Using Technology to Manage Expectations in an Omnichannel World, Part 2
This is the second and final part of this multipart series. You can read part one here.
Distribution is in the midst of a significant phase in the evolution from single to multichannel and, most recently, to true omnichannel commerce, where retail (fulfillment via pallets or cases), wholesale (fulfillment via pallets), and e-commerce channels (fulfillment via eaches) converge to keep inventory in motion and provide a seamless experience for the customer across the entire brand. Today’s companies need a fulfillment operating system designed for fast-paced, high-volume, high-product-variety operations, unlike disparate hardware and software solutions anywhere.
Retailers need technology that helps them meet customer expectations while providing a seamless shopping experience across all channels. To achieve these goals, many retailers are leveraging robust omnichannel-enabled, high-yield fulfillment operating models that can help them make a high-yield decision at every point in time, considering promises to customers and stores, inventory positions, time and labor constraints, and other external environmental factors.
Here are five key elements that all retailers should be incorporating into their demand-driven omnichannel supply chain strategies.
No. 1: A Single Inventory View Across Multiple Channels
The same silos that don’t work in the business world definitely don’t work in the supply chain, where complete visibility of inventory (either shared or separate) across all channels is imperative. That means using one system for managing inventory for any channel — something that all retailers should be striving for in the omnichannel environment.
A global footwear manufacturer, for example, should use the same SKU across all its channels for a particular style of shoe, irrespective of whether those shoes are being sold online, offline or via telephone. Historically, many retailers have sold products using separate SKUs for specific channels. In the last five years, many of them have moved to using a single inventory view in their enterprise resource planning (ERP) systems, with merchandising teams merging and buying common SKUs across all channels.
The problem is that many of those retailers’ distribution models remain largely siloed. A shipment of 100 pairs of similar shoes, for example, may be split up into 80 pairs for a retail warehouse with the remaining pairs going to an e-commerce warehouse — and never the two shall meet. Retailers lack the capacity to ship e-commerce orders from their retail warehouses, and vice versa. Even though they may have a single inventory from a system perspective, they’re still restricted when it comes to selling that inventory across channels.
No. 2: Multiple Hierarchies of Inventories
Warehouses and distribution centers (DCs) that historically focused on shipping pallets are now managing cases for stores, eaches for customers, and other specific shipping requirements. This puts unique pressures on fulfillment centers that have to manage multiple hierarchies of inventories and multiple units of measure as efficiently as possible.
To make that happen, more companies are implementing unadaptable automated hardware and software systems. Because most fulfillment systems were built to manage separate inventories and only pallets or cases, they never had to touch individual items. When e-commerce and omnichannel came on the scene, many retailers shifted to using siloed inventories for specific channels. This approach is both inefficient and expensive.
No. 3: A Common Hardware and Software Infrastructure
For the demand-driven omnichannel retail supply chain to run smoothly, the system must be able to handle different types of configurable processes for both retail and e-commerce within a single common infrastructure. When that infrastructure includes all systems (i.e., both software and hardware solutions), the need to segregate the process based on inventory goes away.
With this, the need to track and respond to business growth across separate sales channels also goes away, making it easier for retailers to adopt a single supply chain view and strategy for those various sales channels. This enables intelligent forecasting, replenishment, and inventory management across the network — three things that no successful retailer can afford to be without in today’s competitive sales environment.
Even the retailer that’s using different software systems in two different fulfillment centers is missing out on big efficiency gains enabled by common systems, data and information sharing. Some retailers believe that five years from now, 35 percent of their business is going to come through e-commerce. To support that growth, a high-yield fulfillment operating system can help them build out a common infrastructure that includes software and hardware that works and learns together to reduce errors, maximizes the efficiency from the same space, and helps drive revenue growth.
No. 4: Good Resource Utilization Across All Channels
On track to increase by more than 275 percent between 2014 and 2021, worldwide e-commerce sales are growing by leaps and bounds. As they work to harness this opportunity while also building out efficient omnichannel capabilities, the most successful retailers are also focused on getting the best resource utilization possible across all channels.
Getting there isn’t always easy. If, for example, an electronics retailer that’s using a siloed supply chain experiences a 5 percent uptick in e-commerce sales, utilizing resources across multiple channels may become extremely difficult. Those resources can be as basic as warehouse racking and shelving, or as complex as the software systems that support fulfillment, warehousing and transportation.
The same challenge comes into play during seasonal peaks and valleys, when resources may either be in huge demand or idle (depending on the season). Seek to even out those fluctuations with software that orchestrates automation via collaboration among devices comprised of intelligent robots, inventory stock units or racks, pick-put stations and charging stations, among other pieces of equipment.
It’s all about cross-utilizing resources and optimizing similar resources in the same facilities, and in a way that effectively manages different peaks without the need for additional Capex investment.
No. 5: A System That Can Quickly Adapt to Change
To reach peak effectiveness, the omnichannel supply chain must also be adaptable, agile and flexible. It must have the ability to scale up or down on the fly, all in the name of staying nimble in a world where the rules are changing daily. Driven by ever-evolving consumer expectations and trends like the Amazon Effect, retailers need to be able to provide a seamless omnichannel experience every time and everywhere, regardless of the current business conditions.
If, for example, product return volume unexpectedly rises during the current quarter, a retailer has to be able to immediately adapt to the change — not let returns pile up in the corner of the DC while workers go about their business fulfilling new orders.
Predicting channel growth with 100 percent certainty is essentially impossible, therefore, retailers need adaptable, next-era systems that grow along with them, and that fully support their omnichannel supply chains through this growth.
Blurring the Lines
As the lines continue to blur between offline and online sales, and as companies continue to tackle issues like warehouse space limitations, persistent labor shortage, and the Amazon Effect, the need for automated fulfillment strategies will continue to rise.
More demanding than in-store buyers, 30 percent of U.S. online buyers will take their business elsewhere after just one poor service experience, according to an American Express survey.
Using the five strategies outlined in this article, retailers can effectively design omnichannel supply chains that not only help them efficiently meet their customers’ ever-changing needs, but also ensure cost-effective, on-time, accurate fulfillment in a world that demands it.
Jeff Cashman is the COO at GreyOrange, a global company that modernizes order fulfillment through artificial intelligence-driven software and AI-driven mobile robots built together so they cooperate in deciding on and executing warehouse activities that maximize payoffs and minimize tradeoffs to create the highest yield.
Jeff Cashman is the COO at GreyOrange, a global company that modernizes order fulfillment through Artificial Intelligence-driven software and AI-driven mobile robots built together so they cooperate in deciding on and executing warehouse activities that maximize payoffs and minimize tradeoffs to create the highest yield.