Consumers today have numerous ways to find and buy products, making it easier than ever for them to find what they want and get it when and how they want. They often have multiple interactions across a variety of channels with a product or brand before they decide to make a purchase, making it even more critical to meet if not exceed their expectations when and where they are ready to buy. Generally, this will mean being present and available in the channel the customer wants to shop and ensuring they can receive the product in the way and within the timing that suits them best. Enabling Omnichannel fulfillment is one of the key ways retailers can meet these customer expectations.
What Is Omnichannel Fulfillment?
Omnichannel fulfillment is a strategy that allows businesses to sell across multiple sales channels and fulfill those orders from whichever inventory pot best meets the business and customer priorities, regardless of the channel where the order originated.
When online ordering first began, it looked much different than it does today. Each selling channel had siloed inventory, which meant retailers had a higher inventory holding overall and they incurred costly transfers when they needed to move stock between channels. In addition, consumers endured limited delivery/pickup options, more frequent out-of-stocks, and a diminished ability to ensure that an item was actually available in a store before they traveled to it.
With modern omnichannel fulfillment, customers have more options regarding how and when they want to receive their item, and retailers have more options in terms of how to meet those needs in the most efficient and effective way. As an example, a retailer who has a distribution center (DC) in the Midwest would likely need several days to ship large items from that DC to a customer on the East Coast, but if the retailer has a store near the customer, they can then offer the customer express options such as picking up their order from that store or choosing an express delivery option that would involve the store shipping to the customer. For retailers with defined seasons, it also allows more customers to be exposed to end-of-life or end-of-season inventory that may otherwise be stuck in remote stores or moved around by expensive transfers before discounting becomes too deep.
With omnichannel fulfillment, orders may meet any of the following scenarios:
- Buy online, ship from the DC directly to the customer
- Buy (or reserve) online, pick up in store
- Buy online, ship from the store directly to the customer
- Buy online or in a store, ship from a store or a DC to an alternative pickup point (e.g. a store or a designated parcel collection point)
- Buy in a store, the ship from DC directly to a customer
- Buy and pick up in a store (potentially picked up in a different store than where the customer paid)
Additionally, customer-return scenarios will often cross channels, such as when a customer returns their product via a method different from the way they completed the purchase (e.g. buy online, return in store).
Retailers may offer all or some of these services as part of their omnichannel consumer offering, depending on what is most appropriate to their customers’ desires and business priorities.
Major Benefits of Omnichannel Fulfillment
Implementing an omnichannel fulfillment strategy can provide numerous benefits for businesses:
- Increased sales (and higher conversion rates): Offering customers more options for purchasing and receiving products provides an immediate increase in revenue as customers take advantage of new options. In addition, over the longer term, omnichannel customers have been shown to have higher lifetime value and purchase frequency than single-channel customers.
- Improved NPS (happier customers!): Allowing customers to shop and receive goods in the way and according to the timing they want fosters happier, more loyal customers. Assuming the process is orchestrated in line with brand promises, it can also reduce post-purchase service costs.
- Reduced longer-term fulfillment costs: Order orchestration rules are defined and configured as part of an omnichannel strategy and allow businesses to select the lowest cost options to fulfill a particular order based on factors such as ship-from/to locations, available carrier options, required arrival date, stock availability and cost to pick/pack/fulfill from those locations.
- Better margins: Providing varied and faster fulfillment options such as buy online pickup in store (BOPIS), pick-up point collection and same-day delivery in owned channels, provides businesses with the ability to compete with the large fulfillment operations provided by marketplace-style purchasing channels that generally charge significantly higher fees. Additionally, it enables retailers to sell through clearance stock with minimal need to move stock around and reduced need to discount due to ensuring limited stock items are available to a broader swath of customers.
- Stronger brand image/Increase in brand visibility: By providing a seamless shopping experience across multiple channels, businesses can build a stronger brand image and increase brand visibility.
Enabling Omnichannel Fulfillment
Enabling omnichannel fulfillment is a whole-of-business strategic initiative, not just a supply chain project. It involves changes to technology, people, and process across multiple functional areas and often requires a shift in ways of thinking across the organization.
A successful implementation generally starts with a solid assessment of current capabilities and technologies, customer needs and business priorities to build out a gap analysis and a roadmap for success.
In general terms, omnichannel fulfillment will require coordinated initiatives across multiple areas:
- Technology: A consolidated solution must be implemented to enable real-time inventory management so each channel has an accurate view of current stock, inventory protection capabilities, and order routing to decide the best channel to fulfill the order form based on customer selections, business rules, real-time inventory & capacity data and master data. In general, the key piece of enabling technology here is a modern order management system (OMS), which is often an addition to the technology stack and needs to connect across many other systems.
- Process: A modern OMS will enable a retailer to route the order to the appropriate channel with appropriate parameters (e.g. must ship-by day/time), but this necessitates updated processes for store and DC teams to prioritize the order and manage the pick, pack, and ship or pick-up processes. The retailer will also need to consider in-store processes to manage orders not collected and other inventory management processes that may be impacted by new sources of orders. Customer service implications must also be taken into account to ensure that customer care policies align across channels and are as seamless as the original transaction.
- People: Teams across the organization will be required to take on new tasks that take them away from the work that forms their current day-to-day and the basis for their current goals and incentive structure. It is critical to success that responsibilities, impacts to roles, priorities and incentives are well thought through and communicated. Without appropriate change management, incentives and team members who understand the WIIFM (what’s in it for me), omnichannel efforts can be left at a standstill or destined to deliver a poor customer experience.
- Data & Reporting: Omnichannel fulfillment comes with many benefits but also introduces more complexity, generally requiring fulfillment processes to be more immediate/faster. This means that having accurate data within business systems (both master data to enable smart decision making and operational data like current stock levels) becomes more critical. It also provides a slimmer margin for operational error and increases the need for monitoring, alerting and overall reporting to ensure that potential problems and trends are identified early so they can be corrected before they become customer concerns.
Summit Advisory Team Can Help with Your Next Steps
At Summit Advisory Team, we help businesses like yours explore and implement omnichannel fulfillment strategies, leveraging data-backed recommendations to deliver transformational omnichannel implementation projects that meet your business goals. Our team of experts can provide guidance and support in assessing your current state and developing a customized omnichannel fulfillment roadmap that meets your business needs and goals. We have both technical and organizational implementation experience and can help you every step along the way.
Our expertise and support will ensure that your business can seamlessly manage inventory, fulfill orders, and deliver products across all channels. If you’re interested in learning more about how omnichannel fulfillment can benefit your business or how to get started on your omnichannel journey, contact us at Summit Advisory Team.