In last week’s Retail Paradox Weekly, we highlighted some of the findings from our newest benchmark study that will be published tomorrow, Retail Supply Chain 2012: Globalization, Localization, and Cross-Channel. To summarize the study: the increasing demands for inventory flexibility that a cross-channel strategy makes on supply chain are only beginning to be felt and understood.

The report highlights that retailers are still unsure the extent to which changes on the selling side of their businesses affect the supply chain. But the buy anywhere/get anywhere selling model that has emerged is forcing a re-think of the entire operating model. For example, it means redefining the stores’ role in the supply chain, from being purely on the receiving end to being an active participant as both a destination and a source for inventory. For Retail Winners the overall challenge is seen as the need for a more agile supply chain as the best response to the long-term unpredictability of demand.

The need to support buy anywhere/get anywhere shopping, and the desire to enable a more agile response to demand, mean big changes for the supply chain. And that equals risk — big risk — for most companies.

When the Going Gets Tough…

When talking about risk, the discussion immediately turns to strategy vs. execution. Strategy is the job of the executive team, and perhaps there isn’t one bigger in retail than ensuring that the supply for goods meets the demand for them, efficiently and profitably. In the study, Retail Winners say they are concerned that “Supply Chain Management and Merchandising Management are often in conflict “ as an organizational inhibitor that could create risk for the overall strategy. Winners seek to address that organizational friction by implementing cross-function metrics that improve communication between them, while also looking for an “executive champion ” to help overcome the difficult-to-prove ROI of new supply chain technologies.

Well and good, but the risk is bigger than an inter-departmental issue — “supply chain ” gets to the heart of the business. So “supply chain agility ” seems like the perfect issue for the executive team to get focused on in 2012. In the past, it was sufficient for most Winners to empower the Supply Chain executive to make important decisions regarding the supply chain. For other retailers, it tended to be the CEO who was the ultimate decision maker. While the greatest number of non-winners still believes that the CEO must be the decision-maker, executive decision-making collaboration is key for Winners, particularly between the Supply Chain executive, the CFO, the Chief Merchant, and the CEO.

But while many over-performers see executive collaboration as important in ensuring a more agile supply chain, their perspective is still fairly narrow and traditional, focusing on getting Supply Chain and Merchandising to work together better than they may have in the past. Some executives, most particularly the Chief Marketing Officer, are viewed as generally outside of the discussion. That reflects the predominant “product-oriented ” culture found in so many retail companies; for many, it’s still all about moving products through the selling channels. In the 21^st Century world of retailing, it’s not about how retailers want to sell, but how consumers want to buy. To the extent that the CMO is responsible for creating excitement (and thus demand) for the Brand with customers via any and every channel, the Marketing point-of-view must be represented in any discussion about supply chain performance.

What about other executives? In the study, the CIO (the executive responsible for all those systems that need to be modernized and integrated) is seen by the majority of Winners and other retailers alike as unimportant to decisions about the supply chain. And the executive who is most responsible for execution at the point of service, the COO, is not viewed by either Winners or others as important, even though in a true cross-channel fulfillment model, stores are active participants in the supply chain.

The fact that respondents to the survey view “supply chain governance ” rather narrowly, keeping the pressure primarily on the top Supply Chain executive and the Chief Merchant to “work it out “, is in many ways jarringly similar to how even winning companies view governance of another critical business function: IT. In RSR’s May 2009 benchmark study entitled IT and Business Alignment in Retail Benchmark Study, we found that while it was clearly a winning behavior for the Executive Committee to oversee overall IT spending, most executive steering committees did not get involved in governing potentially conflicting business priorities for IT resources (ironically, this is especially true of winning retail organizations). The only plausible explanation for the executive team’s lack of involvement is that they wanted leave it to LOB executives and the CIO to “work it out ” among themselves, essentially placing success or failure of the IT agenda squarely on the shoulders of the CIO.

The same is true for the Supply Chain executive in the new study. While it is said that “when the going gets tough, the tough get going “, for the challenges facing today’s retail supply chain, the answer seems to be, “pass it to the supply chain guy “.

Follow King Arthur’s Example

The fabled King of Camelot established the concept of a management “roundtable “. As that relates to retailers and their supply chains, the days of handing all the decision-making to a single Supply Chain executive are past. The CEO needs to know that the supply chain supports the go-to-market strategy. The CFO needs to bring money-management expertise to the table to ensure that inventory, which is after all nothing more or less than money in another form, is being leveraged profitably and with minimum cost. The Chief Merchant needs to know that merchandise plans consider the true cost to land that merchandise. The Chief Marketing officer needs work with the supply chain to ensure that demand-generating campaigns can be supported. The COO needs to make sure that all the selling staff at the point of interface with consumers has what it needs to satisfy customers. The CIO needs to know what service levels are required throughout the demand fulfillment chain and position information technology resources accordingly. All of these executives need to be at the “Supply Chain Roundtable “.