The Impact of the Omnichannel Customer Experience on Logistics

By Evan Mc Caig, CEO & Managing Partner, SCApath

Evan Mc Caig, CEO & Managing Partner, SCApath

Omni-channel is a buzzword, a competitive advantage, an IT challenge, and YOUR CUSTOMER’S EXPECTATION. It’s the path our clients are taking to unlock previously unfulfilled demand while providing customers with a seamless shopping experience. Omnichannel represents a sea change, a chance for consumer companies to re-invent themselves and unlock financial gains previously unreachable. From website clicks, to app swipes, to store shelves, the mediums involved in a sale today are a common retail experience – but are your supply chain systems capable of delivering when and where your customer dictates?

The Omni-channel challenges the supply chain to provide “one version of the truth” on product availability with consistent service levels, whether the sale is fulfilled from the e-commerce distribution center or from the local retail store. To step up to the Omni-Channel challenge, retailers are making changes to their order management, distribution and transportation systems. Traditional retail systems were built to be very physical, store-shelf centric and have not kept up with the challenge of maintaining a single view of network level supply and adjusting in real time to the changing channel level demands. This has created opportunity for a new breed of execution systems called Distributed Order Management (DOM) that sit in the center of merchandise allocation, inventory and fulfillment systems and match enterprise-wide supply with cross-channel demand.

In a retail organization, inventory typically resides in location level systems across all DCs and Stores in the network. DOM systems are capable of integrating with these disparate technologies, receiving real time inventory positions and normalizing the data for fulfillment decision making. When a customer is making a purchase from the store that is out of that product, distributed order management by virtue of having visibility into the entire supply chain will find the product if it exists anywhere in the network and promise to fulfill in the way a customer chooses. This core capability enables cross-channel selling and fulfillment such as buy online / ship from in store, buy in store /deliver at home, and vendor direct to home to name a few.

“To step up to the Omni-Channel challenge, retailers are making changes to their order management, distribution and transportation systems”

Leveraging a DOM system requires the ability to fulfill orders throughout the network from a common pool of inventory and often brings a mix of retail, e-commerce, and wholesale channels inside the same distribution center. The warehouse management system (WMS) design must be flexible enough to fulfill distinct order profiles while meeting efficiency and customer service level expectations.

For example, a highly automated multi-channel facility for a global brand utilizes a unit sorter for e-commerce and targeted wholesale orders, pick and put-to-light flex modules for high quantity per line retail and wholesale orders, and an automated storage/retrieval system that supports dynamic fulfillment across all three channels. This type of fulfilment architecture is only achievable with best-of-breed warehouse management and control systems, implemented by cross-functional IT and business teams that are strategically aligned. Moreover, complex integrated technology on a ‘high availability’ infrastructure is becoming the rule in Omnichannel distribution.

The growth of digital selling is shifting last mile delivery of the product back to the retailer, which means that much more product is shipped through a more expensive transportation modes than ever before. This shift presents three new TMS challenges - last mile delivery costs, parcel carrier capacity, and shipment visibility. In our viewpoint, modern transportation systems are stepping up to the Omnichannel challenge; however, mixed channel freight planning, and real time visibility require additional focus to meet Omni-channel demands.

Omni-channel distribution provides intriguing opportunities to reach customers in innovative ways, but often presents more questions than answers. When charting the right path to Omnichannel success, one size does not fit all, and it requires the thoughtful analysis of a company's unique strategic priorities, network assets, and IT capability.

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