More than 90 percent of retailers/brands have an omnichannel strategy or plan to invest in one soon, but just 8 percent believe they have mastered omnichannel, according to Brightpearl’s The State of Omnichannel report.
We set out to identify some of the barriers to effective implementation. In our recent omnichannel fulfillment and distribution survey, we asked manufacturers, retailers, and ecommerce companies to name their top fulfillment challenges. We got an earful.
Following is an excerpt from Ready or Not: Omnichannel Fulfillment & Distribution…
Top fulfillment challenges today
Establishing a more sophisticated supply chain isn’t easy. Omnichannel poses a host of potential challenges related to order management, fulfillment and distribution, and survey respondents say they are experiencing many of them.
1. Transportation-related issues such as delivery time and cost topped the list of challenges for nearly half (48.1 percent) of respondents. Increasing consumer expectations for fast and free shipping are likely a major contributing factor here – both in B2C and B2B environments.
“To help address this issue, many companies expand their distribution networks to move products closer to the customer,” points out Perry Belcastro, vice president of fulfillment, at Saddle Creek Logistics Services. “With strategically located DCs, they can reach more than 99 percent of the U.S. within two business days via ground service – thereby achieving competitive customer service using economy shipping options.” Rate negotiation, planned shipping volume and zone skipping to specific sortation hubs can also be helpful, he says.
2. Inventory management across multiple facilities was a close second to transportation issues with 46.8 percent of respondents. As companies move toward a multi-site distribution model, they’re likely realizing a need for better visibility and real-time information.
A robust order management system (OMS) can provide enterprise-wide visibility, the ability to pull from multiple fulfillment sources and accurate, real-time information about product availability, order status and shipment tracking, Belcastro says.
3. Order processing issues (i.e., accuracy, turnaround) trouble 43 percent of respondents. The high volume of individual, small-parcel orders can overwhelm traditional fulfillment operations, and escalating expectations for faster deliveries adds pressure to fill orders faster.
Custom engineered processes and methodologies like Lean Six Sigma can help to improve efficiency, cost-effectiveness and order accuracy. Automated fulfillment and material handling solutions also help to improve velocity.
4. Scalability to accommodate growth/fluctuations is a significant concern for 41.8 percent of respondents. As sales volume increases – or ebbs and flows with business fluctuations – companies struggle to manage changing needs for space and staffing.
In this case, Belcastro suggests utilizing a third-party provider with flexible resources (space, staffing and equipment) to handle the peaks and valleys without a major overhead investment.
Interestingly, just 26.6 percent of respondents said omnichannel profitability was one of their top challenges. It is likely that respondents feel they have other more pressing issues rather than that they’re achieving real profitability. In a 2017 JDA survey of retail CEOs, only 10 percent of respondents said they were able to make a profit while fulfilling omnichannel demand.
In fact, the Saddle Creek study finds that more than half of companies (53.2 percent) have experienced an increase in fulfillment costs in the past year.
The biggest factor contributing to the increase? An overwhelming majority of respondents (69 percent) point to shipping costs. Demand for free shipping and, often, free returns can take a toll on transportation budgets. Labor costs aren’t far behind – cited by 64.3 percent of respondents. This stands to reason since ecommerce fulfillment tends to be more labor intensive than traditional fulfillment operations.
“Controlling costs is always a priority,” Belcastro says. “It is important to explore every option to improve processes and increase efficiency throughout the omnichannel supply chain.”
To learn more about the current state of the omnichannel supply chain, industry trends, the role of technology, use of outsourcing and more, read the whitepaper.