Why Do An Omni-channel Transformation

Overview

In an era when digital transformation often means a reduction in printed media or elimination of paper in favor of mobile devices or a virtual experience, manufacturers in the paper and print industry face the challenge to differentiate products and the customer experience.  It’s time to look at an omni-channel transformation

For Sappi, differentiation in an industry challenged by change in consumption means making improvements to channels and improving the customer experience. This has not been an easy task, as customers of the print industry are becoming aware of the need to change their interactions with suppliers in a way that meets their unique business needs. And second, a technology gap often hinders omni-channel operations. Too many industrial manufacturers and retailers lack adequate resources to meet their customer demands. Once these companies surmount these challenges, they will be able to deliver a truly omni-channel experience.

Sappi Limited, originally incorporated as South African Pulp and Paper Industries Limited in 1936, is a South African pulp and paper company with global operations. The company, headquartered in Johannesburg, produces and markets printing paper, packaging, specialty and release paper products, dissolving wood pulp, and forest biomaterials for Europe, South Africa, North America and other export markets. According to Didier Magnien, IT Director of Sappi, the company has transformed customer experience and engagement using e-commerce built on SAP HANA technology.

Transforming the Customer Segment

Sappi viewed its channels to market according to two basic segments: merchant-retailers and customer-direct; with each serving the Europe and North America regions as primary markets. The company believes in maintaining a strong connection to suppliers and customers. Since 1991, the company used an EDI (electronic data interchange) system and middleware that automated most customer orders without manual intervention. EDI technology for most companies has been expensive and time-consuming to implement, with projects often spanning several months. As part of the company’s digital transformation initiative, Sappi targeted the European markets as an opportunity to transform customer segments and use the merchant-retailer channel. 

Re-evaluation of Sappi’s customer markets represented a significant step change, requiring a re-assessment of the underlying technology that supported its business. The merchant distribution channel was not efficient or profitable for either the merchant or Sappi. The merchant channel accounted for 70 to 80 percent of Sappi’s sales where, traditionally, the merchants are responsible for acquiring and processing customer orders and making the final delivery from their local stocks.  In the beginning, this distribution model made sense allowing Sappi to focus on manufacturing and bulk distribution to merchants.

But, over time, Sappi was asked to perform a considerable portion of the order processing and delivery to final customer process to facilitate the sale on behalf of the merchants. In 2014, Sappi looked for solutions to address the supply chain issues, resulting in a changed merchant role and increasing the direct channel to the customer where appropriate. Such a move to serve hundreds of thousands of direct customers required some process redesign and technology investment in the SAP systems.

Sappi end customers are typically printing shops that specialize in producing printed communication materials such as brochures, magazines, catalogs, and direct mail of various formats and sizes located in Europe.  Many of these medium-sized businesses have limited systems knowledge and no IT department. Other print shops are larger and have internal IT systems that require a level of IT integration between Sappi and the customer.

Value of the Omni-channel Transformation

Many in the retail industry believe that the omni-channel retail experience means that customers expect a similar experience across channels, with customer interactions in these channels the real driving point of the experience. However, as you look deeper into the omni-channel customer experience, you see that this is often not the case. Each channel represents a distinct selling or interaction opportunity for the retailer and must be treated differently.

As Sappi transformed its customer segment, it was necessary to create a Sappi e-commerce site, called “E-Shop.” This was especially true for medium-sized print shops, as the change in customer segment required Sappi to upgrade its technology. Using this e-commerce site, customers can check inventories in real time by directly accessing the information in the SAP system. This allows customers to book orders, direct debit, track orders, access and print sales order documents, or make copies of invoices using a computer web browser or from any mobile device.

The growth of e-commerce made these new processes a natural evolution for Sappi, as it enabled the company to meet the changing needs of its consumers. In the e-commerce environment, when a consumer enters the site, for example, the level of personalization varies by whether or not they have signed into their account.

If signed in, the site can use previous browsing, transaction, and search history to recommend additional products.  Alternately, cart abandonment information can be used for a re-targeting campaign. Even without signing in, the site can use search history to make recommendations.  This level of personalization and customization is simply not possible through the merchant channel. Merchants cannot use prior shopping patterns to personalize the experience or figure out what products the consumer may need. However, one thing does connect the varied channels of operation: product availability. If the product is not available through the channel of choice, the customer most likely will move on to another retailer that can fulfill his or her order.

In the past, the larger print shops often used their own print software capable of advanced planning (example: Masterprint). This software provided them with enhanced capabilities, such as helping the staff optimize the printing process and deciding on activities such as the amount of ink, time to print, and cost calculation for each job. These customers often preferred to use their own tools rather than Sappi’s e-commerce site. For these customers, Sappi used SOA (service-oriented architecture) integration and web services to integrate their SAP instance directly with the customer’s software.  This provided a similar customer experience that users were accustomed with eShop. Using the capability of SAP HANA, customer integrations could be accomplished with one week of effort, unlike the previous EDI and middleware integrations that would take months to implement. This effort Sappi made to transform the way paper is sold and differentiate each unique direct customer segment is characteristic of other leading paper manufacturers’ and retailers’ omni-channel experience.

Regardless of the size of the print shop, all customers expect a seamless experience, not just a similar one. Whichever channel the consumers choose (and the customer journey is certainly not a linear, single-channel path), they expect to find the product they want. And they expect to be able to receive it through their channel of choice. The connected channel experience also applies to returns, as customers want to return products in the easiest manner possible. This unified brand experience is the essence of omni-channel. And the move towards e-commerce is Sappi’s first step in changing the omni-channel nature of its business.

Recommendations

When it comes to the omni-channel customer experience, many retailers across many industries are tempted to replicate a similar customer experience across channels. The problem here is that each channel is its own interaction point and is designed to deliver a different experience. Instead, the true driver of omni-channel customer experience is inventory availability to be able to fulfill orders on time and through the appropriate channel.

So how do forest products, pulp, paper, packaging industry manufacturers like Sappi enter the true omni-channel world? The key is to look at the big picture of what the omni-channel experience really is. No two channel experiences will be exactly the same and the customer does not want them to be. Instead, he or she is looking for a hassle-free transition through the channels on their buying journey. This means that products must be readily available across channels and customer orders fulfilled when the products are needed. Without a customer, there is no customer experience; without the product, there is no customer.

Based on ARC research and analysis, we recommend the following actions:

• Expand e-commerce operations. The market is steadily growing, with survey respondents anticipating 30 percent growth over the next five years. Companies need to adopt an online and mobile strategy that utilizes the key technologies outlined earlier to ensure timely fulfillment.
• Empower the customer. Forest products, pulp, paper, packaging industry retailers need to put control of the customer experience in the hands of their customers. This means making multi-channel fulfillment and returns management a priority. Aligning inventory across channels, warehouses, and distribution centers will allow enable "anytime, anywhere" retailing. This applies to buy-online/pick-up-in-store, order-in-store/ship-to-home, and store transfers.
• Close the technology gap. Technology today provides real-time views into orders as well as inventory, enabling cross-channel selling and fulfillment. Companies should also evaluate applications such as inventory optimization and real-time inventory location tracking.

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Keywords: Sappi, Paper, Packaging, Pulp, Forest Products, Wood Fiber, SAP HANA, Omni-channel, Retail, Supply Chain, Logistics, Distributed Order Management, ARC Advisory Group.