by Carol Weidner, eZCom Software
Every holiday shopping season has its upsides as well as its lessons to learn. Holiday 2015 signaled an uptick in overall spending and consumer demand.1 However, digital shelves did not always meet that demand: this year, online out-of-stocks saw a ten to fifteen percent increase over 2014.2
Unforeseen demand can explain part of this shortfall – especially for hot items in the toy category. But industry experts point to a more overarching issue – the majority of retailers have not yet fully aligned inventory management with omni-channel imperatives.3 Backend dramatically affects brand engagement – perfectly executed social and e-mail campaigns have little impact if consumers can't get what they want when they want it.
New Habits, Big Expectations
Technology has brought a myriad of new choices and possibilities to retail while raising consumer expectations concerning convenience and shopping options. More and more, consumers utilize multiple channels to complete each purchase, such as click and collect (buy online and pick up in store) and endless aisle (purchase in store and ship to home from another store, drop ship location or DC). This trend of combined channel shopping heavily characterized holiday 2015 and raises the bar significantly for retailers (as well as their distribution and supplier partners).4 It requires extremely agile fulfillment capabilities, highly visible inventory, and significant integration of all fulfillment points as well as the applications that support them.
Although most retailers now recognize such seamless and integrated fulfillment capabilities as the ideal, not all have completed implementation.5 Many established retailers have significant investment in legacy systems and still have portions of inventory and fulfillment managed through siloed applications. Many are in pilot stages of the item-level RFID tagging that provides heightened inventory visibility and helps stores more efficiently function as fulfillment centers. And the industry as a whole currently struggles to configure the balance between push and pull fulfillment models that the new buying patterns require – a gold ring that will likely remain in constant motion as technology evolves. (Ironically, startup retailers that may have had problems competing with more established rivals often have an edge in this new environment – they can start fresh with flexible cloud-based backend systems, respond more quickly to consumer trends and technological innovations, and disrupt with new channels and business models.)
Seamless facilitation of omni-channel fulfillment delivers a win-win for both consumers and retailers. For example, in recent surveys holiday shoppers have expressed a preference to purchase items online and to pick up in store, as this option relieves anxiety concerning holiday shipping issues and saves searching and standing in lines at store locations. Once consumers are in store, however, most click and collect shoppers tend to purchase additional unplanned items – to the tune of 40% this past holiday. Likewise, well executed "save the sale" and endless aisle options protect shoppers from the hassle of calling and/or driving to multiple store locations to track down out-of-stock items. Such transactions afford retailers the obvious upside of, quite literally, saved sales.6
Chasing the Omni-channel Ideal: Making the Dream a Reality
Specific tactics can facilitate retailers' exchange of linear distribution models for a "buy anything, anywhere, anytime" distribution web. These include:
Enable stores to borrow best practices from the DC's playbook and vice versa. If omni-channel fulfillment ideally allows customers to order anything with quick turnaround from any channel, each channel must borrow from the others' strengths.3 Stores with capriciously organized back rooms and semi-accurate inventory will benefit from warehouse-tested tools that heighten visibility and enable streamlined and accurate in-store picking and shipping, such as item level RFID tagging, use of RF guns, voice-directed fulfillment, and even integrated "lite" versions of the DC's WMS system. Similarly, retailer and supplier partner distribution centers, with large order legacies, need tactics to efficiently process smaller and more complex orders shipping direct to customers as well as to stores. An example includes picking single line e-commerce or click and collect orders bound for stores to tote containers with clear labeling, thereby scaling up small orders to the size of typical store replenishment orders.
Keep inventory close, but not that close. Industry experts have suggested "hub stores" as at least a partial solution for relieving omni-channel pressures, such as store replenishment and direct (from store) to consumer fulfillment – from stores, DC's and even supplier partners.3 A hub store would hold defined quantities of the great majority of SKU's in the inventory, and be close enough to a supported group of stores to send out daily replenishment and/or click and collect orders, acting essentially as their "enhanced back room" to pivot in response to sales developments without overwhelming actual back rooms with unmanageable and impractical amounts of inventory.
Simultaneously serve the experience of the in-store, online and mobile customer (as well as every iteration in between). Omni-channel fulfillment requires close coordination between stores, retailers' DC's/warehouses, and supplier partners' warehouses on many levels--including seamless real time visibility of all channel inventory. What's happening online and in-store, both on the floor and in the back room, must be up to the minute, centrally recorded, and accessible to all. Success depends on accurate, scalable and agile integration of software solutions that facilitate this close coordination (such as the aforementioned "WMS lite") – and transition from siloed applications. Solutions exist to track the pace of business on each platform, continuously update stock numbers, send reordering notifications, submit requests to vendors and foster price changes in real time.7
Coordinate more closely with suppliers. Closer connection, or even integration, with suppliers' inventory and order management systems offers considerable omni-channel advantage. Tighter coordination supports seamless and successful direct to consumer fulfillment (drop shipping) – key to omni-channel success. Drop shipping gives retailers the ability to offer a larger array of merchandise to consumers (without the costs and risks of warehousing), giving traditional retailers a toe-hold against e-tailers in terms of selection. It can facilitate cheaper and often faster shipping to the consumer as the fulfillment channel eliminates financial and time costs associated with receiving and distribution. This logistical savings additionally allows retailers to compete on price and still preserve margins – further giving them ability to fulfill the "anything, anywhere" expectations of today's consumers.
Additionally, increased transparency with suppliers can bolster successful just-in-time inventory management. These automated and efficient inventory replenishment systems strike balance between glut and stock outs, saving costs on inventory overages while ensuring in-demand products stay available for purchase, where and when needed. Through integration with suppliers' order management systems, retailers can initiate rapid, strategic response to low stock levels.8 Although such syncing of systems requires an initial buildup of technology infrastructure, the investment can pay high returns in terms of omni-channel efficiency, cost savings, and customer satisfaction.
Continually up the IT ante. In omni-channel retail, IT forms the backbone of the customer experience. Accordingly, it warrants significant investment. Tech departments can no longer focus solely on automating daily back end tasks of the enterprise, they must find ways to innovate and disrupt. As a recent Retailing Today article put it, "Every retailer must actively leverage technology to innovate new ways of engaging and delighting the customer, and then converting and executing sales as efficiently as possible."9
Omni-channel also necessitates IT departments to create and maintain flexible, scalable, and robust infrastructure. Customer and sales data volume has risen dramatically with the rise and ubiquitous use of multiple shopping channels and the support of in-store and online digital shopping "experiences." Inventory across all channels must ideally be managed centrally and visibly. IT departments must align the back end across shopping channels, execute integrations and break down silos.
Prioritize. In shooting for the omni-channel ideal, each organization should define its own contemporary real. Although omni-channel fulfillment dictates a global and dramatic change in inventory management and fulfillment, individual paths to success will vary in accordance with priorities, strengths, budgets, and challenges. Set long and short term goals and tactics in accordance with your organization's unique environment to pace for eventual success.
Carol Weidner, CEO of eZCom Software, is living proof of the adage "If you want something done right, ask a busy person." Soon after graduating
from Rutgers University with a degree in Mathematics, she opened her own successful business – wholesaling home wares and accessories in the New
York/New Jersey area. Carol continued in her entrepreneurial endeavors while she returned to Rutgers full time and completed a second degree in
Biology. Following her (second) graduation, Carol learned computer programming and focused on EDI – working for companies serving the retail
industry and consulting for major retailers like Toys "R" Us. When an opportunity arose to take over a small many-to-many retail portal in 2000,
Carol grabbed the reins. She directed the finance and sales side of the burgeoning company, while working together with a team of colleagues who
redesigned one of its key products to serve as a web-based EDI application. The result was the B2B supply chain software provider eZCom Software
– and the cloud-based EDI solution, Lingo. Carol can be reached at firstname.lastname@example.org or 201-731-1800. Learn more about eZCom Software
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