Logistics Viewpoints

A complete analysis of logistics trends, technologies, and services

Omni-Channel Fulfillment is Key for the Holiday Season

Omni-channel logistics | By •

omni-channel fulfillmentBlack Friday and Cyber Monday are in the rear-view mirror and the holiday shopping season is in full swing. That means that the holiday shipping season is in full swing too. The National Retail Federation (NRF) has issued its annual forecast, anticipating that retail sales will grow between 4 percent and 6 percent in 2023, meaning sales will reach between $5.13 trillion and $5.23 trillion this year. Non-store and online sales, which are included in the total figure, are expected to grow between 10 percent and 12 percent year over year to a range of $1.41 trillion to $1.43 trillion. This puts a lot of strain on retailers when it comes to omni-channel fulfillment.

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. A lot of this fulfillment comes in the form of home delivery. And over the last month+ of the year, that equates to over 3 billion packages in the US alone.

ARC Advisory Group, the company that I work for, releases a number of market studies on a number of technologies. These studies utilize a comprehensive bottom-up process for evaluating markets. To that end, I, as well as my colleagues Steve Banker and Clint Reiser, have done quite a bit of research on omni-channel fulfillment. ARC’s definition of omni-channel fulfillment is end-delivery centric. We do not include solutions that incorporate in-store technology, such as mobile POS, clienteling, marketing, planograms, or merchandising. We do, however, include technologies that link channels for fulfillment. Our research focuses on the end-consumer receiving their product, whether from home delivery, in-store pick-up, or other means.

There are five major technologies included in the study: warehouse management systems (WMS), transportation management systems (TMS), distributed order management (DOM), inventory optimization/store replenishment, and demand planning. Below is a brief description of how these technologies fit into the omni-channel fulfillment landscape.

One interesting point from previous ARC research that was noticeable about these technologies is that they were not as widespread as one would have expected. With the exception of WMS, each technology represented a significant technology gap, and a large opportunity for companies to refine and improve their omni-channel operations.

Warehouse Management Systems

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 Systems

A TMS helps companies efficiently, reliably, and cost effectively move freight from origin to destination.  TMS encompasses solutions for moving freight in all modes.  The TMS processes include freight transported inbound or outbound, domestically or internationally, and using transportation assets the company owns or are owned by an outside service provider.  The freight managed by a TMS ranges in size from parcels to bulk commodities.

Distributed Order Management

DOM 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 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.

Inventory Optimization

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.

Demand Management

Finally, demand management is used to manage and forecast the demand of products. 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.

These five technologies are critical to achieving omni-channel fulfillment. In today’s ever-changing digital world, omni-channel is the new norm as e-commerce continues to outpace brick and mortar sales from a growth standpoint. It will be interesting to see how the technology, and the processes required to use the technology efficiently, continue to change over the next few years.

A Beginner’s Guide to Omni-Channel Fulfillment

Omni-channel logistics | By •

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.

Maximizing Last Mile Deliveries

Life Stories | By •

last mileOne of the most difficult and expensive aspects of the supply chain is last mile and home delivery. However, from a customer experience standpoint, it is also the most memorable and possibly important. Home delivery has become an increasingly hot topic as a result, and last week, I spoke on a panel about last mile logistics as part of the Reuters Events Retail Supply Chain Virtual USA conference. You can listen to the recording here.

During the panel discussion we touched upon ways to maximize partnerships to optimize final mile deliveries. We broke this down into three main components:

  1. The needs of the customer: the nuances and expectations of the customer to build a suitable network footprint for efficient fulfillment;
  2. Collaborate & tap into unique capabilities: how to create a flexible and agile network of multimodal transport providers within cities to match increasing demands from e-commerce in ways that dated practices can’t. See how data sharing;
  3. Use data technology to enhance accuracy: how the use of multiple data points throughout the delivery process will improve automation potential in last mile processes for better route optimization and customer experience management.

From my perspective, I looked at last mile in a few ways. First, what is the store’s role in last mile deliveries for e-commerce orders? Second, what kind of interest are retailers expressing for new and emerging last mile technologies? And third, how can retailers that rely on private fleets meet customer expectations for last mile deliveries?

The Store and Last Mile

The store’s role in omni-channel retail has changed significantly over the last few years as more and more brands look to make their stores a bigger part of e-commerce fulfillment. According to my recent omni-channel fulfillment survey, 37 percent of respondents indicated that they fulfill e-commerce orders from the store. For these orders, 78 percent indicate they pick orders from the front of the store and 48 percent pick from the back of the store. This survey was released pre-COVID, so I suspect the number of stores used to fulfill e-commerce orders will increase.

The big question becomes how are e-commerce orders fulfilled from the store? According to survey respondents, the number one method is to pick orders at the store and hold them for customer pick-up (83 percent). COVID has certainly accelerated this capability for many retailers, and the result has been a pivot to contactless, curbside pick-up. Additionally, 71 percent of respondents are picking orders at the store and shipping them to the customer. This is a capability that likely has seen an uptick during the COVID pandemic as store were turned into warehouses during the initial re-opening phases.

There are varying circumstances for when retailers turn to their stores for e-commerce fulfillment. In my survey, I asked what the key criteria were for deciding to use a store rather than a distribution center. The most important factor, identified by 44 percent of respondents, was the item quantity on hand at the DC versus the store. Essentially, as stores have excess inventory, they are using the store to fulfill orders to reduce inventory overhead. Forty percent of respondents identified delivery distance to the customer as a key criterion, which is especially true for rush orders.

Emerging Technologies for Home Delivery

When it comes to last mile, 83 percent of respondents are using parcel companies such as UPS and FedEx for last mile deliveries. These services were built to deliver small packages to your doorstep in a short timeframe. They are also affordable for small businesses to use, as well as retail behemoths. The two other highly used delivery methods are drop shipments from partners and 3PL delivery partners (51 percent each).

But what about emerging technologies for home delivery? Adoption rates are very low, but interest is growing in a few areas. One of the more interesting technologies is the autonomous mobile robots, such as those developed by Starship Technologies and Alibaba Group. These robots are able to navigate city streets to deliver an item to a consumer. So how much interest is there right now in robots? According to survey respondents, 15 percent are actively pursuing the technology for last mile deliveries.

As autonomous technology continues to improve, there is increased interest in drones and autonomous vehicles. The reality is that there are still regulatory hurdles to clear and more testing needs to be done. About 11 percent of respondents are investigating the use of drones for last mile deliveries. Autonomous vehicles have also been tested for home delivery. In this situation, an autonomous vehicle brings a package to a customer’s house, whereupon the customer enters a code and retrieves the package from a cargo hold. About 13 percent of survey respondents have indicated plans to adopt this technology at some point in the future.

Private Fleet and Home Delivery

When it comes to transportation management systems, fleet management solutions for last mile remains relatively small. But, the growth of e-commerce and omni-channel should represent an opportunity for TMS suppliers. Currently, it does for only a few providers of fleet management as last mile routing is different from cross-country routing. Many retailers rely heavily on parcel solutions or a transportation execution solution rather than a multi-modal TMS, and other retailers will examine crowdsourcing solutions rather than a TMS.  Coronavirus has changed the outlook for direct-to-consumer commerce, and a TMS is now a critical component of this strategy.  There is still room to compete in last mile, but suppliers need to think creatively to capitalize on this opportunity.

Besides speaking on a panel for last mile home delivery, I also attended the Descartes Evolution virtual conference last month. As I mentioned in my article two weeks ago, a session that stuck out to me was Home Delivery Best Practices presented by Chris Jones, Executive Vice President at Descartes.

In the US, May alone eclipsed the entire 2019 holiday shopping season and $82.5 billion was spent online. During his presentation, Mr. Jones pointed out that we are now in a delivery economy and touched upon a few ways that home delivery can drive the customer experience. One of the more interesting aspects of the presentation was the notion of customer delivery personas. These different personas help you to understand who your customer is and allows you to reduce costs and improve service. The delivery personas can be applied as a matrix looking at delivery speed and precision. This way retailers can let customers self-select their delivery service. He pointed out that it does not take a lot of premium customers to make a lot of money.

Within the presentation, Mr. Jones identified four solutions / capabilities that drive the customer experience: dynamic delivery appointment scheduling, same-day optimization, contactless delivery, and omni-channel home delivery.

Dynamic Delivery Appointment Scheduling

Dynamic Delivery Appointment Scheduling generates dynamic appointment options during the sale. Retailers can use DDAS to sell premium delivery timeframes, which generally cost more. This gives the customer more control over the delivery process and allows them to choose whether they want to pay a premium for home delivery in the timeframe they want. The solution helps to create delivery density, as retailers can make sure that they are only offering delivery to certain areas at certain times so drivers can make a large number of deliveries in a short period of time. This eliminates unscheduled or unfeasible deliveries. Retailers can use tiered pricing depending on how and when the customer wants their order delivered.

Same Day Optimization

Same Day Optimization enables time-definite same-day appointment scheduling based on real-time fleet status. Essentially, you can book delivery timeframes on a dispatch schedule. The benefits of same day optimization are three-fold. First, it allows companies to maximize resource utilization. Second, it allows companies to maximize customer service by ensuring realistic timeframes. And third, it provides a premium delivery service to consumers.

Contactless Delivery

Contactless Delivery is more important than ever in a COVID world. This solution provides proof of delivery information using picture capture and GPS coordinates. Contactless delivery helps to keep drivers safe as they no longer need to directly interact with customers for signature capture. It also minimizes disputes over whether an item was delivered or damaged. Drivers can take a picture on their phone of the delivery, whether that is where they left it or the customer taking it, and it is emailed immediately and directly to the customer. Given the COVID pandemic, contactless delivery will likely be the new norm.

Omni-Channel Home Delivery

Omni-Channel Home Delivery is delivery appointment promising across multiple delivery modes. As home delivery becomes increasingly complex, these modes include private fleets, DC/stores, white glove agents, parcel and local couriers, commercial LTLs, the gig economy (crowdsourced deliveries), and click and collect from stores. By combining these modes, and the different selling channels into one platform, companies can utilize specialized options to reduce costs and improve service. Namely, it gives the customer a lot of options of how and when they want their item delivered.

Last Thought on Last Mile

Last mile will always be the most difficult and most expensive part of the retail supply chain. However, if COVID has taught us anything about home delivery, it is that the customer’s expectations for a seamless experience will not change. As a result, retailers are making a pivot in how they use stores, re-thinking technology for home delivery, and putting the customer at the forefront of the decision-making process on delivery timeframes and modes. Contactless delivery options will continue to drive the market and likely will result in new technological advances. It is certainly an area we will continue to monitor.

Retailers’ secret advantage for lightning-fast order deliveries

Guest Commentary | By •

Roger FalkensteinHow and when an order is delivered plays a huge role in the experience of an omnichannel retail consumer. Particularly in an industry where retailers offer most of the same items at similar prices, the speed of delivery can be a customer’s deciding factor.

The need for speed and convenience in our lives – combined with shorter and shorter delivery promises by online giants like Amazon – have helped shift expectations from multi-day deliveries to one day or even one hour. This can seem like a nearly impossible expectation for brick-and-mortar stores, but it turns out that these retailers already have an important advantage.

Rather than a cost burden, a brick-and-mortar storefront can actually be a differentiator that helps drive one-hour delivery times. Unlike the larger online retailers that depend on warehouses located in metropolitan areas, you have a built-in launching pad for lightning-fast delivery.

Let’s examine how in-store order fulfillment can help meet the demand for one-hour delivery times.

Logistics considerations
Here’s what needs to happen: Upon completion of the online order, it’s transferred from your eCommerce system to a work queue that triggers a task for a store associate to pick and pack the order. The system should direct the associate on the optimal pick path through the store to locate the inventory. Then the associate uses a mobile device to locate the item, verify it’s what the customer ordered, confirm the pick, and stage it for delivery while giving the driver enough time to meet the delivery deadline.

No problem, right?

To achieve fast in-store order fulfillment processes that support a one-hour delivery promise, your store operations have been set up strategically and with flexible processes. Consider:

Pick times: Picking processes are critical for minimizing travel time throughout the store, which is the most significant time expended when picking orders. Some retailers use one store associate to pick multiple orders, while others rely on a zone method that assigns particular employees to pick particular areas of a store. Either way, your systems should direct pickers on a logical path and sequence to minimize fulfillment times.

Resource management: Manage store resources like you would in a warehouse. Look at the schedules and ensure you have the associates to support your delivery promises. Consider using labor metrics to determine how you are progressing against your customer promises, how individual employees are performing and how you are managing priorities.

Customer communications: Expect that your customers want real-time information at every step of their order. By leveraging a direct interface through your web store, you can send an instant communication to your customer when the order is fulfilled, on the delivery truck, and when it has been delivered.

How will you complete the last mile?
Retailers are using different delivery models depending on their store needs, resources, and delivery radius. Here are some of the most common:

Dedicated fleets: In this scenario, a retailer has a fleet of vehicles with the sole responsibility of delivering items from the store to the customer. They often employ sophisticated routing tools to make sure deliveries are made at the right time and within a logical, minimal-mile path.

Dedicated individuals: Think of it like the pizza delivery concept: You have one employee who makes very local deliveries to your customers, perhaps within just a few miles of your store. This can keep delivery costs low and delivery times very short.

Customer pick up: This can be an efficient and positive experience for you and the customer if you’re strategic about shaping the right experience. Think about whether you want customers coming into the store or driving to a pick-up window to get their order, how much time you want a store employee interacting with a customer, and so on.

Storage lockers: These are convenient pick-up sites located in your customers’ neighborhoods. After an online order is picked, the store delivers it to a storage locker. The customer, equipped with a unique code to open the locker, can arrive whenever it’s convenient to retrieve the items.

The right technology is essential
Putting together a patchwork of systems and processes may seem like a faster and more inexpensive approach, but it’s not sustainable and there’s simply too much at stake. A flexible breed of technology is essential for offering a consistent and positive delivery experience.

In-store fulfillment platform: Gain all of the tools you need to set up an in-store fulfillment operation, including order capture, order management, store mapping, work queue management, wave planning, real-time inventory tracking, and automated shipping processes for delivery services.

Web store: Drive sales with a convenient and brand-right shopping experience for consumers that accurately quotes shipping and sales tax rates upfront, upsells additional products, allows customers to specify delivery times, and more.

Real-time inventory visibility: Implement a single pool of inventory per product to which all channels have access, and introduce fulfillment prioritization rules among online, home delivery and store requirements.

Integration with other retail systems: Ensure your store systems are integrated. This includes store point-of-sale, planograms, order management, transportation, and ERP systems to maximize efficiencies.

With a storefront, you have an immediate advantage for meeting a one-hour delivery promise. But that depends heavily on orchestrating your logistics processes strategically and employing flexible store technology. With those tools, you can meet customer demands in a way that’s profitable, scalable, and that gives you a competitive edge.

Roger Falkenstein, HighJump Territory Manager, has been engaged in consultative sales and territory management with HighJump for over 28 years. As a seasoned innovator, Roger is leading the strategies to deploy the HighJump supply chain execution platform in support of retailers’ continuously evolving omni-channel requirements. He holds an engineering degree and nearly 40 years of experience in the supply chain industry.

The Challenge of Profitable Shipping in an OmniChannel World

Guest Commentary | By •

JOhn KruzanThe need to provide online customers with transparency to shipping costs is well known. According to KISSmetrics, unexpected shipping costs account for nearly one-third of all abandoned shopping carts. And the importance of providing online shoppers a variety of service levels is also understood –  the 2015 Pitney Bowes Annual Shipping Survey found, 93% of consumers indicated shipping options to be an important factor in their overall shopping experience – a 23% increase over 2014.

Speed, efficiency, and transparency are the new normal. Retailers know that what was an acceptable three or four-day delivery window a few years ago has now been reduced to two days or less.  And same day and time-definite offerings are becoming the expected options. However, what retailers don’t know is whether or not this is profitable business.

ARC Advisory Group research on omnichannel fulfillment shows that retailers’ focus is shifting from simply obtaining the sale to actually improving margins.   Many retailers are realizing that improving shipping operations and obtaining transparency to the costs are a critical part of their omnichannel strategy. To do this, retailers need a better strategy on how to get an order into their customer’s hands better, faster and more efficiently – and to know the cost of doing so. Here are some critical elements to meeting this challenge:

Visibility and Transparency:
Start with accurate visibility of all inventory regardless of where it is, even in transit. In short, all systems including ecommerce platforms, point of sale, order management, warehouse management, inventory management, transportation management and customer relationship management systems need to be aligned around the consumer – not just the network.

Retailers must become more transparent with how shipping costs are allocated for specific services. This includes all accessorial fees, dimensional weight and specialty handling charges.  While analysts will say free shipping drives sales, retailers cannot surprise customers when shipping is the final decision point in a purchase.

Carrier Enablement:
The days of retailers negotiating rates with a single carrier is over. The promise of omnichannel fulfillment is about meeting delivery commitment based on consumer preference.  This means retailers need to embrace a wide-array of new carriers and services including national, regional, local and specialty carriers.

Leveraging new carriers is just the first part of the equation. To manage costs and lower transportation spend, carrier rate and service selection must be tightly integrated into all appropriate systems, including point of sale, order management and transportation management solutions. Further retailers must adopt best practices including incorporating business intelligence into systems to automatically select the level of service based on explicit business rules, competitive shopping for the best rate amongst multiple carriers – international, national, regional and even local couriers, as well as intelligent sourcing to select the best point of origin.

Shipping Locations:
As ship-from-store and buy online and pickup in store gain more prominence, it’s important for retailers to embrace it as tactic in an overall omnichannel strategy and not a panacea for omnichannel itself. While these tactics can reduce transportation costs, it is only effective if the retailer has full visibility to inventory and can effectively meet demand.

It’s important to point out that in a ship-from-store model, all stores have to participate. A hub and spoke methodology can be used to optimize best location/service/cost to ship a package.  Conversely, pure-play ecommerce retailers who rely entirely on warehouse or distribution centers must employ many of the same principles around visibility, transparency and carrier enablement to meet their connected consumers’ expectations domestically and globally.

Technology:
In many ways, omnichannel is a paradox for retail. From the consumer’s viewpoint, retailers have to reduce complexity over different channels.  To do this, retailers are required to embrace more complex business and operational processes.  Omnichannel success cannot rely on old technology to bring the consumer experience into the 21st Century.  Technology around omnichannel fulfillment is not one pervasive solution, but potentially a number of different technologies, each conducting discreet operations along the buyer’s journey – such as managing sales, inventories, orders, warehouses or carriers.  New deployment and economic models around SaaS and cloud computing are reshaping the industry.  Regardless, technology needs to be tightly integrated to provide proper visibility and control – which is the cornerstone of a seamless experience and omnichannel success.

In many ways, the rules of omnichannel are still being written so many retailers are still struggling with a strategy. The last few years have been about the consumer and understanding their changing desires and how they want to interact across any number of channels.  Going forward, retailers are going to look at infrastructure and technology needed to move shipments as effectively as possible.  In today’s world, shipping is an extension of a company’s brand.  The true goal for omnichannel success is to decrease costs for the retailer, while continuing to over deliver on promises to the customer.

John Kruzan is Sr. Director, Shipping Solutions, with Pitney Bowes Global Ecommerce.  Prior to joining Pitney Bowes in 2011, Mr. Kruzan held management positions with Airborne Express, DHL Express and several logistics technology companies, specializing in business development, marketing and strategy.

 

Use Modeling Technology to Design and Test Omni-Channel Strategy

Cloud/Software-as-a-Service | By •

Toby BRedesigning overall retail strategy through the eyes of the consumer with a seamless shopping experience at the core, necessitates an ‘outside-in’ supply chain perspective and often big adjustments to supply chain operations. Retailers are turning to supply chain modeling as a way to effectively design and test omni-channel fulfillment strategies prior to execution. Modeling can be used to evaluate the numerous network and policy changes to an organization’s supply chain that may be required for an omni-channel strategy, as well as to understand cost, service and margin.

Let’s look at four vital areas in which supply chain design can help retailers best leverage all available distribution assets to fulfill orders across channels:LLamasoft Network

  1. Supply Chain Network Structure

In order to utilize DCs and retail stores fluidly for a seamless customer experience at optimal cost, retailers need to rationalize the existing supply chain network—which means answering numerous tough ‘what-if’ questions such as:

  • When will you need to add additional capacity and where?
  • Where is the optimal location for new facilities?
  • Which facilities should you use to fulfill orders for which customers?

Supply chain design technology enables businesses to build digital models of the end-to-end supply chain to evaluate and compare dozens of scenarios side-by-side and test them under real-world variability for better decisions around site selection and product flows.

  1. Inventory Balancing

Omni-channel fulfillment impacts the placement of inventory and the overall replenishment process from store or warehouse to the customer.  If inventory can be allocated to customers at the latter stages of receipt, either at the port or DC, this can provide flexibility to serve volatile demand across channels. While variable costs at the DC may increase, the overall inventory costs may be reduced by providing more pooling across channels. Retailers must also consider demand variability based on promotions and seasonality when building inventory policies as part of an omni-channel strategy.

  1. Transportation

There are tremendous implications for transportation policy as retailers evaluate various delivery targets, from same-day to next-day delivery to third-party same-day delivery options. These are key drivers of the cost/service analysis that will be done to understand how omni-channel strategies will impact the bottom line. Transportation optimization enables users to model their entire supply chain network, incorporating alternate transportation options and key variables such as cost, time, capacity and delivery parameters. You can identify an optimal transportation plan based on the total costs and service constraints.

  1. Service

Exceptional service based on shopper preference is the highest goal of omni-channel retailing, but that service comes at a cost. What is the right mode mix and service mix for retailers?  And what service levels should you offer customers given the hype about same day/expedited service requirements? Businesses can confidently give customers choices by evaluating and testing the inventory and transportation cost impact of alternate service level scenarios in advance.

Supply Chain Design Technology Advancements to Support Omni-Channel Retailing
Here are a few areas where recent technology breakthroughs can be specifically applied to omni-channel supply chain challenges:

Scenario Management—Build digital models of the end-to-end supply chain to evaluate and compare dozens of scenarios side-by-side.

Order Simulation – Reduce risk by testing potential supply chain changes before enacting them. Artificially “run the clock” to execute the supply chain in a digital environment that truly factors time and variability into each individual transaction, decision and movement throughout the supply chain at SKU-level.

Transportation Optimization — Test new shipping strategies to predict actual costs and service levels. Understand reverse logistics and last-mile delivery implications of assets, costs, and flows.

Demand Classification — Understand true demand patterns and segment products by how consumers buy, when they buy, how much they buy and what influences them in buying more. This is the key to minimized stock-outs and right-sized inventory.

Cloud Solving – Extend your models to the cloud to facilitate collaboration and more rapidly solve large models and up to 100 scenarios in parallel—without tying up your desktop computer.

Toby is the co-founder and executive vice president of LLamasoft, leading the global sales, marketing and business development teams. Over the last decade, he has helped bring supply chain design into the corporate mainstream as a key business process and competitive weapon, and has positioned LLamasoft as the leading global supply chain design technology provider. Toby is a frequent presenter and panelist at supply chain and logistics leadership forums, has been named a ‘Pro to Know’ and has authored dozens of articles on the growing importance of supply chain design as a key competitive weapon. Toby has over 20 years of experience in building and growing technology businesses, primarily focused on process improvement and analytics. His expertise has been used to launch new technologies into mainstream use at global Fortune 500 businesses. He is a graduate of the University of Michigan.

 

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