Omni-channel fulfillment is arguably today’s hottest supply chain topic. My colleagues and I have written a number of blog posts on individual case studies on this topic. Here is a case study on an anonymous major US retailer that likely has a store location near you. How do your fulfillment operations compare to this leading retailer’s? I will refer to this anonymous retailer as “Retailister.”

RetailisterRetailister currently operates 9 traditional store replenishment DCs and 4 e-commerce fulfillment centers. The company also engages 3PLs during the peak season. Retailister operates with a global inventory system that provides comprehensive inventory visibility. This capability is enhanced with an established distributed order management (DOM) system. Going forward, Retailister is expanding its inventory visibility deeper into its supply chain by obtaining production and inventory information from suppliers to obtain chain-of-custody and “factory to port” visibility.

Omni-Channel Fulfillment Operations
Retailister predominantly utilizes its traditional store replenishment DCs for that purpose and the e-commerce fulfillment centers for online orders. However, store replenishment DCs also fulfill high-volume SKUs ordered online during the holiday peak season. Come November, the store replenishment peak has diminished, providing slack resources in time to support the retail ordering peak.

Retailister’s stores are also enabled to ship items. But the practice of ship-from-store is used as an exception because the company does not want the stores to initiate split shipments (As a side note, Steve’s post from Monday on Walmart’s omni-channel initiatives states that 65 percent of customers want to have items consolidated in fewer packages). However, Retailister’s stores do fulfill a lot of buy- online, pick-up-at-store orders. They also make sure that safety stock is retained at the stores, as store traffic is the store’s primary customer. This year, the company is engaging in a smart fulfillment sourcing initiative that is further evaluating the merits of ship-from-store.  Previous ARC research has shown that many organizations are concerned with the efficiency of ship-from-store operations. In particular, Retailister will be evaluating the merits of shipping from the closest stores to shipping destination and the use of underperforming stores for this purpose.

Conclusion
I consider Retailister’s omni-channel fulfillment operations to be more sophisticated than most organizations. In particular, the company’s global inventory visibility and distributed order management system serve as a foundation for the integration of channels and the expansion of additional order and fulfillment combinations. The company’s initiative to obtain greater visibility into its sourced orders from suppliers will increase its ability to properly match supply with demand. I am interested in learning about the findings of the company’s “smart fulfillment sourcing” initiative. If this pilot uncovers efficient scenarios for ship-from-store operations, Retailister’s omni-channel fulfillment practices will move into the Leaders category in my book.

NagyIt used to be that clothes shopping for me was an in-store experience, browsing the aisles and casually perusing around to find the perfect item.  These days, life is filled with work, play dates, and kids sporting activities leaving little time for enjoyable store visits.  Online shopping from my computer or my phone has become my go-to.  Items can be shipped to the house or a local store for pick up and, if returns are needed, I can send them back in the mail or drop them off at the store.  These touch points make it easy for me as a shopper, but make the multichannel supply chain of products, deliveries, and returns challenging for the retailer—especially when the touch points are both global and country specific.

Consumers, like me, demand the same experience, whether shopping at a store or online, whether product is delivered to the store or home.  Retailers and manufacturers are under increased pressure to support that level of consistency to avoid losing a consumer to another provider who can meet their needs.  And, consider those demands as retail volumes continue to increase around the world, particularly in regions like China where more and more consumers living in Tier 3 and 4 cities are turning to the internet to make purchases.

According to a recent analyst report, The Evolution of Supply Chains in a Direct-to-Consumer World, manufacturers and retailers are increasingly looking to global transportation management systems (TMS) to support a seamless multichannel experience. They are upgrading physical assets and IT assets, using more technology to provide comprehensive status information and better manage transportation and warehousing. Warehouse management system (WMS) and TMS technologies are essential to developing a cohesive approach capable of combining network design, inventory management, delivery priority, and lane choice in a dynamic way to offer best-in-class fulfillment.

Companies that plan to purchase or upgrade their TMS systems should be looking for particular capabilities that support this complexity. Companies should choose the best mix of options, depending on what they consider most important to gaining a competitive advantage: agility and speed, supply chain visibility, event management and on time delivery, freight flow density, inventory management, and continuous improvement. In a supporting role, a TMS solution can be tailored to each network, and it can provide essential features that are shared by different multichannel operations so the company can continue to meet consumers’ rising expectations, even as shipment volumes increase.

 

Brent Nagy is Director of Customer Strategy for C.H. Robinson. Brent has been with C.H. Robinson for over 10 years and has spent the majority of that time consulting, engineering and implementing onsite at client locations. His experience spans multiple sectors with a focus on heavy manufacturing and automotive supply chains. In his current role, Brent oversees strategic customer engagements whereby leveraging account management talent and C.H. Robinson’s broad menu of services to deliver on client expectations.

 

Kevin X. Jones, the Vice President of Inbound Transportation at Walmart, and Sheila Taylor, the Vice President of Logistics at Sam’s Club, discussed Walmart’s approach to omni-channel logistics at the eft (eyefortransport) conference last week.

Walmart’s ultimate goal is to understand their customers’ expectations, and yet be able to meet these expectations in a profitable manner.  “We are expected to make a profit,” Kevin said.

The task is not trivial.  In the first quarter of 2015 the company had $115 billion in sales, with 17 percent growth in ecommerce sales.  The world’s biggest retailer has 260 million customers across their channels, which they serve with a combination of their own fleet and third party carriers.

In the US, their fleet is primarily focused on outbound moves.  Walmart ships 6.3 billion cases annually out of 23 distribution centers (some run by 3PL partners) using roughly 6,000 tractors and 58,000 trailers on which they drive over one billion miles.  Walmart employs over 12,000 associates in the transportation department.

Sheila talked about putting the customer in charge.  Customers don’t want to do as much driving.  Walmart’s customers have decreased their trip distance by 11 percent, partially based on Walmart opening more stores, particularly smaller format stores in more urban settings, and partially based on ecommerce sales.

There has been growth in mobile, up to 70 percent of customers use smartphones to shop.  Walmart customers do come into the store and touch and feel products and then buy online, hopefully from Walmart.

Customers want goods fast and free.  22 percent of customers want to buy online and pick those goods up somewhere – at a store, or in a locker closer to their residence.  And the pickup destinations aren’t easy to forecast.  Customers are starting to buy goods for vacations, for example, and having them sent forward to the vacation destination.  65 percent of customers want to have items consolidated in fewer packages, and 63 percent of customers want to schedule a day and time for delivery.

While the demands on logistics are increasing, the pressure to move goods efficiently remains.  Trailer utilization remains important despite the growth in each picking and shipping.  Walmart executives know they don’t do a good enough job in inventory management at the store.  The store level inventory accuracy must increase to facilitate new omni-channel flow paths.

The company knows they can’t build separate networks to support the different flow paths to the customers.  They will need to move to a dynamic distribution model where goods don’t always flow from DCs to stores; or ecommerce warehouses to homes.  The company will need to support new flow paths where goods may ship from a retail DC to a home; or an ecommerce warehouse to a store; or goods may flow to new, more customer centric, omni-channel formats not even in existence yet.

Walmart knows they don’t know how to do dynamic distribution yet; they will need help from 3PL partners and suppliers to move to this new model.  They will need to continue to do pilots and experiments to learn what works.  They have experimented with home delivery of groceries and grocery store pickup in Phoenix, Denver, and San Jose.

And in Phoenix, the retailer has began testing off-site pickup with a delivery truck parking in local business centers for two hours each week. The temperature controlled truck is segmented to keep frozen foods, refrigerated foods and items at room temperature. Walmart coordinates with area businesses to determine the appropriate times to park the truck at the mobile pickup site. At the site, customers pull up and are treated to a bottled water and snack while their online grocery order is retrieved from the truck and loaded into the customer’s car.

walmart omnichannel truck

But Kevin said that when an experiment works, when they learn the costs and prove they can make money, Walmart is capable of scaling very quickly.  Mr. Jones pointed to the example of neighborhood markets.  For years they struggled to make money with these formats, when they figured out how to make a profit with this format they build 300 of these stores in the second half of the year.  None of this was in the strategic plan at the beginning of the year.

While there is much work to do to improve their omni-channel capabilities, there have also been wins.  Sheila pointed out that the integration between the ecommerce teams and store merchandizing is improving.  The ecommerce team is doing a better job of giving their brick and mortar colleagues a head’s up when a particular SKU is selling extremely well.  And the ecommerce and store procurement teams are talking more and doing a better job of leveraging their joint spend.

Categories Omni-channel logistics
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Source: blog.wagepoint.com

Source: blog.wagepoint.com

Earlier this week, news broke about the California Labor Commission ruling on an Uber driver being classified as an employee, rather than a contractor. My understanding of the criteria used to make that determination is limited. But it does make me question whether this determination will eventually effect truck owner-operators. The first business model that came to mind is that of a mid-western family owned company’s historical owner-operator model, where they sold the truck to the owner operators, facilitated the tendering of loads, and established mileage compensation. Also, what about local parcel delivery subcontracted out by the large parcel carriers? Here is an IRS checklist for those of you interested in Federal guidelines.

Now on to this week’s logistics news:

Amazon doesn’t appear to be deterred by the California Labor Commission ruling cited above. The company is developing a mobile application that would recruit and pay individuals to deliver packages to destinations within their vicinity or destination.  The conceptual service, reported to be called “On My Way” would also partner with brick and mortar retailers to rent their space for storage. It is still not determined whether or not Amazon will go to market with this service.

Source: Association of American Railroads

Source: Association of American Railroads

Intermodal has been growing precipitously for a number of years and this week it achieved a new record in the US. For the week ending June 13, US intermodal volume was 283,363 containers and trailers, the highest week on record for intermodal units. This is in contrast to an 8.1 percent decrease in carloads, when compared to the same week last year. The commodity groups the dragged down the carloads are predominantly bulk commodities such as coal, petroleum, and metallic ores.

The Trans-Pacific Partnership took one step closer to becoming a reality this week as the US House of Representatives passed legislation to give President Obama “fast track” promotion authority. However, the Senate still needs to vote on the measure and this may prove to be difficult as this issue is a rare occasion where the Democratic President and the Republican majority of legislators appear to agree with each other more than the Democratic legislators. I’m guessing this will be an ongoing news story.

New research conducted by BCG and CH Robinson estimates that, following the completion of the Panama Canal Expansion, up to 10 percent of container traffic to the U.S. from East Asia could shift from West Coast ports to East Coast ports by 2020. The research involved scenario analysis considering various levels of demand, capacity, and costs. The report is titled Wide Open: How the Panama Canal Is Redrawing the Logistics Map. A copy can be downloaded at www.bcgperspectives.com.

Fetch Robotics, a start-up that is developing robots for logistics, announced a new round of private equity funding this week. I was personally briefed by Fetch Robotics on the company’s vision for its robots, Fetch and Freight. I can say that they have moved beyond the academic phase and are the closest vendor to making collaborative autonomous robotics a reality in the warehouse, to my knowledge.

ZimFun-File News: You can buy a one trillion Zimbabwean dollar note on eBay for only 35 US dollars! The only problem is that it is technically only worth 40 US cents. Zimbabwe officially switched to the US dollar last week. Reportedly, the Zimbabwean dollar reached inflation rates of 500 billion percent in 2008. I’m not even sure how many zeros that is- which is why I wrote it out in words instead of numbers!

 

Have a good weekend! This week’s video – Money for Nothing by Dire Straits

 

Categories This Week in News
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Doug SurrettEight percent of retail sales in the United States are made online today and e-commerce will grow by more than 10 percent a year reaching $370 billion in 2017, according to analyst research.

Manufacturers and retailers need more than websites to ride this tidal wave. Sales are short lived without the capacity to fulfill orders in an efficient and timely manner.

Parcel-centric transportation management software (TMS) has traditionally been a solution for business to consumer (B2C) commerce. Its primary function is to maintain the rates and print labels for sending packages through UPS, FedEx and the Postal Service.

Meanwhile, shippers and third party logistics providers in the B2B sector have typically used TMS systems designed for large shipments of less-than-truckload, truckload and intermodal.

The boundary between B2C and B2B has blurred as e-commerce expands in larger-than-parcel items (generally more than 150 pounds) like patio furniture and outdoor equipment. Large parcel carriers do not offer nationwide delivery solutions for these types of shipments. Omni-channel retail and supply chain strategies have also expanded the boundaries of traditional e-commerce.

Both trends are opportunities for 3PLs to take on more business by saving their customers money with TMS systems that consolidate parcels into LTL, truckload and intermodal shipments across multiple distribution channels.

Parcel-centric TMS systems do not have the tools to optimize and consolidate parcels into larger shipments. Likewise, very few TMS systems in the LTL, truckload and intermodal market are able to consolidate parcels. Identifying and executing savings across a nationwide or global network is difficult, if not impossible, by using one or both types of TMS platforms.

TMS designed for all shipment sizes, on the other hand, can create efficiencies and better enable businesses to ride the wave of e-commerce. Here are three examples how:

Zone skipping: Imagine a 3PL has 10,000 orders that need to go to a common destination such as Los Angeles from a single distribution center in Cleveland. Rather than ship the parcels individually, the parcels could be consolidated into a truckload and sent to a UPS facility in Los Angeles for final delivery.

Shippers and 3PLs with significant parcel volumes can save between 30 and 50 percent with zone skipping rather than shipping items individually from origin to final destination.

In this example, a TMS system can instantly find the least-cost solution that satisfies all delivery constraints and print the shipping labels for UPS to deliver in Los Angeles. It can also account for the weight, dimensions and volumes when consolidating parcels.

If 10,000 packages was the maximum for a truckload shipment, but total orders for Los Angeles were 10,300, the TMS could instantly determine that sending an LTL shipment of 300 packages to a UPS facility in Salt Lake City, for instance, would be more cost-effective than shipping the additional packages individually or as an LTL shipment all the way to Los Angeles.

Zone skipping generally requires an LTL-size shipment or larger to be feasible, but opportunities do exist and would never come to light without a TMS that can instantly optimize the freight selection process.

Standardization: Shippers and 3PLs that lack sufficient volumes to consolidate parcels can use a single TMS to maximize savings by having a company-wide freight selection process to ensure the best rates and carriers are being used to ship parcels, LTL and truckload shipments.

 The benefits of having a globally optimized freight selection process go beyond daily transactions. TMS systems can help 3PLs obtain new business by running various “what if” scenarios and models using historical shipment data in order to create a compelling savings story for current and prospective customers.

Consumer choice: Giving the customer the option to save money in shipping costs for choosing slower transit times is a win-win for both parties. By looking at all freight in the network today and future commitments, a TMS can show the price differences for shipping goods using the ground network or air freight.

Business and consumer customers expect to know shipping costs and delivery dates when making buying decisions, from ordering a pallet of bricks or a new pillow online. TMS technology can give instant and accurate pricing by factoring savings from load consolidation, zone skipping and other opportunities and share that visibility with the customer and create a low-cost advantage for shippers and 3PLs.

Riding the wave of e-commerce is difficult when using disparate TMS systems. To maximize savings and take on more business, shippers and logistics providers need technology capable of optimizing for all types of shipment sizes and modes of transportation.

 

Doug Surrett has been in the Logistics industry since 1988. He currently serves as Vice President, Global Logistics for MercuryGate where he oversees the company’s expansion plans outside the US market.  Previously, Doug had been Vice President of TMS Consulting for RedPrairie. Before joining RedPrairie, he worked at UPS in Operations, IT and Customer Automation. He has also owned his own consulting practice focused on TMS, Global Trade and WMS software systems.