By Antony Francis , Lakehill Partners
March 17, 2019
Let’s begin with an overview of what omni-channel means. Whether it be B2B or B2C, buyers and consumers expect to be able to source and purchase goods in any combination of methods whether online or in brick & mortar stores and then be able to return them in any way they choose.
This is where omnichannel logistics comes to solve this no-exhaustive list of methods:
- Online purchase delivered to the buyer’s home or place of business, either via an e-retailer (e.g. Amazon) and either fulfilled directly by the e-tailer (e.g. FBA – Fulfilled by Amazon) or by the manufacturer/seller.
- Online order sent to a store for local pickup or local delivery from a store.
- Ability to search availability either in a DC or a local store. This is important when dealing with out-of-stock or back-ordered items.
- Online order and in-store purchase return management. Customer choice is all important.
Increasingly, customers expectation of arrival times has changed such that same day delivery is becoming an almost standard feature. But at what cost to serve? Last mile delivery networks are challenged to reduce these delivery times without increasing rates to their customers.
Omni-channel logistics is designed to manage inventory flow across all sales channels. It, therefore, comes with its own unique set of challenges. Many of these are not new to the logistics space. They have been known for years. Indeed, one of the principal barriers to eliminating these issues has been technology. With today’s connected systems and the use of distributed ledger technology, we are getting closer to resolution.
Now, let’s look at 5 of the top omni-channel logistics challenges that businesses face:
- Lack of visibility in the supply chain.
- Poorly executed processes.
- Solving transportation conundrum.
- Returns Management and Reverse Logistics.
- Insource operations or outsource to a 3PL
- Lack of visibility in the supply chain.
Two key challenges are inventory visibility and visibility once in transit. In short, it means picking and packing the right product and delivering it when expected.
A well-developed Inventory Management System which views stores as mini-warehouses with the same visibility to contact and selection should be coupled to the Order Management System that is fed from various Order Entry points (online or other). Each of these systems has key metrics and dashboards built into them to alert to execution status at any time.
We are always dealing with three supply chain (physical, informational and financial). Once, these were mutually exclusive. That is no longer the case today. Knowing the cost to serve is as important for a business as pick accuracy or fulfill rates as operational metrics.
Once the shipment has left the dock, it is all important to be able to alert a customer when an issue arises in transit and allow interception in-transit and re-routing capabilities. Many TMS products integrate these features including shipment status, GPS, temperature, humidity and shock sensors, etc. It is also important to know which product is in which box when a pallet or multi-piece shipment arrives.
For international shipments, it is critical to integrate freight forwarder systems into the shipment status tracking, in the event of delays in customs clearance.
- Poorly executed processes.
A killer for supply chain operations is manual processes that come from legacy systems that have yet to be connected to an updated technology platform. One of the enduring areas is inventory control which often still rely on physical count process engendering slow update and inaccurate counts. As companies grow and restructure or acquire other operations, the integration of these platforms is often painfully slow. The key to solving this supply chain breakdown is to consolidate these processes, rather than let them function in silos.
- Solving transportation conundrum.
There are many ways to get a product to the customer’s doorstep, whether from a DC or a store. 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 omni-channel logistics. This is especially true for returns. They may not require the same speed as used for the forward side.
- Returns Management and Reverse Logistics.
The return process for any product should be just as seamless as its initial delivery. In this new omni-channel landscape, customers expect to be able to return products they’ve purchased online in-store or by mail. Companies that don’t offer this ease of return are unlikely to generate repeat business. Implementing sound reverse logistics infrastructure is imperative to good customer service within the omni-channel logistics framework.
- Insource operations or outsource to a 3PL
Although digital transformation has been the focus attention from analysts and technology companies alike, businesses must take care not to overlook the physical transformation. The method of flowing truckloads of products from large DCs to stores has become outdated. Businesses must update their supply chain and distribution networks to compete in this new market, in which the speed of delivery and inventory reduction are paramount. Leading enterprises are testing out new distribution strategies that eliminate DCs to become more agile and to better align with customer expectations for faster deliveries.
In fact, the companies that do omni-channel best sell orders online without ever taking physical possession of the product. E-commerce and order management systems are synced in such a way that online shopping cart orders trigger a PO directly with the vendor. This, in turn, places a PO on an OEM and triggers a chain of events with the outbound freight forwarder, the carrier, and the inbound forwarder and then an outsourced or in-house party within the business’s supply chain carries out fulfillment. All these operators’ systems need to be fully integrated.
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.
More and more companies are relying on their 3PL/4PL partners to run the back-office operations, allowing them to focus on the core competencies of designing, producing, marketing and selling products. Leave the rest to the experts.
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 omni-channel fulfillment. A 3PL’s core competency around fulfillment operations — such as knowing which metrics to use and how to measure them to drive continuous improvement — can help companies both large and small close the capability gap.
Summary
The right 3PL partner can use its retail and shipping industry knowledge and supply chain experience, as well as a diverse set of OMS/WMS/TMS capabilities and integration strategies to address the challenges listed above.
Lakehill Partners has a long history of systems integration and business process redesign. Let us help you manage the way forward.
For more information on this subject, please contact Antony Francis at antony.francis@lakehillpartners.com.
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