ARC Advisory Group conducts annual analyses of the major technology components within the global supply chain management market. These market studies include a deep analysis of the transportation management system, warehouse management system, supply chain visibility, supply chain collaboration, managed transportation services, warehouse automation, and global trade management markets, among others. The research process includes the analysis of large amounts of information and interviews with executives from numerous software companies. The process concludes with the publication of ARC’s Global Market Research Studies, which analyze the market shares across numerous categories of the leading suppliers. Aside from the market share analysis, the study looks at the trends that are driving and/or inhibiting growth in these markets.
This year I am publishing a new market study that examines the omni-channel fulfillment market. This study will look at five key technology applications: TMS, WMS, distributed order management, inventory management / store fulfillment, and demand planning. The study will look at the market size of a select set of industries: automotive, electronics, food and beverage, household and personal care (CPG), wholesale / distribution, and retail. The study will be publishing in the coming weeks, but I wanted to give a sneak peek at some of the drivers for omni-channel fulfillment growth.
The Growth of E-Commerce
The rise of e-commerce is fueling tremendous growth in the omni-channel fulfillment space. From a recent ARC survey on omni-channel fulfillment, 83.8% of respondents indicated they receive direct retail orders through their online channel, compared to 75.7% who receive direct retail orders through a brick and mortar location. This is mainly due to the increase in the number of retailers selling exclusively on the Web. And while 63% of revenues come from the brick and mortar location, e-commerce is taking a bigger chunk every year. In the last five years, e-commerce revenues have increased 51%, and are expected to grow 42% in the next five years. This continued growth will make it more important for organizations to fulfill orders through the most efficient channel, regardless of where orders originate.
Technology is Getting Better
When it comes to omni-channel commerce and fulfillment, solutions are getting better. The naming convention, much like the technology itself, has evolved. First there was multi-channel, where a retailer sold goods through more than one channel. Then, it become cross-channel, where retailers tried to enable the customer to move between channels during the purchase journey. Now, there is omni-channel, where retailers are trying to provide full, seamless continuity across all channels of operation for the customer. The technology components have done the same, allowing companies to share, track, and ship inventory from a variety of locations to the consumer or store depending on which is the best fit.
Need to Meet Customer Expectations
Today’s customer wants one thing and one thing only – the product. And they want it when and how is the most convenient for them. This puts more emphasis on enabling technology to pull inventory from multiple locations to best serve the customer. As a result, suppliers and retailers alike are upping their game to ensure their solutions and experiences meet the customer demand.
Cloud offerings have made it easier for small companies to jump into the world of global commerce and omni-channel fulfillment. These Tier 3 and 4 companies are basically able to get lighter versions of TMS, WMS, DOM, inventory management, and demand planning solutions that do not require them to have an on-premise application. Instead, lower cost models enable these customers to use the functionality they need to fulfill omni-channel orders without a burdensome IT presence.
In conclusion, omni-channel retailing is arguably the hottest trend in supply chain management right now. The rise of e-commerce, improved technology, the need to meet customer expectations, and the advancement of cloud solutions are driving the growth of the omni-channel fulfillment market. In order to succeed in the omni-channel environment, suppliers and practitioners alike need to follow a few key guidelines. First, support e-commerce and the omni-channel paradigm. Second, continue to invest in fulfillment technology. Third, continue to innovate, from both a technology and business process standpoint. And finally, target high growth markets. These strategies will put companies on the path to success.