omni-channel Archives

Mastering Profitable Omni-Channel Logistics, Despite Disruptions

Omni-channel logistics | By Terence Leung • 02/08/2022

If 2020 and if 2021 proved anything, it’s that the omni-channel selling environment is here to stay. As physical stores opened, shut down and re-opened again, consumers became more flexible in the way they shop for, and purchase, just about every product. Consumers have gotten used to the convenience and ease of online shopping, home delivery, curbside pickup, buy online/pick up in-store and other alternatives to the traditional in-store shopping experience.

According to a recent article in Forbes, 48% of consumers today prefer a hybrid shopping model that combines online and in-store components. For example, they might browse products online, but visit a brick-and-mortar store to finalize their selection. This new behavior means that manufacturers and retailers need to anticipate consumer needs across channels with more accuracy than ever. They need to deliver the right product to the right location at the right time, flawlessly, to fulfill ever-more volatile demand patterns and shopping behaviors.

Another powerful omni-channel market force continues to be the “Amazon effect.” The mega online retailer accounted for a staggering 41.4% of all e-commerce sales in the US during 2021. A major reason for Amazon’s dominance is its rapid delivery capability; over 200 million consumers worldwide subscribe to its Prime subscription service, which offers same-, one- or two-day delivery for many products. To compete with Amazon, most retailers and manufacturers have had to dramatically shorten their own delivery windows.

Navigating an Increasingly Challenging Logistics Landscape

These e-commerce trends are placing increasing pressure on logistics teams to keep up with demand volatility, provide incredibly fast delivery, and reliably fulfill all their promises to customers and consumers. It’s challenging for logistics providers to keep up, even in perfect supply chain conditions.

But, as we know, supply chain conditions were far from perfect in 2020 and 2021. Just as the world of omni-channel selling is here to stay, supply chain disruptions also seem to have become the norm. Faced with port closures, labor shortages and COVID-19 related production shutdowns, the world’s logistics teams have fought valiantly to pick up and deliver products at all. Lacking visibility into real-time product location and status, they have struggled to make confident decisions, and reliable commitments, in an extremely uncertain environment.

Lacking clear information, retailers, manufacturers and their logistics partners frequently made less-than-profitable fulfillment and delivery choices in 2020 and 2021 that eroded their profit margins. It’s already been demonstrated that the sudden and dramatic shift to e-commerce, driven by the COVID-19 pandemic, resulted in a general loss of profitability for many companies. As just one example, Nike’s online sales grew by 75% in 2020 — but its profit margins fell from 45.5% to 37.3% due to the higher costs associated with online selling.

For most companies, margins only declined further in 2021, as product shortages and transportation roadblocks forced all supply chain participants to make critical decisions on the fly, acting without complete information or hard data. Manufacturers, retailers and their logistics partners often managed supply and demand volatility by shifting scarce inventory among stores or distribution centers, or investing in expedited freight charges, without considering the real implications of these strategies on their long-term profitability.

The New Imperative: Visibility, Followed by a Synchronized Response

How can logistics teams hope to more successfully, and profitably, navigate this challenging business landscape in the future? The answer lies in identifying supply chain disruptions — from a big event, like a port closure, to smaller day-to-day performance exceptions — at the earliest possible moment. Whether it means recognizing a skilled labor shortage at a specific warehouse today or anticipating a significant weather event next week, logistics professionals need to see exactly what is happening across the end-to-end supply chain, in real time.

The next step? Logistics decision makers need to identify the impacts of every exception on their operations, on their customer promises and, equally important, on their profit margins. Based on those impacts, they need to create a rapid, synchronized response across the end-to-end network that maximizes all outcomes to the greatest extent possible, bringing the supply chain back on track. They also need to communicate the disruption, and the planned response, to all stakeholders, including customers and consumers.

Logistics Digitalization Provides an Answer

This level of awareness and responsiveness may sound impossible to achieve, but advanced technology places it within the reach of every logistics team. By digitizing their end-to-end supply chains, including warehousing and transportation, logistics providers can monitor conditions in real time, recognize and communicate exceptions, conduct predictive analysis and drive a fast, synchronized response. As disruptive events occur along the digital thread, the entire organization can act in a fluid, connected manner to optimize costs, service levels and other outcomes.

Today’s advanced supply chain solutions far exceed the cognitive abilities of human planners and manual analysis to monitor supply chain conditions, recognize problems and orchestrate an optimal resolution. Enabled by artificial intelligence (AI), machine learning (ML), predictive analytics and optimization engines powered by proprietary algorithms, these solutions can often autonomously anticipate and resolve disruptions before they ever impact costs or service levels. While there are advanced digital solutions available that span the entire supply chain, logistics providers can particularly benefit from digitizing their transportation and warehousing capabilities.

Transportation: Moving to a Digital Environment

The transportation function has been dramatically impacted by supply chain disruptions in the past two years, thanks to headline-making events like port closures and driver shortages. While consumers are increasingly demanding fast, flexible delivery on their terms, transportation teams are facing significant challenges in accommodating this growing need.

Digital transportation management solutions can help by connecting the entire shipping network, including customers and carriers, in real time. As disruptions emerge anywhere in the digital thread that connects transportation assets and stakeholders, they are visible and immediately actionable. Often these solutions execute a seamless, autonomous response based on pre-defined objectives. In more complex situations, they gather the right data and the right decision makers in a “war room” environment where various resolution scenarios can be explored and initiated.

Given today’s compressed windows for fulfillment and delivery — and the frequency of disruptions — AI- and ML-enabled solutions, delivered in a software-as-a-service (SaaS) format, are the only reasonable way to manage the transportation function. These digital solutions make it easy, fast and seamless to manage the complexities of all the transportation function’s moving parts and keep the overall supply chain on an optimal course. As they enable flexible multi-mode delivery schemes, dynamic planning and re-planning, unified inbound and outbound logistics, and carrier collaboration, these solutions deliver a high return on investment.

Blue Yonder commissioned a study to examine the real-world financial benefits of advanced supply chain solutions, and the benefits are clear. In the resulting report, transportation managers cited a variety of powerful results, including closer relationships with carriers, seamless bidding and procurement, and more strategic carrier selection. While driving a projected $14.1 million in transportation savings for the typical $10 billion company over a three-year period, digital solutions also helped logistics teams increase their agility and responsiveness.

According to a recent survey conducted by Bringg, 99% of retailers plan to offer same-day delivery within the next three years, compared to just 35% today. In this climate, it is important to take actions to improve delivery responsiveness and speed.

Blue Yonder estimates that by digitizing transportation operations, companies can significantly and simultaneously improve customer service, eliminate their empty miles, increase asset utilization, and reduce their overall transportation spend — for both increased profitability and a significantly reduced environmental impact.

The Digital Warehouse, Fueled by Optimized Labor

In the warehouse, logistics providers are being asked to manage smaller orders and more specialized tasks with a scarce workforce. They are also exploring new distribution models, including micro fulfillment centers located closer to the ultimate consumer. Again, digitalization provides the answer to navigating this complexity. Advanced digital solutions make the labor workforce much more productive by reducing travel times, increasing throughput, improving fill rates and optimizing available human resources. They also provide a tightly connected environment in which robots, co-bots and other forms of automation can be optimally integrated with the human workforce.

Not only do advanced SaaS solutions increase real-time visibility of exceptions in the warehouse — and enable autonomous resolution for most events — but they also allow a granular, moment-by-moment assessment of labor productivity and task completion. Resources can be strategically re-assigned in real time as conditions change and, over the long term, associates can be coached to achieve continuous improvement.

The study projects a risk-adjusted $31.2 million in labor cost savings for the typical $10 billion company that leverages warehouse, transportation, and order digitalization. Just as important, digital warehouse solutions enable logistics companies to deliver on their customer commitments, reliably and profitability, even when faced with extreme labor shortages and high employee turnover rates. Based on hundreds of implementations, Blue Yonder believes that warehouse digitization can help the typical organization achieve <99% performance rates for on-time, in-full delivery and a significant increase in throughput — supporting one-hour fulfillment for the majority of orders.

Realizing the Promise of Digitalization

The world’s logistics teams are finding themselves at a critical crossroads, navigating an omni-channel landscape that’s unprecedented in its level of complexity and its number of competing priorities. On the one hand, logistics teams need to deliver greater levels of speed, service and flexibility than ever. But, on the other hand, they need to minimize resources and protect profit margins. The two core capabilities underlying logistics, warehousing and transportation, are among the largest cost centers in the entire supply chain, so the stakes are high.

More than ever, logistics professionals need to make key decisions on the fly, in real time. But they have to make the right decisions, targeted toward optimizing all outcomes. The only way to not only survive, but thrive, in this brave new world is by leveraging digitalization. Backed by the power of AI, ML, predictive analytics and autonomy, logistics teams can recognize issues and disruptions and execute an optimized, profitable resolution at digital speed — no matter what new challenges the future delivers.

Terence Leung is Senior Director, Solutions Marketing at Blue Yonder. He has a keen interest in digitalization and the value it generates throughout the supply chain. In this role, he leads his organization to drive thought leadership and go-to-market strategy for supply chain execution and logistics solutions. In addition, he works with customers to understand requirements and drive best practices in the digital journey.

Prior to joining Blue Yonder, Terence was the leader in product marketing and value engineering at One Network. Previously, he was in leadership positions in industry management at Savi Technology and solutions and management consulting at i2 and Deloitte Consulting respectively. Terence holds an MBA from the University of Texas, Austin and an Electrical Engineering degree from MIT.

Editor’s Choice: Singles Day – A Retail Revolution

Omni-channel logistics | By Chris Cunnane • 01/11/2022

Note: Today’s post is part of our “Editor’s Choice” series where we highlight recent posts published by our sponsors that provide supply chain insights and advice. This article is from Audrey Dong, from KNAPP, and looks at e-commerce in China and the impact of Singles Day.

E-commerce in China has developed rapidly in the past decades, with currently over 25% of total retail sales generated online. Especially due to the COVID-19 pandemic, consumers are increasingly shifting from offline to online shopping and the e-commerce market is expected to grow from about $2.1 trillion in 2021 to $3.0 trillion in 2024.

Omnichannel provides a seamless and convenient shopping experience, by simply clicking consumers can place orders anytime, anywhere and get the products the same day or next day. Meanwhile, livestreaming is becoming the hottest trend in selling products online, and is expected grow by 95.5% this year. Digitalization and development of logistics technology are the driving force behind the scenes, which are even more obvious at the peak time.

Double 11 witnesses record-breaking online sales

Double 11 (AKA Singles Day), known as the biggest online shopping festival in the world, was originally initiated by Alibaba on Nov.11^th in 2009 and subsequently adopted by other e-commerce platforms and retailers. With the shopping fever generated by customers nationwide, double 11 generates breaking sales records each year. For example, the gross merchandise volume of Alibaba Tmall has increased from $5 billion in 2013 to $78 billion in 2020 as below chart. In comparison, the total sales of Black Friday and Cyber Monday in the US was around $19.8 billion in 2020. Though Tmall accounts for about 50% of the total Chinese B2C E-commerce market share, China’s large population and the growing middle class offer big consumption potential.

Moreover, the 2021 Double 11 Festival was the largest to date, with over $139 billion of sales generated in major E-commerce platforms like Tmall and JD.com. In the past the event was only held on Nov.11^th. This year’s event featured two sales windows on Nov.1-3 and Nov.11. It also included the pre-sale for teh first sales window starting on October 20^th to allow consumers to secure orders by paying a deposit, with the balance to be paid on the official sales date. For example, JD’s Single Day Grand Promotion started at 8pm on Oct.31^st, with 190 million products sold within 4 hours.

The fragmented and complex orders generate pressure on logistics to handle billions of parcels. Even in the COVID 19 environment, a total of around 675 million parcels for orders from all online platforms were delivered during double 11 in 2020, and the volume is estimated to increase yearly by 26%.

To read the full article, click HERE.

The Order Fulfillment Upheaval – An Omni-Channel Perspective

Omni-channel logistics | By Clint Reiser • 06/23/2021

It is no exaggeration to say that the COVID-19 pandemic caused an upheaval in order fulfillment processes. The question today is to what degree did these changes occur and how will processes change in the future. Will they revert back to the prior state as if the pandemic never occurred? Will they continue along the same trajectory brought about during the pandemic? Or will the processes be a mix of both, and how so?

An understanding of these dynamics was the goal of ARC’s survey-based research conducted with DC Velocity earlier this year (see DC Velocity Infographic in June 2021 issue). Order fulfillment changes were widespread and exerted effects on fulfillment channels, resource requirements, throughput, merchandise, investments, and more. Today let’s focus on the dynamic combination of order placement and fulfillment processes – also known as omni-channel.

Our survey was conducted with respondents across manufacturing, wholesale, retail, and logistics service provider (3PL) sectors. So certain channel activity is less prevalent in wholesale or manufacturing than in retail. With that said, we asked respondents about the degree to which their organizations processed and filled specific order types in 2019 to serve as a baseline to measure forthcoming changes, and to understand the profile of respondents in the survey sample (image 1). Traditional e-commerce (ship from warehouse), followed by traditional retail (in person) were the most prevalent order process and fulfillment channels used by our survey respondents. The other processes that utilize a combination of online ordering and retail store inventory were less prevalent, as expected.

The interesting findings begin with the changes our respondents experienced in their fulfillment operations during 2020 – a tumultuous year to say the least. The survey sample experienced a net decrease in activity within the traditional retail channel as retail locations were restricted to customers or closely entirely for much of the year. And the majority of those that experienced decreased activity in traditional retail stated that it decreased extensively. In contrast, the survey sample experienced a net increase in activity across other channels including online order, customer pick-up at store; online order, shipped from retail store. Publicly noted examples (external to the ARC survey) include the increase of online order, pick up at store from retailers such as Target and the use of stores as fulfillment centers. The increase in activity was especially pronounced for traditional e-commerce (shipped from warehouse) with the majority of those experiencing increased activity stating that it increased extensively. The direction of these findings for 2020 was to be expected. Less clear are the changes that will occur in 2021.

Our sample of survey respondents are expecting widespread increases in business activity for 2021, with net increases expected across all listed channels. The majority of those expecting increases within the traditional retail channel are expecting moderate, rather than extensive increases. This was unexpected. It is possible that the moderate increase is due to an underrepresentation of traditional retailers (whom I expect to experience extensive increases in traditional retail) such as grocery, sporting goods, and department stores in our sample. I am also surprised by expected increases in online order, pick-up at store and online order, ship from retail store. Again, it is possible that this is due to the profile of our respondents being skewed toward manufacturing and durable goods, as opposed to nondurables (CPG, apparel, etc.). It is also possible that I have underestimated the degree to which processes such as picking up online orders at stores will “stick”. I have reduced my personal use of these practices as I am enjoying the renewed novelty of entering stores. However, it is possible that this novelty will fade and give way to the convenience of pick-up in the near future. I am also surprised by the expected net increase in shipment from stores. I am interested in learning more about the reasoning behind this decision (as it is more of a supplier rather than a consumer preference). Finally, the broad-based expectation of increases in traditional e-commerce supports the perspective that the pandemic accelerated an existing trend and much of that change will “stick”.

Final Word

The findings from our survey-based research of logistics practitioners shows the degree of change that occurred in 2020 and the likely progression of these changes in 2021. In general, the changes will partially revert back to pre-pandemic order processing and fulfillment practices. However, the e-commerce shift was in process prior to the pandemic and there are financial and convenience benefits to these practices that are likely to encourage their continuation. Finally, our findings are consistent with some broader economic measures. For example, the US Census Bureau reported a 32 percent increase in 2020 e-commerce sales – a strong acceleration from 2019. I expect this increase will decelerate markedly in 2021. Furthermore, the change in monthly sales by kind of business suggest both a rebound for businesses that declined during the pandemic (apparel, automotive) and a continuation of pandemic-related growth trends (home furnishings and sporting goods). This indicates that consumer purchasing preferences may have shifted somewhat, as well.

How to Achieve the Perfect Delivery

Global Trade Management Solutions | By Chris Cunnane • 04/21/2021

Last month I participated in Oracle’s Perfect Delivery Virtual Summit, along with Matt Leonard from Supply Chain Dive, Marcelo de Matheus from Tramontina, and Mohamed Absar from DP World. The point of the virtual summit was to discuss how streamlining the order-to-fulfillment process achieves perfect delivery, improves customer loyalty, and reduces costs. Below are some key take-aways from my segment.

What is the Perfect Delivery Metric?

The perfect delivery includes four elements: order completeness, timeliness, condition, and documentation. This means the order is delivered on-time, in-full, not damaged, and with the appropriate invoice.

As supply chain complexity increases, perfect deliveries become more difficult. Improving on this metric will always involve a focus on people and processes, but often also includes implementing new, more robust, supply chain applications. The wrong metrics drive suboptimal behaviors and metrics can often be manipulated.

It is also not uncommon for logistics to be blamed for late deliveries, as it is the end of the process. However, when the end-to-end order fulfillment process is broken down and measured, it is frequently found that logistics is not performing that badly.

When it comes to measuring customer loyalty, the Net Promoter Score survey is typically a best practice. Net promoter score is correlated with revenue growth and calculated based on a response to a single question: how likely are you to recommend this company, product, or service to a colleague or friend?

When a company’s net promoter score falls, usually the company will begin a process of discovering why the score has fallen, and then try to fix the problem.

What Pressures are Companies Facing?

There are three main pressures that companies are facing today. First is creating a unified buying experience across channels. Customers are not necessarily looking for a similar experience across channels; each channel has its own interaction point and is designed to deliver a different experience. However, customers need to be able to find the product they are looking for in the appropriate channel.

Second is the ability to capture orders easily. With a wide variety of selling channels available, and differing flow paths for different business models, companies need to be able to easily and accurately capture all order information.

The third pressure is to deliver orders rapidly. Customer expectations for expedited delivery are becoming more commonplace, in both the B2B and B2C world. And as the lines continue to blur between B2B and B2C, and the model expands to a B2B2C focus, order fulfillment processes become more complex. As a result, this is putting added strain on fulfillment operations.

Perfect Delivery and Omni-Channel Technology

One of the most important technologies for omni-channel is distributed order management. Distributed order management allows 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 does not 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.

Changing the Order-to-Fulfillment Value Chain

For B2B companies, their supply strategy is built on three pillars. First is to connect demand to supply in real time. Second is to ensure the right product is in the right place at the right location. Third is to deliver on time.

Getting these strategies in place is incredibly difficult to achieve. When a consumer needs an item, they often will go to a retailer who in turn depends on a number of suppliers to keep items in stock. For each item, there are a number of SKUs they may have. This SKU proliferation makes it nearly impossible for retailers to have all the products they need on hand. Technology is the key enabler in all three of these pillars.

Order-to-Fulfillment Value Chain Applications

The most critical applications are order management orchestration, warehouse management, transportation management, and global trade management.

Order management orchestration 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 systems through a variety of channels.

A warehouse management system’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.

A transportation management system helps companies move freight from origin to destination efficiently, reliably, and cost-effectively, and it includes 2 types of solutions. Planning and execution is focused on freight moves involving a carrier. And fleet Management involves freight moves with transportation assets owned by the company.

Finally, global trade management optimizes and streamline business processes related to cross-border trade. The modules include restricted party screening, trade compliance, customs management, global trade intelligence, and estimated landing costs.

You can watch the full video below.

5 Success Factors in Effective Omnichannel Planning

Guest Commentary | By Emre Haliloglu • 12/03/2020

This year with the global pandemic, Black Friday was different from before. Luckily, we did not have to set up our camping tents in front of our favorite stores, but just logged in to their mobile apps.

Online shopping has been on a steady rise since 2010. With the global pandemic, it became a necessity. Consumers who realized the ease of use of online shopping – choosing items from the warmth of their seat and having them delivered in a couple of days – gained a new habit.

This new habit was reflected in the numbers. In the US, the share for e-commerce sales has risen from 4.2% to 11.8% between 2010 and 2020. That share reached a whopping 16.1%, in Q2 of 2020. The retail giant Walmart’s e-commerce business in the US increased by 97% in Q2 of 2020.

It is now a widely expected fact that online sales will not return to pre-COVID-19 levels even after life goes back to normal. The projected e-commerce sales of Walmart are expected to increase at a higher rate in 2021.

The pandemic brought the omnichannel initiatives to the top of the list of priorities for many companies. The Walmart CEO, Doug McMillon pointed out this initiative in his interview: “The stores and online merchant teams are now integrated, and we believe we’ll benefit from that change going forward.”

Before COVID-19, many companies had separate business units running e-commerce and brick and mortar stores, corresponding warehouses and fulfillment centers. They managed online product availability separate from store inventory. This meant that, if they ran out of stock for an item in e-commerce, it was likely that it was not sold online until it was restocked.

Now retailers are competing on the speed of delivery, availability, and convenience for customers. These expectations brought the focus on leveraging the store network for serving online customers. Omnichannel capabilities allow them to fulfill the orders using store inventory and give customers options to pick-up online orders in stores and return them at a location that is convenient for them, instead of shipping back to e-commerce fulfillment centers. This requires integrating data and processes across the network, which requires IT investments, operational work, and additional shipping and handling costs.

Making store inventory available for omnichannel fulfillment is also an opportunity for reducing over-stocks at stores and reducing the need for markdowns.

For omnichannel fulfillment to work effectively, there are many strategic, tactical, and operational supply chain planning decisions requiring advanced analytics.

Here are some important initiatives for retailers to consider if their company is involved in omnichannel planning.

Capturing Sales and Fulfillment Data

There are key considerations such as the fulfillment cost, selections of stores for omnichannel fulfillment, operational requirements, and customer expectations about the delivery timeline and number of shipments. All of these factors need to be tracked and analyzed, which means the sales transactions should include a selling location (where the order comes in), fulfillment location, expected delivery date, fulfillment date, and receiving date.

For demand forecasting and inventory optimization, order date and order location are required in addition to fulfillment date and location. Unless you have visibility to demand by order location, you are likely to keep underestimating the online demand, especially at the time of stock-outs in the e-commerce warehouse.

On the other hand, if some selling locations are not fulfillment locations due to strategic and tactical decisions, the demand should be estimated in respective fulfillment locations and not selling locations.

Incorporating returns into forecasting and inventory decisions

The return rate for online sales can be as high as 30 percent or even more for some categories like footwear. Most of the time, the fulfillment location and return location are not the same. Since returns significantly affect the store inventory levels, this factor must be considered in inventory planning.

Keep in mind, different retailers have different ways of processing returns. Some choose to put them into the store stock on the same day, some go through a longer sanitization and QA process where returns will be available for sale after 24 hours, while some ship them back to the e-commerce fulfillment center. It is crucial to define such restriction rules and capture them in the data accordingly.

Buying behavior varies across consumers. For instance, my personal preference is to shop around and to wait for deep mark

downs and buy clothing items in bulk. It is normal for me to buy four pairs of shoes or eight pairs of pants at once. We do not have to wander around a shopping mall. The items are shipped to our home, we try them on and eliminate the ones that my spouse doesn’t like 🙂 You can then return a pair of shoes and three pairs of pants to the store in the mall closest to your house.

When you buy four pairs of shoes and eight pairs of pants online, the software of the retailer should estimate the return quantity and location by using historical data. They should even personalize the data if possible, so the inventory decisions for your favorite return store would change automatically.

Utilizing store transfers to have a better response time and lower costs

When a fulfillment location is different from a selling location, it takes time and extra cost to fulfill orders. Some brick and mortar stores do not ship the products directly to customers but send them to the selling location first. The products are then shipped to customers from the selling locations. Every time there is a demand, a low volume of products can be shipped from fulfillment stores to selling locations. However, if automatic transfers were made daily/weekly, we would benefit from the economies of scale. The waiting time for customers will be less since selling locations will have the products in stock thanks to stock transfers between stores.

Optimizing omnichannel order fulfillment in batches

Most companies are inclined to have business rules. These rules are applied when an order comes, so, fulfillment locations are determined for a specific order instantaneously. However, processing orders in batches allows for optimizing the fulfillment decisions. Instead of deciding on the fulfillment locations every time a new order comes, they can be combined, and an optimization can be run “n” times a day while following the business rules. The “n” can be chosen depending on the number of orders and the required response level for customers. If the company delivers the orders, optimal transportation and multi-stop routing options will be available.

One important consideration is minimizing the number of packages customers will receive for their orders. Some customers can have a strong preference for receiving a single package, then, shipping all line items of an order together will go a long way for customer satisfaction.

Taking a strategic approach to determining fulfillment locations

Instead of opening all of the store networks for omnichannel fulfillment, it is worth taking time to conduct a network design analysis. The role and capacity of each location can be determined by running a network optimization model. This decision will not be made daily or weekly, but it can be revised several times a year. With this work, some locations can only be selling locations to ensure optimal investments for potential fulfillment locations. That being said, the capacity for fulfillment locations could be decided on to serve offline customers better.

Omnichannel Planning Made Easy

We mentioned that there are important factors retailers should consider in their omnichannel planning efforts. Business rules must be incorporated, fulfillment locations must be considered, and relevant data must be monitored for accurate predictions. All of these factors are hard to manage using spreadsheets. Most retailers transform and manage their supply chains on digital platforms such as cloud-based software.

An ideal software solution will ensure that omnichannel operations will be managed with the business rules and requirements set by the company. These can include the choices of fulfillment and selling locations which will be easily optimized during the year, based on the orders and the level of customer responsiveness. The demand will be estimated in their respective fulfillment locations and not at their selling locations. If orders are matched one by one, this estimation can be made with business rules or the optimized answer of the software. Products can be automatically transferred between selling locations based on the prescriptive analytics provided by the software where daily replenishments and transfers are optimized based on the operational capacity.

In an omnichannel planning software, all of the required data can be processed leveraging advanced analytics and machine learning. These data will be used for predictive analytics for forecasting the demand and return rates. Then, prescriptive analytics will optimize the inventory level in fulfillment and selling locations.

A perfectly optimized omnichannel planning process will please families and make sure that they fulfil all their needs from e-commerce retailers!

Emre Haliloglu is a Senior Project Manager at Solvoyo. He is a Supply Chain Professional with more than 8 years of experience implementing Planning, Pricing, and Optimization solutions for retail companies. Among the companies he managed end to end supply chain projects are A101, Şok, Defacto, Hepsiburada, Penti. He solved different problems of Retail Management, including Product Lifecycle Management, Category Planning, Assortment Localization, Demand Planning, Size Optimization, Promotion Planning, Allocation & Replenishment, Markdown Optimization, and Supply Chain Management. He is passionate about technology and digitization, and eager to utilize it in supply chain management.

The 2020 Holiday Season Logistics Guide

Learning & Leadership | By Chris Cunnane • 10/21/2020

Last week’s Amazon Prime Day kicked off what will surely be a wild 2020 holiday season. While the numbers are not official yet, most estimates have Prime Day raking in nearly $10.5 billion in worldwide sales. Not to be outdone, Walmart and Target launched their own online deals to coincide with Prime Day. Black Friday is till 5 ½ weeks away, and by all accounts, it will be the biggest Black Friday ever. In fact, more and more retailers are launching Black Friday deals that will run for a week or more to help meet the rising demand for online shopping.

One of the biggest questions is whether or not logistics companies will have the necessary capacity to deliver all of these orders. According to multiple reports, UPS and FedEx have begun telling shippers that they have essentially reached full capacity already. With the onslaught of online shopping to come, retailers and logistics companies alike are telling consumers to shop and ship early. These companies are bracing for the potential of a massive capacity shortfall which could impact up to 7 million packages per day between Thanksgiving and Christmas.

As such, logistics companies and retailers are planning earlier than ever to get ahead of the capacity crunch. As we’ve done in years past, let’s check in to see how some of the largest logistics providers and retailers are handling the holiday logistics rush.

Amazon is in full-on holiday season mode even though we are still 10 days away from Halloween. The company has announced that as it gears for up the busy holiday rush, and to continue to ensure capacity around the growth of online orders, it is hiring 100,000 workers. While it did not say how many of that 100,000 would be seasonal-specific, the overall strategy is to bring in warehouse and delivery workers to build out the logistics and fulfillment network. The minimum starting wage is $15 an hour, and in some markets the company said it is offering up to $1,000 in sign-on-bonuses. Amazon will also open 100 additional buildings across its fulfillment, sortation, and delivery network. The company plans to increase capacity by 50 percent by the start of the peak season to effectively manage the demand spikes it is expecting. All of these numbers are on top of the 175,000 workers Amazon hired in a matter of months as the pandemic set in, with 125,000 of those workers becoming full-time employees.

UPS is hiring more than 100,000 seasonal employees as it gears up for the holiday season. Like Amazon, UPS has already brought in a large number of workers to meet the growing e-commerce boom. In the second quarter of 2020, UPS hired 39,000 as package volume surged by 23 percent over the same period in 2019. As a unionized workforce, UPS is among the top-paying in the industry; part-time package handlers earn $14.50 an hour and seasonal drivers can make as much as $21 an hour. On average, 35 percent of seasonal jobs turn into permanent positions. Like last year, UPS is also extending its “Earn and Learn” program, which gives qualified students a bonus of up to $1300 for college expenses. The shipping deadlines for UPS are December 15 UPS Ground, December 21 UPS 3 Day Select, December 22 UPS 2nd Day Air, and December 23 UPS Next Day Air. UPS will also impose surcharges ranging from $1 to $3 per package on high-volume US residential shippers.

FedeEx is planning to hire a record 75,000 seasonal workers in 2020, a jump of 27 percent compared to 2019. Aside from bringing in more seasonal workers, FedEx is expanding its e-commerce capabilities. The company will expand its Sunday home delivery service to cover nearly 95 percent of the US population. FedEx is also increasing Ground’s network capacity and expanding coverage of the FedEx Freight Direct service. The shipping deadlines for FedEx are December 15 for FedEx Ground, December 22 for FedEx 2Day, December 23 for FedEx Standard Overnight, and December 25 for FedEx Same Day. FedEx will also be applying peak season surcharges to high-volume shippers, ranging from $1 to $5 depending volume.

The Postal Service is gearing up for a busy season as well, as it gets ready to delivery nearly 15 billion pieces of mail and 800 million packages. The USPS will likely hire somewhere in the range of 35,000 to 40,000 seasonal employees once again this year in positions such as mail handlers, holiday clerk assistants, and mail processing clerks. The agency will also push consumers to use its Click-N-Ship feature which allows users to order free Priority Mail boxes, print shipping labels, purchase postage and even request free next-day package pickup. The Postal Services asks consumers to plan accordingly, as it predicts December 14 will the busiest day online with more than 13 million consumers predicted to visit usps.com for help shipping holiday gifts. USPS shipping deadlines include December 18 for First-Class Mail and packages, December 19 for Priority Mail, and December 23 for Priority Mail Express.

Walmart made some major changes to its normal Black Friday sales event for the 2020 holiday season. Last week the company announced that will be holding “Black Friday Deals for Days” with category-specific markdowns on different days, with an initial offering online followed by in-store deals. The dates include November 4 / 7 for toys, electronics, and home products and November 11 / 14 for TVs, computers, tablets, movies, and music. Walmart will hold a sale on November 25 followed by the company’s “true” Black Friday the day after Thanksgiving. To meet the growing demand, Walmart is hiring 20,000 seasonal workers in its e-commerce fulfillment centers across the country for a variety of positions, including order fillers and power equipment operators, that begin at a starting hourly rate ranging from $15.75 up to $23.75 based on location, position and schedule. Walmart has already hired more than 500,000 workers across its stores and supply chain since the beginning of the COVID-19 pandemic. In an effort to promote customer safety, Walmart is offering pick-up and delivery on more than 160,000 items that can be picked up or delivered as soon as the same day. Free next day or two-day shipping on online orders over $35, pending eligibility and customer location, will also be offered.

To kick off the holiday season, Target will pay $200 bonuses to all 350,000 of its hourly employees at stores, distribution centers, and contact centers. Target also launched an online sales event to coincide with Amazon Prime Day as part of its efforts to kick off the holiday season. The company is hiring about 130,000 seasonal employees this year, which is in line with how many it hired last year. These hires will focus on everything from customer service to stocking shelves. The big push for 2020 is how it will approach its staffing in relation to same-day services such as curbside pick-up. Target is doubling the number of employees that will be dedicated to same-day curbside and in-store pickup of online purchases compared with the first half of the year. Distribution centers will have more workers than last holiday season to make sure they can continue to re-stock stores in a timely manner. There will also be modified training across stores and distribution centers so employees can switch from task to task as needed, such as from disinfecting shopping carts and helping with curbside pickup during peak hours. Target-owned same-day delivery start-up Shipt will likely be very busy this holiday season.

Even though it’s earlier this year, the holiday season is kicking off. And this year’s season looks to be the biggest one yet. Most estimates put holiday spending around $1.15 trillion, which will be a 1 to 1.5 percent increase over 2019. The big driver this year will be online sales as more and more people avoid brick and mortar stores. Amazon, UPS, FedEx, the Postal Service, Walmart and Target are bringing in more than 465 million seasonal workers to make sure packages are delivered on time. The question remains to be seen whether the investment in people and infrastructure will be able to handle the strain of increased orders. And in a few weeks, we can talk about the reverse logistics nightmare that is looming.

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