Black Friday and Cyber Monday are in the rear-view mirror and the holiday shopping season is in full swing. That means that the holiday shipping season is in full swing too. The National Retail Federation (NRF) has issued its annual forecast, anticipating that retail sales will grow between 4 percent and 6 percent in 2023, meaning sales will reach between $5.13 trillion and $5.23 trillion this year. Non-store and online sales, which are included in the total figure, are expected to grow between 10 percent and 12 percent year over year to a range of $1.41 trillion to $1.43 trillion. This puts a lot of strain on retailers when it comes to omni-channel fulfillment.
Omni-channel fulfillment is not a singular technology addressing a singular problem. Instead, it is a combination of solutions that allow an organization to fulfill orders received from multiple channels through a variety of channels. The key component is to fulfill the orders through the most efficient channel for both the consumer and company. A lot of this fulfillment comes in the form of home delivery. And over the last month+ of the year, that equates to over 3 billion packages in the US alone.
ARC Advisory Group, the company that I work for, releases a number of market studies on a number of technologies. These studies utilize a comprehensive bottom-up process for evaluating markets. To that end, I, as well as my colleagues Steve Banker and Clint Reiser, have done quite a bit of research on omni-channel fulfillment. ARC’s definition of omni-channel fulfillment is end-delivery centric. We do not include solutions that incorporate in-store technology, such as mobile POS, clienteling, marketing, planograms, or merchandising. We do, however, include technologies that link channels for fulfillment. Our research focuses on the end-consumer receiving their product, whether from home delivery, in-store pick-up, or other means.
There are five major technologies included in the study: warehouse management systems (WMS), transportation management systems (TMS), distributed order management (DOM), inventory optimization/store replenishment, and demand planning. Below is a brief description of how these technologies fit into the omni-channel fulfillment landscape.
One interesting point from previous ARC research that was noticeable about these technologies is that they were not as widespread as one would have expected. With the exception of WMS, each technology represented a significant technology gap, and a large opportunity for companies to refine and improve their omni-channel operations.
Warehouse Management Systems
A WMS’s primary mission is to manage a warehouse’s resources, including inventory, space, labor, equipment, tasks, and material flows. Essentially it is the backbone of moving goods from point A to point B. Not surprisingly, the majority of companies are using a WMS as part of their omni-channel operations. The increase in e-commerce has put added stress on warehouses, as they are now replenishing stores while directly filling customer orders as well. These added complexities have made a WMS application critical for the new omni-channel paradigm.
Transportation Management Systems
A TMS helps companies efficiently, reliably, and cost effectively move freight from origin to destination. TMS encompasses solutions for moving freight in all modes. The TMS processes include freight transported inbound or outbound, domestically or internationally, and using transportation assets the company owns or are owned by an outside service provider. The freight managed by a TMS ranges in size from parcels to bulk commodities.
Distributed Order Management
DOM allows an organization to capture all information in the order management process across all relevant channels. This includes the entry of the order, sourcing, payments, and fulfillment. It also spans all channels of sales operations. The benefit is that it doesn’t matter where an order originates. All fulfillment channels have access to the information and the retailer can appropriately allocate the inventory depending on stock levels, demand requirements, and timing of fulfillment.
Inventory optimization enables retailers to balance their inventory levels with capital investment constraints. Clearly this is easier said than done. However, the use of multi-echelon inventory optimization software can help retailers to identify the appropriate amount of stock needed at stores, warehouses, and distribution centers to meet desired service levels. Establishing these levels will help to free up available cash, thus making the business more profitable.
Finally, demand management is used to manage and forecast the demand of products. This allows organizations to properly allocate inventory to warehouses, distribution centers, and stores. The focus is on customer demand in the short term, and enables the retailer to respond to local events to change their inventory levels.
These five technologies are critical to achieving omni-channel fulfillment. In today’s ever-changing digital world, omni-channel is the new norm as e-commerce continues to outpace brick and mortar sales from a growth standpoint. It will be interesting to see how the technology, and the processes required to use the technology efficiently, continue to change over the next few years.
The post Omni-Channel Fulfillment is Key for the Holiday Season appeared first on Logistics Viewpoints.