Industry buzzwords come and go, but one phrase that is definitely sticking—and pushing shippers to rethink their fulfillment strategies—is “omni-channel.” And while the term may have made Gartner’s most recent list of overused marketing words, omni-channel is holding its own in a world where customers expect to have a seamless experience across all sales channels with omni-channel fulfillment.
Omni-channel fulfillment has had a significant impact on logistics operations, and is largely being driven by the tremendous growth in both business-to-consumer (B2C) and business-to-business (B2B) ecommerce. According to Statista, global B2C ecommerce sales will hit $6.5 trillion (USD) in 2022 while B2B ecommerce sales account for 13% of all B2B sales.
“The ecommerce shift has taken the retail world by storm, and omni-channel is the brick-and-mortar sector’s response to that,” writes HighJump Software’s Guadalupe Pagalday in What Does Omni-channel Mean to your Distribution Center Operations? Put simply omni-channel fulfillment allows consumers to get what they want, however and whenever they want it.
“Consumers demand and depend on omni-channel options, which likely have put a lot of pressure on your distribution center (DC) and fulfillment operations,” she writes. “You have to meet your customers’ needs while also keeping a close eye on the efficiency and profitability of your business.”
Retailers Struggle to Serve Multiple Channels
Retailers face particularly high barriers when it comes to efficient and effective omni-channel fulfillment. According to Retail Systems Research (RSR), that’s because the traditional retail supply chain was designed for one thing: to fulfill to stores. So with consumers now demanding so much more, retailers must be prepared to respond.
“Unfortunately, supply chain challenges are particularly acute: lack of visibility into inventory (wherever it may be), increased pressure on inventory turn and margins (making it difficult to continue to proliferate inventory to support a proliferation of channels), and a growing sense among retailers that they aren’t just missing out on some demand – they are missing out on a lot of demand,” according to RSR’s Omni-Channel Fulfillment and the Future of Retail Supply Chain.
The good news is that there are ways to break through these barriers and create an omni-channel fulfillment strategy that is both efficient and effective. Here are some tips that Roberto Michel outlines in Logistic Management’s Warehouse/DC Management: Six best practices for better inventory management: (For more tips and a complete explanation of each strategy, read the full article here.)
Pay attention to demand planning.
Establish priorities for multi-channel fulfillment by prioritizing wholesale orders, prioritizing e-commerce over replenishment to stores, or some other measure.
Leverage the power of distributed order management (DOM).
DOM is especially useful for companies trying to make decisions about whether to fill e-commerce orders from a DC, from a store, or split the fulfillment nodes for orders.
Utilize common bin locations.
Leveraging common, forward-pick bins for most inventory can bring labor efficiencies and a greater ability to share inventory. For example, if a wholesale order for a SKU typically is going to be so big it would deplete the pick bin, then it may make sense to pick wholesale orders from an overstock location.
Adopt a disciplined approach to inventory management.
In today’s fast-paced distribution environments, good inventory management is the foundation for success. Much of your success with inventory management is about establishing and then maintaining operational discipline. Once you get a process started, having the discipline to do it right every time is critical.
Key Operational Requirements for B2C Fulfillment
- Inventory management. When you ship to stores, you track pallets or cases. When you ship to people, you might have to track hundreds or thousands of units of a single SKU, and may also have to track serial numbers.
- Infrastructure. ARC Advisory Group recently reported that 47% of multi-channel marketers use a “web-only” DC for Ecommerce sales. Separate warehouses for multiple channels means redundant buildings, people, systems and inventory.
- Information systems. If you ask a B2B-focused 3PL to fill Ecommerce orders, they will struggle if they don’t have the right systems. The system must receive orders from multiple sources (your own website and many other merchant storefronts like Amazon and eBay), consolidate these orders, determine the right picking method, and communicate pick requirements to the warehouse floor. Not every WMS is capable of doing this efficiently.
Amware Logistics examines these key omni-channel fulfillment challenges in detail in the Ebook “Mastering Multi-Channel Fulfillment.”