Omnichannel Retail Requires Close Collaboration with Logistics Providers

Stephen DeAngelis

September 12, 2019

The next time you feel the need to toast someone, raise your glass to all the supply chain professionals involved in omnichannel retail operations. They have it tough. John McAteer, Vice President of Sales, Retail, and Technology at Google, writes, “In retail, there’s no space for standing still. Empowered by mobile, people can get exactly what they want instantly and effortlessly, and they expect retailers to meet their needs faster than ever before.”[1] Consumer “needs” include multiple ways of buying and receiving goods. To meet consumer needs, everyone in the supply chain needs to work harmoniously together or risk bad reviews and loss of business. James Curtis, a Business Development Representative at One Network Enterprises, explains, “Consumers are buying products through many different channels the consumer goods supply chain has become more complex than ever before. … With the movement from pure store-delivery to store-plus-home-delivery, you have many more points of consumption than ever before. The number of orders increase substantially because there are no longer only truck loads. Now companies must have the ability to manage parcels while providing a higher level of service.”[2]

Omnichannel logistics challenges

From a consumer perspective, omnichannel retail is about enjoying a seamless shopping experience across channels and selecting a delivery method that meets personal timing and location preferences. Consumers don’t really care about what goes on behind the scenes. The retailer’s perspective is much different and more complex. The staff at Legacy Supply Chain Services explains, “Consumers expect to find the products they want both in-store and online, to use technology to make purchases with the swipe of a finger and to have their purchase delivered to their doorstep the very next day. The expectation of instant consumer gratification has businesses scrambling to shore up their supply chain to ensure cost-effective on-time delivery, which is where omnichannel logistics comes into play.”[3] Legacy staff members identify 9 top omnichannel logistics challenges businesses generally face. They are:

1. Lack of Inventory Visibility and Metrics. Carrying inventory is a necessary evil. Too much inventory means profits are eaten away by storage costs. Too little inventory and sales opportunities are lost. Legacy staffers write, “In the world of omnichannel logistics, it’s crucial that businesses know the status of their inventory and whether it’s at a distribution center or retail location. The last thing a company wants is to promise next-day delivery to its customers and not be able to follow through.”

2. Poor Visibility into Inventory in Transit. Consumers expect to know where their purchases are and when they are going to be delivered. Legacy staffers assert, “Both major enterprises and startups alike generally have relatively poor visibility into inventory in transit, which has led to an increasing demand for real-time freight visibility solutions.”

3. Segmented Supply Chain Processes. There can be a difference between segmented supply chains and unintegrated supply chains. Legacy staffers note, “If a business’s various supply chain processes don’t work together, it can’t ensure across-the-board customer satisfaction. Larger companies generally have many private warehouses and distribution centers, managed by different in-house and outsourced operators, that run on different systems. As a result, they employ different tactics to ensure their supply chain runs smoothly. The key to solving this supply chain segmentation is to consolidate these processes, rather than let them function in silos.”

4. Unreliable Order Fulfillment Processes. Unreliability is the best way to lose customers. Legacy staffers write, “When a business tells its customers that they will receive same-day or next-day delivery, it needs to deliver on that promise.”

5. Finding the Right Transportation. As far as the customer is concerned, there is little difference between the retailer they purchase from and the logistics firm that delivers the purchased product. For consumers, it’s a single transaction. Legacy staffers write, “There are many different ways to get a product from a brick-and-mortar storefront or distribution center to the customer’s doorstep. The challenge is to find the most effective and efficient transportation solution to keep customers happy without driving up the landed product costs. Selecting the right shipping method for the right customer situation is essential to omnichannel logistics.”

6. Reverse Logistics. About a third of all products purchased online are returned — making reverse logistics critical for successful omnichannel operations. Legacy staffers note, “The return process for any product should be just as seamless as its initial delivery.”

7. Manual Processes. We live in the digital age and supply chains need to become digital. Legacy staffers explain, “One of the leading causes of inventory inaccuracy across supply chain nodes is the continued use of manual — often paper-based — processes to capture inventory data.”

8. Overlooking Physical Transformation. Legacy staffers correctly point out that digital transformation strategies aren’t all about technology. The digital world and the physical world connect in the supply chain. They explain, “Although digital transformation has received the lion’s share of attention from analysts and technology companies alike, businesses must take care not to lose sight of physical transformation. The method of flowing truckloads of products from large distribution centers to stores has become outdated. Businesses must update their supply chain and distribution networks to compete in this new market, in which speed of delivery and inventory reduction are paramount.”

9. Implementing 3PL Strategy. Although some larger retailers are developing their own fleets, most retailers can’t afford that option. As a result, Legacy staffers note retailers need to partner with trustworthy 3PL providers. They explain, “A successful 3PL is an operations manager, a strategic consultant and an IT provider all in one. This combination of capabilities is especially valuable when it comes to inventory optimization and omnichannel fulfillment.”

Deborah Abrams Kaplan (@KaplanInk) asserts, “Retailers looking to improve margins could begin by looking at one metric — shipment to orders. This key performance indicator is used to compare the number of packages sent per individual order. A 1:1 ratio is the goal.”[4] To state it another way, if a consumer buys several products from the same merchant during their digital path to purchase, the goal is to ship all the products in a single package. It’s best for the retailer, the consumer, and the planet.

Concluding thoughts

The staff at Inbound Logistics notes, “As retailers transform their market strategy to embrace new e-commerce and marketplace channels, their supply chain must be ready to pivot as well. … Omnichannel is not just a logistics decision. Re-orienting the company to embrace omnichannel retailing requires integration with IT, sales and marketing, and procurement as well as transportation. … To begin — or speed up — a pivot to omnichannel retailing, organizations should assess what they can do in-house, and which areas require outside help.”[5] Legacy staffers add, “Omni-channel logistics is all about providing consumers with a seamless shopping experience. This experience is only attainable when businesses leverage their e-commerce capabilities in a way that acknowledges the reality of running both a brick-and-mortar storefront and distribution center network.” As I noted at the beginning of this article, omnichannel operations are tough. Raise that glass and toast all those who strive to make omnichannel operations work.

Footnotes
[1] John McAteer, “Data-driven merchandising: Moving from an art to a science to reach today’s shopper,” Think with Google, March 2019.
[2] James Curtis, “Meeting the Omnichannel Challenge,” The Network Effect, 26 February 2019.
[3] Staff, “Top 9 Omni-Channel Logistics Challenges Businesses Face,” Legacy Supply Chain Services, 2019.
[4] Deborah Abrams Kaplan, “To optimize fulfillment, logistics have to play along,” Supply Chain Dive, 27 November 2018.
[5] Staff, “H.O.W. | How to Transform the Supply Chain for Omnichannel Retailing,” Inbound Logistics, 18 November 2018.