Fulfilling the promises made to the customer
Over the past years fulfillment logistics has been undergoing drastic changes. The industry is shifting from standard delivery options starting at 3 days or longer to next-day, same-day, or even same-hour delivery. Retailers are using that shift by leveraging fast deliveries to differentiate themselves from the competition. However, this race for time cannot go on forever and the limiting factor is transportation.
The increases in consumer demand are coming at a high cost to retailers. Faster deliveries mean lower average fill-rates of trucks and other transportation methods, causing retailers to pay for “shipping air”. In addition, the rapid increase of digital sales and the resulting returns are another pain point costing retailers tremendous amounts of resources to get their stock back on shelves.
Omnichannel Logistics aims at unifying stock and transport information for the retailer on the backend, while offering a seamless appearance to the consumer across all sales channels. Despite logistics being an activity mostly hidden from the consumer, it is a key contributor to great customer service and therefore to a positive customer experience.
Our 30 seconds introduction: ''Omnichannel Logistics is the transition from a typical supply chain to an interconnected network. In this networks goods flow freely between all locations and channels of a business, while having full transparency on inventory and product location. The core notion is that „a product is a product“, regardless of the fact whether it is purchased through a physical or a digital channel. The implementation of a well-functioning omnichannel distribution strategy is a driver of customer satisfaction and of an enjoyable and memorable shopping experience.''
Market and Consumer view
From warehousing, to picking, to transportation – historically, retailers have been separating their processes for digital and physical sales. However, this thinking in silos is coming to an end with the rise of omnichannel logistics. With rising numbers in digital sales and decreasing in-store sales, retailers have to think of new alternatives of offering a unified shopping experience across all channels. New concepts are regularly introduced to best meet consumer needs and wants from a logistics perspective, such as “buy online ship from store” (BOSS) or “reserve online, pickup in store” (ROPIS). This shift also requires changes to existing logistics infrastructures all throughout the supply network. Let’s go over five crucial aspects of omnichannel logistics – from warehousing to returns.
Omnichannel Warehousing
With multichannel retailers shifting to omnichannel distribution, changes in their warehouse infrastructure become necessary. Multichannel retailers usually have two separate warehouse spaces – one for B2B and one for B2C orders. These spaces can be in different locations or in the same building but with visible segregation between the two. This is due to the different storage requirements and space utilization but also for other reasons such separate accounting for both business units. Warehouses fulfilling digital orders are kept at an individual item level either in shelves or boxes. Physical stores are typically supplied with bulk orders and stock is kept and shipped at a pallet level. Both methods require different handling equipment and a different space setup, e.g., wider aisles for pallet storage to fit a forklift vs. narrow aisles for individual item picking by hand. Further, this often leads to double stockkeeping as goods are kept separately between physical and digital resulting in higher costs. The omnichannel warehouse is the starting point of a successful omnichannel retail strategy.
Necessary Changes
Remove segregation from warehouse spaces and repurpose warehouses to meet the needs of all customers (stores, consumers, retail partners).
Implement unified picking processes and train employees to handle all types of equipment and processes.
Challenges
If fulfillment for digital and physical sales takes place from different cities or even countries an omnichannel warehouse is difficult to implement à option of converting both warehouses into omnichannel warehouses.
High capital expenditures to accommodate equipment that can handle goods on an item and/or pallet level.
Rethinking Distribution
Delivery speed is one of the most crucial differentiators for retailers. Many see themselves limited by their existing transportation networks, which are often only a single distribution center in a market or zone. Goods that have to travel hundreds of kilometers are near impossible to get to the customer for a same-day delivery.
A cost-effective option to increase delivery speeds – at least in urban areas – is the implementation of ship-from-store. By making use of already existing nodes in the supply network, distances travelled can be significantly shortened, making deliveries much faster. Especially for urban areas, new ways of distributing goods are growing in popularity. Delivery vans are being replaced by electric vehicles or bikes and research is even moving toward drone and robot deliveries. Ship-from-store can drastically reduce delivery lead-times.
Necessary Changes
Implementing ship-from-store capabilities.
Training employees to handle shipment orders.
Have full stock transparency in-stores and have it connected to the OMS.
Challenges
Reconfiguring store space to house shipment station.
Include store into your distribution network.
Never disappoint a customer again
A sound omnichannel logistics strategy enables customers to have the same positive experience when shopping regardless of the channel through which they decide to purchase. Two key factors of the customers experience is the range of products offered and the price at which they are offered.
Offering the same range and price across all retail channels is a very difficult task, which omnichannel logistics can help manage. Due to space restrictions, local demands, or stock availability the range offered in physical stores is often smaller than the range offered online. Nevertheless, the customer should not be left feeling like they are missing out on something – enter digital store solutions, that enable the consumer to access a brand’s full range through kiosks or mobile apps.
Having full in-store availability is also a good safety net to avoid the frustration that comes with a product being out of stock. Instead of leaving the store disappointed, the customer can opt for the next best thing, which is ordering it in store and having it delivered.
This mode of presenting products to the consumers triggers a few possible omnichannel logistics services like buy in store, ship to home or endless aisles. These methods have already proven themselves, for example, in furniture retail for ages but now fashion retail is beginning to see the benefits as well. An omnichannel strategy supported by logistics processes helps you never miss out on a sale again.
Necessary Changes
Enable your customers to experience the full product range, even if it is only partially displayed.
Implement a digital solution to build a connection between the online and physical shopping experience.
Challenges
Deciding which products to offer in-store and which to be online exclusives.
Have clarity on the processes for in-store orders to be treated either as an order from the store or as a digital order.
Perfecting last mile delivery
Receiving a parcel is part of the purchasing experience – and so is not receiving your parcel. The last mile has a significant impact on customer satisfaction, as it is the only consumer facing action in the delivery process. The anticipation of finally receiving an ordered product is huge. There are several considerations that go into selecting a suitable service provider for the last mile. For one, the service standard and reputation should be in line with the retailer’s image and reputation. It is likely, that international retailers will need to be in contract with multiple service providers to offer their customers the smoothest process. This means that there need to be sufficient collection or drop off points should a customer not be available during the time of delivery or should they want to return an item.
Logistics service providers are continuously improving their last mile services by implementing new technology. Especially in urban areas there are less of the traditional vans and more small electric vehicles and bikes or even drones and robots. Whether it be delivery by bike, drones or robots.
Real-time tracking of drivers and last-minute changes to the delivery location are some further ways the retailers can help ensure that receiving their products is an enjoyable experience for the consumers.
Start viewing your consumer’s experience with your logistics service provider as an extension of brand experience.
Necessary Changes
Re-evaluate whether the selected carrier is suited to your own image.
Challenges
The influence of a retailer on a carrier‘s delivery performance is very limited.
Orchestrating Omnichannel returns
The customer journey does not end with the completion of the purchase but with the returns process. With upwards of 20% of digital orders being returned, returns cannot only be an afterthought. There are many reasons for returns to occur both from the side of the retailer and the consumer. Returns are a costly process for retailers, having to cover reverse transportation costs, handling, repackaging, refunding, and getting the product back in the warehouse or on store shelves – often fully diminishing margins.
With an omnichannel logistics strategy consumers can return their items regardless of their point of purchase, like buy-online-return-in-store (BORIS).
In a multichannel environment the treatment of a digital return and a store return is vastly different. Returns from stores arriving at the warehouse usually appear in big batches at the end of a season. It is usually known what is in that delivery and no further processing is necessary. However, for digital sales the processes are much more complex. Especially with return labels already in the box, retailers never know what is being returned until it shows up. Once at the warehouse it needs be checked that the item returned is what it is supposed to be and not a different product or a counterfeit for the consumer to be refunded as quickly as possible. This step of checking and triggering refunds is often outsourced due to its complexity and labor intensiveness. Omnichannel logistics no longer differentiates between product origins.
Necessary Changes
Automate B2B returns, e.g., with barcodes, RFID, where the product condition is no concern.
Increase checking capacities for B2C returns or consider outsourcing.
Challenges
Managing accounting processes.
Training in-store employees to authenicate returns.
Creating sufficient warehouse capacities to handle all returns.