E-Commerce: Order Fulfillment in an Omni-Channel World

In a complex, Omni-channel environment, the role of supply chains has greatly evolved due to this modern, complex Omni-channel environment. Retailers must now address new challenges, the first is the visibility and ubiquity of inventory. Not all retailers have the ability to tie all their product back to a single source of inventory. Whether there is product in store or at a drop-ship vendor, having a single view on inventory has changed.

The other aspect is the advent of regional fulfillment. Some retailers have fulfillment centers on both the East and West Coast in order to complete a high percentage of their ground orders within a two- to three-day time period. There is competitive pressure for retailers to plan their inventory from two or three locations to deliver this consumer experience; however, we're still seeing many challenges with retailers' ability to execute this. Fulfilling from multiple locations can also result in split-shipments with multiple packages being sent to a shopper, which is more costly for the retailer and is not the best consumer experience. Additionally, when it comes to inventory planning and the allocation of product in an Omni-channel environment, retailers are struggling to optimize. Loss of sales can be overwhelming from product being out of stock at individual retail locations or at centralized distribution centers. Retailers that embrace Omni-channel distribution are able to go beyond a centralized distribution center and offer products available across the chain.

Solutions such as ship-from-store enable retailers to increase their sales by capturing opportunities that otherwise would have been lost. Making more inventory available to shoppers and providing convenience greatly impacts a consumer's loyalty to a brand. In order to achieve full unified visibility, a combination of ship-from-store and regional fulfillment will optimize fulfillment and sales and provide the best consumer experience. With commerce turning to an on-demand model due to mobile ubiquity, universal access to online stores has created more real-time expectations. Consumers want everything to be faster and to have choices. If the product is not in the store, they want to be able to have it delivered to their home; if they need to speak with customer service and a representative is not available, they want to be able to immediately send a question via chat. Retailers that are not embracing this Omni-channel evolution will lose sales.

Omni-channel fulfillment strategies enabled with the appropriate processes, physical infrastructure, fulfillment network, empowered organization and technology featuring distributed order management software is what a company needs to succeed in the online world off ecommerce.

Whether you are a retailer or a wholesale distributor, an Omni-channel fulfillment strategy, properly enabled and flawlessly executed, will deliver significant benefits to your company and your customers. In addition, Omni-channel fulfillment strategies can lead to:

• Reduce or eliminate out-of-stocks and back orders.
• Leverage your inventory across all channels and significantly reduce transportation costs
• Improve customer service and establish competitive advantage.
• Improved revenue performance
• Capital investment avoidance and repurposing
• Labor and expense cost reduction and avoidance
• Transportation savings
• Store productivity gains
• Inventory productivity gains
• Customer satisfaction improvements
• Retail store morale improvements

The Omni-channel consumer has forever changed retail, and many of today’s retail supply chains are simply not set up to handle this demand for speed and convenience in a cost-effective way, and are already creaking under the strain of the new multichannel world.

As e-commerce continues to explode, the pressure is on for companies to delight online customers, and tempt new ones to fill electronic shopping carts. Much of a merchant's success will depend on whether it develops a fulfillment operation that delivers exactly what customers want. The plain reality is that current supply chain models are not suited to an Omni-channel world – a world where consumers increasingly have little care which channel they use to research, select, transact, or collect products. The current supply chain model assumes that the store is the endpoint of the transaction, and further is built to deliver as efficiently as possible to that endpoint, with the assumption that the inventory delivered to the store will live out its life there until some consumer picks it up and brings it home.

To deal with the challenges of today’s global economy, companies need to transform their supply chains into information-driven value chains. Outdated planning processes and disconnected execution systems are too slow to respond to increased demand volatility; they lack visibility, increase supply chain risk, and cannot react quickly to unexpected supply chain events. A portfolio of order management and fulfillment applications can address these issues.

Omni-channel order fulfillment process takes time, and some of the challenges facing Omni-channel fulfillment today are:

• Inaccurate Workload Forecasts: Today’s labor forecasting does not account for e-commerce order fulfillment. Labor is not allocated specifically to pick and pack e-commerce orders. This results in suboptimal Omni-channel fulfillment: orders are processed as either an afterthought or at the cost of in-store customer service.
• Prioritized Picking: Stores can’t control when a product is ordered online, when it will be picked up, or when it has to arrive at its destination. If Customer A orders a product on Monday morning to be delivered on Friday while Customer B orders a product on Monday evening to be picked up on Wednesday, current systems cannot prioritize Customer B’s order because it is due earlier.
• Inefficient Picking and Shipping Methods: Current Omni-channel fulfillment systems have no insight into employee skillsets. In retail, even a few minutes of lost time on the floor can result in lost sales. If an order comes in for a high-quality fishing rod, the order management system cannot allocate the task to a knowledgeable associate who knows exactly where to find the specific product.
• Customer Notification: There are some customers who only go to stores when it is absolutely necessary. If they have an order that is to be picked up at a certain time, that is the sole reason to leave the house. If the product is not ready when they arrive, it could jeopardize their chances of ever coming back to your store. Customer experience is the most important factor in the success of Omni-channel strategy.

To determine the optimal approach and pinpoint opportunities for growth, savings and customer service improvements. Retailers must define and implement processes, supporting technology and people across all stages of the Omni-channel order lifecycle. Each stage of the order lifecycle is interdependent with a number of sub-cycles that fall into two categories:

• Forward logistics: Any order received through any channel falls into this category. Fulfilling to the customer as efficiently as possible is the crux of the order management lifecycle.
• Reverse logistics: For every order, the returns process must also be considered. Without proper Omni-channel solutions, returns can be far more complicated than purchases.

Some of these stages are:

• Inventory availability - Supply chain responsiveness and customer service are improved by global, real-time inventory visibility across channels. Visibility to on-hand inventory and the segmentation of inventory (by physical and logical site, catalog, product and item) allows retailers to delineate among inventory in different physical locations, including within the store.In order to improve gross margin return on investment (GMROI) and the customer experience, retailers need the ability to:
•  Expose inventory and eliminate silo channel inventory to ensure a customer demand can be met regardless of inventory positioning
• Enable advanced order routing logic that evaluates cost versus service tradeoffs based on inventory positioning and variable supply chain costs such as transportation and labor
• Order routing - The cornerstone of most advanced order management systems (OMS) is the ability to optimize the order routing logic through a work flow, or rules engine. Orders can be optimized based on fixed and variable costs, such as transportation mode, carrier and service level. Systems can also route orders based upon store and DC labor capacity and cost. Often overlooked is the ability to weight the order based on service versus cost tradeoffs, followed by tie breakers. When two stores within the same geographic region can fulfill the order at the same cost and service level, which store gets the order? Dynamic order routing is critical for improving order profitability.
• Customer care and analytics - Knowing and proactively serving your customer is vital. Visibility to customer data at the point of purchase enables enhanced customer service. Buying behaviors, appeasement trends, preferred payment methods, loyalty points and customer call notes all improve the management and expediency of inbound and outbound calls. While the data models and user interfaces of many OMS systems today are order versus customer centric, Omni-channel must start with the customer.
• Fulfillment - There are many options for fulfillment, including brick-and-mortar stores, vendors, DCs, third-party logistics providers (3PLs), or in-store pickup. Strategically leveraging the best option for a given order will reduce overall costs while increasing fulfillment speed, not to mention GMPO. Regardless of where the order is shipped from, end-to-end integration is key.
• Shipment - Shipping methods often vary depending on the product and shipment distance. Offering free or reduced rate shipping reduces GMPO. At the order level, retailers must be able to manage multiple ship-to locations, dynamically rate a shipment and select different carriers based on service level, origin and destination. Retailers must also be able to upgrade or downgrade packages based on promised dates. Advanced OMS systems utilize real-time rating engines to evaluate where to route an order based on cost and service.
• Integration - While each stage of the order lifecycle is pivotal, they must all be integrated to achieve Omni-channel success. Many software systems can manage one or more stages of the order lifecycle, but few can communicate across solutions with ease. A single software platform that enables seamless integration among solutions can be a strategic differentiator, addressing visibility and communication gaps and enabling retailers to more easily optimize the entire order lifecycle.

Transitioning successfully to Omni-channel distribution is challenging. Not only are there more channels than ever to manage, but the lines between the channels are blurring. When designing Omni-channel fulfillment operations, there are a lot of levers that have to be in alignment. So how do you design you’re DC with the flexibility to handle an unpredictable future and that minimizes your cost-to-serve?

To meet customer expectations for a seamless Omni-channel experience, retailers require centralized inventory, order processing and fulfillment capabilities coupled with smart sourcing and workforce management to execute flexible fulfillment strategies in the most efficient and cost effective manner possible. Together, these capabilities can help retailers prioritize and allocate labor, effectively pick and ship orders, accurately forecast workload for e-commerce related tasks, easily prioritize orders for common-sense fulfillment, and consistently notify customers about the status of their orders for pickup or shipment arrival.

Part of the order fulfillment process is physically picking the orders from the fulfillment center. When you consider the extra time it takes for warehouse personnel to search for products throughout an entire warehouse, you will most likely understand how important the organization of your products can be. Imagine how much more simple it would be if you knew which products were commonly purchased together, and you could place them strategically in your warehouse. Possessing the right order management software is essential. When researching, it is a good idea to evaluate the features that are offered and compare them with the unique needs of both your customers and your business. Whenever possible, choose software that streamlines the entire ordering process in order to increase efficiency.

Automation is key when fulfilling orders. Since errors and miscommunication often occur when human input is involved, not to mention the fact that manual data entry is much more time consuming, the more your order fulfillment process is automated, the more accurate and efficient your system will be. Consider selecting an online platform that enables seamless automation and allows your sales team and management personnel to have complete interaction as well.

Warehouse integration can likely be one of the most important factors in satisfactory order fulfillment. It is often essential for customers and sales professionals to be able to view real time inventory and product availability in order to place orders effectively, and for those orders to be filled accurately as well. When your order fulfillment process uses order management software that integrates with your back-end system, your information in each will be much more accurate. Regardless of the type of business you are involved in, you likely know that fulfillment timing and accuracy can be extremely important in a company's success. Select order management software that enables your customers, your sales team, and your management personnel to view order details, the status of orders and track their shipments in order to prevent costly errors or delays.

Visibility is key to changing supply chain processes – particularly visibility into cross-channel influence on customer purchases. Retailers are most keen to invest in analytics that provide that visibility. Online is growing much faster, and as mobile and social efforts continue to grow and roll-up under the ecommerce banner that pace will only accelerate

The retail industry is clearly in a state of flux as it tries to adjust to the Omni-channel challenge. While average and lagging performers are attempting to preserve their current supply chain and inventory management practices even as they try new fulfillment strategies, Winners see the need to create enterprise-wide capabilities that create the most flexibility to fulfill demand in the cheapest way possible – and create the “buy anywhere, get anywhere” paradigm without suffering from redundant, bloated inventory levels as a result.

While there is considerable uncertainty about who will win and lose in the multichannel retailing, two things are certain: this is not business as usual, and multichannel will be the dominant form of retail. Either retailers build a transformative set of supply chain capabilities to compete in this new world or they will struggle to survive.