ARC Advisory Group conducts an annual analysis of the global warehouse management systems (WMS) market. The research process includes the analysis of large amounts of information and interviews with executives from numerous WMS software companies; and the process concludes with the publication of ARC’s WMS Global Market Research Study. This years’ study confirmed that the omni-channel retail paradigm remains the most pervasive factor contributing to growth and change within the WMS market. Both pure-play retailers and brand manufacturers with direct-to-consumer channels are revamping their fulfillment operations to better execute multiple order and fulfillment channels. Meanwhile, e-commerce retailers are also exerting demand on the WMS market, whether it is from direct purchase of WMS solutions or through the extension of contracts with 3PL providers to support their fulfillment operations.
Multiple Channels Supported by a Common Facility
Warehouses that have historically focused on pushing inventory to replenish stores are being expanded with new zones to support e-commerce. The integration of these channels is being done in an attempt to streamline costs, develop a holistic and extended view of inventory, and provide a consistent view to the customer. Consequently, the combined operations contain more complex warehouse processes; demand more complex slotting optimization; and require a wider range of material handling and labor requirements. More specifically, multi-channel warehouses require new logic to manage e-commerce waves, put wall processes, and shipment documentation. E-commerce fulfillment also has different volume patterns than traditional fulfillment due to being direct to consumer. For instance, WMS solutions can assist with the high peak to average order ratios typical in e-commerce.
A large percentage of these multi-channel DCs still function with functionally separate operations located under the same roof. But many are integrating the fulfillment operations of the traditionally distinct channels. For example, some of the more visionary objectives for fulfillment channel integration include the sharing of labor and inventory across traditional and e-commerce fulfillment operations within the DC, the inclusion of fulfillment costs in the fulfillment and order promising decision making processes, and the development of more efficient e-fulfillment from stores.
Retailers are also purchasing in-store WMS solutions to improve store-level inventory accuracy and expand their order and fulfillment options. The implementation of these in-store solutions has been growing at a rapid pace, as retailers with brick and mortar locations develop processes to enable the integration of online with brick and mortar channels to support the fulfillment of e-commerce orders from retail locations and the return of e-commerce orders through stores. These solutions support processes such as pick-to -cart, return fulfillment, wave planning, and the ability to see a picture of the item to be picked (valuable for apparel). Now that many retailers have the in-store systems up and running, they’re beginning to take their operations to the next level. Some of the more advanced omni-channel goals include the increase in sales and reduction of markdowns from matching excess store inventory in a slow geography to strong demand from online shoppers. Also, the agility enabled by integrated channels allows retailers to flexibly deploy labor resources to support both brick and mortar and e-commerce operations as demand changes.
The omni-channel order and fulfillment process known as “click-and-collect” is especially prevalent in European grocery retail. This process, involving the pairing of online ordering with customer pick-up, is commonly facilitated through localized warehouses with drive-up kiosks. These warehouses or “drives” are sometimes standalone operations and at other times are co-located with standard retail locations. WMS solutions that support these operations include functionality such as order item substitution rules, order preparation, and customer-specific information such as loyalty program identification.
The omni-channel paradigm shift is being driven in large part by the growth of e-commerce, evolving customer demands, and retailers’ efforts to develop more efficient operations. Fulfillment operations are central to omni-channel retail, and WMS solutions are a core enabler of omni-channel fulfillment. Those companies that have not yet begun the integration of channels still have time to adapt to the changing environment. Omni-channel operations are likely to continue expanding, as smaller companies and late adoption regions adapt their operations. Meanwhile, those companies that have already operationalized omni-channel fulfillment now look to improve upon efficiency and flexibility. I therefore expect omni-channel commerce and fulfillment to expand and evolve for a number of years.