A Beginner’s Guide to Omni-Channel Fulfillment

omni-channel fulfillmentOmni-channel retailing is one of the hottest trend in supply chain management right now. With e-commerce continuing to grow, there is more focus on Web commerce than brick and mortar. The ongoing COVID-19 pandemic has pushed e-commerce to levels that would not have been believed just six months ago. For example, in the US, May alone eclipsed the entire 2019 holiday shopping season and $82.5 billion was spent online. This is a trend that will continue to grow, especially as those who may have been reluctant to shop online have experienced the ease and convenience associated with it. However, this is putting added strain on omni-channel fulfillment operations.

Omni-channel fulfillment is not a singular technology addressing a singular problem. Instead, it is a combination of solutions that allow an organization to fulfill orders received from multiple channels through a variety of channels. The key component is to fulfill the orders through the most efficient channel for both the consumer and company.

ARC’s definition of omni-channel fulfillment is end-delivery centric. We do not include solutions that include in-store technology, such as mobile POS, clienteling, marketing, planograms, or merchandising. It does, however, include technologies that link channels for fulfillment. In this article I will break down the five key technologies that comprise omni-channel fulfillment. This list is not the complete list of everything that could be included, but it gives insight into understanding the building blocks of omni-channel fulfillment. The five technologies are:

  1. Warehouse Management System (WMS)
  2. Transportation Management System (TMS)
  3. Distributed Order Management (DOM)
  4. Demand Management System
  5. Inventory Optimization

Warehouse Management System

A warehouse management system is a category of application software that processes and manages information that supports warehouse operators and operations. Entities include orders, inventory, tasks, locations, status, and resources.  Supported processes include receiving, put-away, picking, value added services (VAS), shipping logic and more. ARC Advisory Group typically uses the term WMS as a reference to real-time systems such as those that utilized RF scanning to automatically record status change.

A WMS’s primary mission is to manage a warehouse’s resources, including inventory, space, labor, equipment, tasks, and material flows. Essentially it is the backbone of moving goods from point A to point B. Not surprisingly, the majority of companies are using a WMS as part of their omni-channel operations. The increase in e-commerce has put added stress on warehouses, as they are now replenishing stores while directly filling customer orders as well. These added complexities have made a WMS application critical for the new omni-channel paradigm.

Transportation Management System

A transportation management system helps companies move freight from origin to destination efficiently, reliably, and cost-effectively. Transportation management systems include 2 types of solutions. Planning and execution is focused on freight moves involving a carrier. The complete process would include procurement, creation of a route guide, planning and optimization, electronic communication with carriers, visibility and exception management, freight audit, and performance management.  Fleet Management involves freight moves with transportation assets owned by the company. The complete process would include routing and optimization; visibility and exception management; transportation asset management; and performance management.

A TMS essentially helps companies efficiently, reliably, and cost effectively move freight from origin to destination.  TMS encompasses solutions for moving freight in all modes. The freight managed by a TMS ranges in size from parcels to bulk commodities.

Distributed Order Management

Distributed order management systems allow the retailer 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 to retailers is that it doesn’t matter where an order originates. All fulfillment channels have access to the information and the retailer 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 retailers do not possess these capabilities right now.

Demand Management System

Demand management applications allow organizations to manage and forecast demand of proucts. This allows organizations to properly allocate inventory to warehouses, distribution centers, and stores. The focus is on customer demand in the short term, and enables the retailer to respond to local events to change their inventory levels. The forecasts are in units of measure used by the supply chain organization (units, cases, orders, tons, etc.) as well as in dollars. Forecasts can be done at different product hierarchical levels – stock keeping units versus product family level, for example; at different levels of granularity – product family sales by region vs. SKU sales by store, for example; and at different time horizons – weekly, monthly, quarterly, etc. These solutions have collaborative features that allow other groups (the sales organization, customers, etc.) that may have insights to contribute their inputs to the forecast.

Inventory Optimization

Inventory optimization solutions take a demand plan, the margin of error associated with demand, and figure out how much inventory needs to be produced, and where it needs to be located across a network, to hit defined service levels. Inventory optimization enables retailers to balance their inventory levels with capital investment constraints. Clearly this is easier said than done. However, the use of multi-echelon inventory optimization software can help retailers to identify the appropriate amount of stock needed at stores, warehouses, and distribution centers to meet desired service levels. Establishing these levels will help to free up available cash, thus making the business more profitable.

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