone for joining us today.