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 and the benefits of multi-channel fulfillment.
Inventory
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, involving high frequencies of similar orders. 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, leading to frustration and inefficiencies, among them:
- If you run these operations on separate inventory management systems, you’ll never get a full, real-time view into all of your inventory—product in distribution centers, en route and in stores. Without that view, you can’t run an efficient, agile multi-channel fulfillment operation.
- You’ll carry more inventory than you need out of fear of having a delivery disruption, duplicating overhead for buildings and labor and ultimately increasing your carrying costs.
- You’ll scramble to move stock from place to place to as dictated by demand, which will dramatically add freight and labor costs because supply and demand has not been properly synced.
A smarter path to multi-channel inventory management….
In the long run, it’s a smarter idea to develop a holistic fulfillment strategy that embraces inventory from all sales channels, even if B2C and B2B channels represent separate P&Ls managed by different executives. Efficiency is the name of the game in multi-channel fulfillment. One master inventory can be used to fulfill orders for all your channels. You can pull this off by using sales forecasts and historical data to figure out what products you’ll need for each channel, where you’ll need them and when. Just as important, make sure you work with warehousing and transportation partners who are well-versed in best inventory management practices.
When companies maintain a single inventory pool for multi-channel fulfillment, they can use the same labor pool, systems and facilities for every order, regardless of its origin and requirements. This leads to long-term savings for facility, labor and transportation costs.
Multi-Channel Fulfillment Case Study: Corkcicle
Corkcicle, a consumer product company started in 2011, found itself facing a good kind of problem. The producer of insulated tumblers, coffee mugs, coolers, barware, canteens and more was experiencing high growth – such high growth that it was outgrowing its fulfillment houses. Part of the problem was the company’s variety of customers and their different points of emphasis – from direct to consumer (fast, accurate, get it out the door) to independent retail (large, complex orders) and mass retail (routing guides with clear compliance requirements). Through a multi-channel fulfillment approach with Amware, the company was able to serve each of their customer categories. Check out the video.
Infrastructure
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, an eCommerce order fulfillment 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.
- Separate warehouses mean more overhead costs for buildings and labor
- Separate warehouses mean more inventory in the system and less control over that inventory
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 that will support the other two regions. 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 B2B bulk distribution and one designed for B2C each-picking. There, the products can be handled, processed and shipped out the door according to each channel’s highly detailed (and distinct) specifications. 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.
Multi-Channel Fulfillment Case Study: Slumberkins
Slumberkins® patented cuddly creatures and accompanying story books teach positive social-emotional learning skills to children. Founded in 2015, the brand saw robust growth from the outset.
Initially an online D2C business, Slumberkins faced complex inventory management and order fulfillment challenges with its sales surge and sought a new fulfillment services provider to help accommodate both its ongoing growth and its future fulfillment needs, which included multi-channel fulfillment as the brand aimed to expand its sales channels. Watch the video.
Information
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. Each retailer has its own set of shipping and receiving demands for pallet size, labeling and more. These requirements can vary by where shipments are going (e.g., the retailer’s distribution center or directly to a store), as well as by product category. Retail compliance is very challenging, and missteps result in chargebacks, which can range from as little as a few cents to several hundred dollars per infraction. You’ll need fulfillment systems and processes that 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. The system also needs to be able to integrate with popular eCommerce platforms such as Magento and Shopify, even if a company is not yet using them – because they likely will be in the future and allowing for scalability and future growth is critical.
Each SKU is stored in its own slot or bin, and each unit within each SKU must be tracked and accounted for. In addition, B2C fulfillment warehouses need lots of pick-facings for picking items into totes or carts, as well as space for preparing small package shipments.
Because pickers can spend as much as 50% of their time traveling around the warehouse to retrieve product, efficient organization of inventory is paramount. This requires a stellar warehouse management system to determine the most efficient picking method, and streamline SKU slotting, inventory tracking and product put-away. Many B2C operations employ automation like pick to light and voice pick technologies to help personnel pick more accurately and efficiently.
All of that can be a steep challenge 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.
Multi-Channel Fulfillment Case Study: FCTRY
FCTRY, a product incubator that helps transform ideas into products, started its life as a wholesale business. However, the company eventually reached an inflection point when it decided to adopt a hybrid model of eCommerce and wholesale. Early in the shift, FCTRY realized that its fulfillment channel couldn’t keep up with the changing nature of the business. FCTRY worked with Amware to develop a multi-channel fulfillment strategy that served both audiences with equal reliability. Check out the video.
The Bottom Line
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:
- can integrate all your inventory and shipping data into a single view, through a single inventory system
- operates a large number of fulfillment centers across the country, so you can choose the footprint that best matches your market
- can suggest new ways to optimize your network, giving your customers better, faster service, while increasing your profit
- has the systems, space and expertise to process B2C orders rapidly and efficiently while also understanding the strict routing guide requirements of big box retailers.
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.
If you’re looking for a single fulfillment provider for all your sales channels, contact Amware today.