As eCommerce growth accelerates, even the most traditional of brick-and-mortar stores are actively selling online. And brands that developed a following online are branching out into retail distribution. These trends have led manufacturers and retailers to tremendous new growth opportunities.
Unfortunately, it’s also led them into a bit of a mess, because while market demand may have gone fully multi-channel, many of the fulfillment activities that companies are using to support it have not.
In fact, not too long ago, more than half of omni-channel retailers still operated dedicated fulfillment facilities for each of their sales channels – as we shared in our story, Merchandise Fulfillment: Adapting to Serve Multiple Sales Channels.
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The problem is this fragmented approach typically leads to too much inventory, too much warehouse space, too many truck runs and redundant management structures. All of which results in too much expense.
To make a profit in the omni-channel world, you need a unified approach to distribution for all your sales channels, with a focus on addressing the problem of the “three I’s” – inventory, infrastructure and information.
Let’s look at each of these key areas – from the problems created by a siloed approach to B2C and B2B fulfillment to the best-practice solutions that support an integrated, highly efficient omni-channel fulfillment solution.
The fulfillment requirements for B2B and B2C channels are radically different, a reality we explored in our article, Using One 3PL for Multiple Sales Channels. So even though your inventory for both channels may be identical, the processes required to pick, pack and ship them are anything but.
In the B2B world, it’s typically about bulk. You usually ship and track inventory by the pallet or case, and there’s less labor involved per sellable unit. Plus, there’s usually a huge customer on the other end. By contrast, in the B2C world, you’re dealing with individual consumer orders and order picks, which are far more labor-intensive per sellable unit.
This explains why many companies choose to maintain separate bulk and direct-to-consumer inventories instead of having one multi-channel fulfillment strategy that encompasses both. It just seems easier.
But having discrete B2C and B2B fulfillment strategies also comes with its own set of problems, among them:
There are stark differences in the physical design and equipment used in B2B fulfillment and B2C fulfillment. A B2B warehouse will probably include racking built for pallets and cases, forklift trucks to move those units, large spaces for receiving and for staging outbound freight, and docks for loading and unloading trucks. Meanwhile, a B2C warehouse will usually have lots of pick faces for picking single items into totes or carts, facilities and software for preparing small package shipments and, often, conveyors and other automation to reduce labor requirements.
As a result, you can’t just throw a B2C account into a B2B warehouse and expect it to thrive – or vice versa.
That’s why many companies have decided to operate separate warehouses for each of their sales channels. It’s also why their total fulfillment costs, across all channels, are out of control.
A smarter path to multi-channel infrastructure management….
In light of this, consider fulfilling B2B and B2C orders from the same carefully designed warehouses and from the same inventory pool – a concept we explored in our article, Do You Need a Separate eCommerce Warehouse?
Divide this inventory in the warehouse into three physical regions, with most residing in a bulk replenishment area. Then, as forecasts determine future demand, and as actual orders come in, use a WMS to send product into the appropriate forward-pick area, one designed and equipped for bulk distribution and one designed for each-picking. The facility should have large areas and docks for receiving and staging pallets and an area fully equipped to sort and pack orders for pickup by small package carriers.
This multi-channel fulfillment approach will result in considerably leaner operations, keeping just enough inventory to meet total customer demand through all your sales channels.
We’ve already noted how challenging and inefficient it is to manage inventory when you maintain separate information systems. But integrating multi-channel fulfillment on a single system can also pose its own set of problems.
For example, when you ask an outside B2C fulfillment-focused company to manage bulk retail distribution, it may struggle to meet the EDI requirements of large retailers, many of whom expect seamless data transmissions without a lot of custom programming. Also, few B2C fulfillment-focused systems can manage routing guide requirements such as creating a different kind of bar code label for each retailer and systemically checking outbound orders to ensure compliance.
On the flip side, if you ask a B2B-focused 3PL to fill eCommerce orders, it may not have a system designed for that purpose and may struggle to process these orders efficiently. Let’s say you’re getting multiple orders through your own web site, your merchant storefronts on Amazon and eBay, and the web sites of Walmart, Target and other retail chains. The system must receive those orders electronically, consolidate them, determine the most efficient picking method, and communicate pick requirements to the warehouse floor for potentially thousands of simultaneous orders. All of that is tough for a 3PL that has traditionally managed pallet-in, pallet-out business.
A smarter path to multi-channel information management….
Whether you handle your own fulfillment or work with a partner, make sure you are using a warehouse management system that’s truly capable of managing inventory for all your channels. This will provide you with visibility into one, universal inventory pool and let you allocate product to any channel, in advance and on the fly. If you can’t afford such a system, align yourself with a 3PL that has already made this significant investment.
Mastering all the distinct nuances of each sales channel’s inventory, infrastructure and information requirements is challenging, but altogether possible if you adopt some of the best practices that we’ve outlined above – or that we feature in our article, Multi-channel Fulfillment Best Practices You Can’t Afford to Ignore.
If you choose to use a third-party fulfillment company to help, be sure to vet all omni-channel distribution partners carefully – and with all three of these important “I”s in mind.
While many providers are highly proficient at serving one channel, that doesn’t guarantee that they’ll be a slam-dunk for the other, especially if they only started serving all channels in the last few years.
The right partner:
Whether you’re adding e-commerce to a brick-and-mortar operation, or adding store distribution to a direct-to-customer business, managing the “three I’s” – inventory, infrastructure and information – will help you simplify operations, reduce waste and enhance control of your distribution network.