Recently, partner Nikki Baird and I released our annual supply chain report, this time focused on the complications brought about by a new omni-channel consumer who has forever changed retail. The resulting report, Omni-Channel Fulfillment and the Future of Retail Supply Chain, examines the business challenges and opportunities retailers face in their ability to satisfy (and hopefully delight) a customer who shops across myriad channels any way they please; the consumer does not care about channels, only solutions.

We have not been shy in our belief that fulfillment as a competitive weapon is a near- to mid-term opportunity for retailers – something that can be capitalized on within the next five years. After that, it (like everything else) will become commoditized – a base expectation of consumers. What this report sought to examine is how close are retailers to achieving true, ubiquitous cross-channel fulfillment? According to survey respondents, retailers are still only in the early stages. But this benchmark report reveals certain trends in motion that hold promising glimpses of a future supply chain transformed by omni-channel retailing. What we’ve uncovered might surprise you.

For example, in a 2010 study of over 30,000 global consumers entitled Capitalizing on the Smarter Consumer, IBM found that:

…49 percent of respondents are instrumented – a 36 percent rise in 12 months globally. The number of shoppers who are currently not willing to use any technologies has also fallen to just 14 percent. The Internet and in-store kiosks remain the most popular options: 75 percent of all consumers are willing to shop on a retailer’s Web site, while 39 percent are willing to use in-store kiosks – a year-on-year increase of 10 percent. But interest in digital TV and mobile technologies is climbing even faster. The number of consumers who are ready to use digital TV has risen 41 percent (from 17 percent to 24 percent), and the number of consumers who are ready to use mobile technologies has soared by 92 percent (from 13 percent to 25 percent). “

But in spite of the fact that more and more consumers are making full use of the available technologies, the great preponderance of retail volume as measured by revenue flows through the stores. For example, the U.S. Department of Commerce states that online sales represent less than 5% of total U.S. retail sales.

Most retailers believe that consumers expect a seamless experience regardless of how they choose to interact with the retailer. But they still (reasonably) expect that the end result will be a visit to the store, regardless of the path to purchase that a customer chooses. In the traditional retail model, a customer order is the market basket, and the customer does a lot of the work physically investigating, selecting, and paying for merchandise – in the store. But in the omni-channel model the consumer digitally investigates and selects, and sometimes even pays for, merchandise, and then wants to take possession of the merchandise in a store. So it follows that the biggest opportunity for retailers is to integrate store-level demand fulfillment withomni-channel customer order generation capabilities.

But today many retailers are either in denial or in transition. While most Retail Winners – 74% according to our survey – try to enable some form of store-level pick, pack, and pay process for non-store customer orders, half of non-winning retailers admit that they don’t enable non-store orders to be fulfilled at the store. For those retailers that do enable in-store order fulfillment, most accomplish pick and pack manually, with varying levels of interaction with the POS system for payment processing.

Currently, the most common process used by Winners is to handle pick and pack manually, and process the payment via in-store POS. For average and under-performing retailers, the most common method is completely manual (pick, pack, and pay).

The state of integration of omni-channel order generation and in-store fulfillment reflects the current state of cross-channel inventory management. Sixteen percent of Winners are managing pick and pick via either distributed order management or e-commerce order management systems and handling payment via POS, compared to 24% of Retail Winners who have enabled demand fulfillment from any channel out of any distribution center. Conversely, none of their peers who responded to our survey report that they have integrated distributed order management or e-commerce order management processes with the stores, and that is consistent with an identical finding (0%) of non-winners who have enabled demand fulfillment from any DC. The two winning capabilities are clearly related: enterprise-wide inventory management and enterprise-wide customer order generation, alongside store-level fulfillment.