The Omni-Channel Dilemma: Where to Invest

Over the last few months, Clint Reiser and I have been working on an extensive omni-channel data set. We presented our findings at last month’s CSCMP Global Conference in San Antonio, TX. We are planning to release a comprehensive strategic report in the next few weeks that will highlight the key trends, business strategies, and technologies currently in use for an omni-channel environment. I am also working on a new market study that will examine the omni-channel fulfillment landscape, with a deeper look into market penetration of Transportation Management Systems (TMS), Warehouse Management Systems (WMS), Distributed Order Management Systems (DOM), Inventory Optimization, and Demand Planning applications. From the research we have done, I can certainly say that there is a wide technology gap in the current omni-channel environment.

From our research, there are two technologies in particular that jump at me as both vital and under-utilized. The first is distributed order management (DOM). According to our data, only 58% of our omni-channel survey respondents have a distributed order management system in place. Distributed order management systems allow an organization to capture all information in the order management process across all relevant channels. This includes the entry of the order, sourcing, payments, and fulfillment. It also spans all channels of sales operations. The benefit is that it doesn’t matter where an order originates. All fulfillment channels have access to the information and the organization can appropriately allocate the inventory depending on stock levels, demand requirements, and timing of fulfillment. To the consumer, this is all a seamless experience, and that is all they expect. The customer wants to be able to order a product online and pick it up in the store. Or, if they are in the store, and the store is out of stock, they want it shipped to the house. The reality, however, is that too many organizations do not possess these capabilities right now. This is a major deficiency of the current state of omni-channel operations.

The second technology that is underutilized is inventory optimization. This technology enables companies to balance their inventory levels with customer demand. Clearly this is easier said than done. There are a variety of market conditions that impact inventory management, including economic factors, supplier relations, and fluctuating and seasonal demand for products. However, the use of multi echelon inventory optimization software can help organizations identify the appropriate amount of stock needed at stores, warehouses, and distribution centers. By carrying less physical, organizations can reduce their inventory carrying costs and become more profitable. By matching supply with demand, the customer is able to find the product they need / want, and the organization can fulfill it through the appropriate channel. But again, this is a technology that is under-utilized by too many organizations.

Our upcoming strategic report will highlight some of the other areas which are lacking and those that are more robust (WMS, for example). But for now, I’ll leave you with our 5 key takeaways from our omni-channel research.

1. Omni-channel is a marathon, not a sprint. There is still a long way to go and a lot of work to be done. You cannot try to rush the process; improper planning will make omni-channel initiatives fail.
2. Put the product first. Inventory availability and fulfillment is at the heart of omni-channel. Once the foundation has been set, then bring in the customer facing technology to enhance the customer experience.
3. The customer must be empowered. There is not a need to try to replicate experiences across channels. Instead, focusing on connecting the channels for a fluid experience.
4. Enhance e-commerce. With 47% growth over the last five years, and 40% projected growth over the next five years, our respondent base is showing that e-commerce is showing no sign of slowing down.
5. Bridge the technology gap. We see two technologies in particular as pillars of the future of omni-channel: distributed order management and inventory optimization. But these technologies are not commonplace enough for the majority of companies to truly be omni-channel. Accurate inventory levels and the ability to pull it from any location need to be at the forefront of an omni-channel strategy.