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Vendor Compliance from a 3PL Perspective: Omni-Channel – Changing the Way Retailers Do Business

Posted By Administration, Thursday, November 13, 2014
Updated: Tuesday, November 11, 2014

by Scott Weiss, Port Logistics Group


The concept of omni-channel is revolutionizing retail. Omni-channel is multi-channel approach to sales that seeks to provide the customer with a seamless shopping experience whether the customer is shopping online from a desktop or mobile device, by telephone, in a brick-and-mortar store, etc.

To survive and thrive in the new era of e-commerce, brick-and-mortar retailers are in the process of reinventing themselves. As they do so, omni-channel commerce is driving them to address a whole set of new logistics and fulfillment challenges.

The following is a comparison of the wants and needs of a consumer at a traditional retail store versus online:

Retail StoreOnline
Competitive priceCheck other sites to make sure it is the best price 
Style, size, color I want in the store, on the shelfOrder multiple sizes, colors, styles – and just keep the one I want 
Quick checkout, friendly sales staffHave my order arrive to my house within 48 hours, 24 hours, or even today
Go home with my purchaseSimple, accurate shopping cart checkout and tracking
Easy, hassle-free returnsEasy, hassle-free returns

 

Omni-channel has big implications in the supply chain. The challenge is to bridge the gap between traditional retail store and e-commerce needs:

Retail StoreOnline
Inventory planning to avoid stock-out in storesInventory planning to deliver next day, wherever
Single Enterprise Resource Planning (ERP) System – best in classMultiple new demand points – electronic storefronts
Prepare for annual peak seasonReact to irregular demand
Efficient bulk pick replenishment to distribution centersFragmented "each" picking to end consumers
Store focused Value Added Services (VAS) – end caps, kitting, tagging, labels agingCustomer focused Value Added Services (VAS) – gift wrap, bagging, branded pack stores

In its most recent The State of the Retail Supply Chain 2014, Auburn University presented the following findings on the omni-channel strategies:1

  • Only certainty is that one-size fits all strategies will create the risk of market share loss – must be flexible
  • Only a few retailers are investing in innovative infrastructure designed for e-commerce; consumer needs are changing rapidly
  • Most retailers are using a shared distribution venter inventory as a primary strategy
  • Retailers/3PLs that already pick at an item level have an advantage

What is or what will your organization's omni-channel strategy be? In determining your organization's omni-channel map, the following are some recommended goals that should be set:

  • Don't upset existing distribution network
  • Minimize cost
  • Leverage/Share inventory across channels
  • Speed and accuracy and critical
  • You must satisfy your customers and create a great brand experience

Now let's take a look at a few examples, possible solutions, and best practices that we have seen in the industry:

Technology

Challenge:

  • New order systems (e-storefronts, shopping carts) built on proprietary and commercial web platforms
  • Multiple demand points, simultaneous order drops, need to work side-by-side with legacy ERP/OMS

Solution:

  • Outsource to a 3PL and rely on their experience/expertise – connecting to multiple order systems, standard and non-standard order interfaces
  • Flexible, cost effective Warehouse Management System (WMS)
  • Single, integrated WMS maintains inventory control

Fulfillment

Challenge:

  • Pick retail orders side by side with e-commerce orders
  • Manage labor costs as SKUs proliferate and travel time increases
  • Innovate – redesign pick strategies to allow for faster each picking across a wider range of SKUs

Solution:

  • "Event Pick" system – new pick algorithms, low-cost iPad interface, rolling multi-bin carts
  • Reduced travel time, dramatically increased fulfillment speed, very low capital equipment expense

Inventory

Challenge:

  • Maintain required inventory for all channels
  • Co-locate inventory to avoid redundancy
  • Seamlessly transfer from one channel to another, depending on demand
  • Pick high-volume retail replenishment and fulfill e-commerce orders

Solution:

  • "Virtual" inventory – co-located, easily transferrable between channels without physical moves
  • Replenish from a single inbound stream
  • 360-degree view, one systemic SKU

Macy's Inc. Unveils String of Omni Initiatives
While many retailers still struggle with implementing an omni-channel approach to target new consumer spending habits, others such as Nordstrom and Macy's have experienced huge success with their focus on omni-channel integration. Here are examples of emerging omni-channel strategies and technologies at Macy's, Inc., encompassing stores, online and mobile as outlined in their September 15, 2014 omni-channel strategy press release:2

  • Use of Apple Inc.'s new mobile payment system Apple Pay
  • Ability to buy online and pick-up in store (BOPS)
  • New mobile wallet function
  • Testing same day delivery for online orders
  • An all new app that allows customers to search the merchandise assortment on macys.com by taking and submitting a photograph of any outfit, accessory or merchandise item they see in daily life. The visual search will take the customer to similar items on macys.com, where they can be purchased.

And there you have it. A term that has been around for quite some time but now really picking up steam in the retail industry.

5 key questions for your organization to consider:

  1. What strategy makes sense for your organization?
  2. How can it best be operationalized?
  3. What capabilities and technologies are needed?
  4. What are the costs? How do you prioritize investments?
  5. How do you measure success?

[1] http://www.rila.org/supply/resources/Documents/4thAnnualStateoftheRetailSupplyChainReport.pdf  
[2] http://pressroom.macysinc.com/press.aspx?catid=34&scid=&mkid=360&pid=17023  


As Vice President, Business Development, Scott Weiss works closely with apparel, footwear, and housewares manufacturers of all sizes to ensure compliance with retailer routing guide requirements.  Port Logistics Group is a market leader in gateway port logistics services, operating over 5 million square feet of warehouse space.  Services include port drayage, import deconsolidation, warehousing and distribution, retail compliance, local transportation, and store delivery in key port locations of Los Angeles/Long Beach, New York/New Jersey, Seattle, and Savannah.  Scott may be reached at sweiss@portlogisticsgroup.com or (562) 977-7620.

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Tags:  Inventory Management  Omni-Channel  Order Fulfillment  Technology 

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