I’ve been researching and studying omni-channel commerce, logistics, and fulfillment for the last eight years, and once again, I am getting ready to publish my annual omni-channel fulfillment strategic report. This year, I put a little different spin on things. While I looked at the current status and likely future development of the numerous elements in this dynamic environment, I also took a deeper dive into inventory management as part of the omni-channel paradigm. Part of the research was in conjunction with DC Velocity, and another part was working with Pitney Bowes. The result of the research is two-fold. First, I conducted a webinar with Pitney Bowes (a Logistics Viewpoints sponsor) last week to look at e-commerce and omni-channel fulfillment. Second, I will be writing my strategic report and will have an article featured in DC Velocity.
A huge factor in omni-channel success or failure is inventory management. Too often, the brick and mortar store has been the weak link in omni-channel operations. This is mainly due to poor inventory accuracy and visibility in addition to inefficient picking processes. But the store is, for better or worse, becoming a fulfillment center for e-commerce orders. There are two types of orders that are picked from the store, and survey respondents indicated heavy adoption of both. The first is to pick items at the store and hold them for in-store pick-up. The second is to pick, pack, and ship items from the store. Updating and maintaining accurate inventory counts becomes more important as store merchandise is picked.
A big component to maintaining accurate inventory counts is visibility. Gaining real-time inventory visibility, with real-time carrier updates, into where your merchandise is across your entire distribution network is no easy task. However, it is essential with the changing nature of omni-channel operations. Today’s retail customer expects on-time delivery of their order. A delay in an order can mean an upset customer and canceled order. However, many businesses simply don’t have enough visibility to be able to warn customers if an order or shipment is going to be delayed.
Inventory visibility encompasses both inbound and outbound shipments. For inbound shipments, inventory is sent from a supplier to either the warehouse or to a brick-and-mortar store. Obtaining visibility into in-bound shipments tends to be more problematic for many businesses, since this requires real-time updates from both internal and external supplier systems.
According to my recent survey, 56% of respondents have real-time visibility of merchandise going from the supplier to the warehouse. However, only 35% have visibility into shipments going from the supplier to the store. Shipping to the store may add another layer of complexity, but this visibility pays off in the long term. According to the survey, companies that have visibility into these inbound shipments are seeing, on average, year-over-year growth of 5% for revenues. This compares to about 2% for those without visibility.
There is also a need for visibility on outbound shipments. According to my survey, 75% of survey respondents indicated visibility from the warehouse to the customer. Considering that customers generally desire tracking information to see where their order is and when it will arrive, this percentage actually seems low. However, given the fickle nature of e-commerce, it is simply a reality. Respondents that have this real-time visibility into outbound shipments from the warehouse to the customer are seeing a 6% increase in revenues, compared to a 6% decrease for those without visibility.
Another critical area of outbound visibility is warehouse to store. The survey indicates that 59% of respondents have visibility from the warehouse to the store. This is important for maintaining critical stock levels and ensuring that retailers have the merchandise in-stock when they need it. Those respondents that have this visibility are seeing a 5% increase in revenues, compared to a 1% decrease for those without visibility.
The most difficult area of outbound shipment visibility for survey respondents involves drop-shipments from suppliers. Drop-shipping occurs when a retailer does not have the inventory on-hand and transfers the order information to the supplier for fulfillment. The supplier ships the goods directly to the end customer and, ideally, will provide real-time location information to both the company and the customer. Drop shipping from the supplier to the end customer has become increasingly popular; by using the retailers own packaging and labeling, the customer does not know that the supplier has fulfilled the order. Survey respondents that have real-time visibility into drop shipments are seeing a 10% increase in revenues, compared to a 1% increase for those without this visibility.
The results from ARC’s omni-channel survey indicate a few major things. E-commerce is driving the new omni-channel paradigm and cannot be ignored. As a result, inventory visibility is more critical than ever. This goes beyond knowing what merchandise is on hand; now, retailers need to have real-time visibility into merchandise across the entire distribution network. This includes inbound (from supplier to the warehouse or store), and outbound (from the warehouse to store or customer, from the store to the warehouse or customer, and from the supplier to the customer) shipment. Without this real-time visibility, customer satisfaction and loyalty are sure to decline, and revenues will be negatively impacted.
If you’re interested in listening to the webinar, click here.