Flexible Warehouse Management for Omnichannel Fulfillment
Published on 10 October 2018
First came e-commerce, then multichannel. Now most consumers expect omnichannel commerce, or what Gartner calls unified retail commerce.
Increasingly, B2B customers also want an omnichannel buying experience.
In the transitions from e-commerce to multichannel and omnichannel, warehouse operations must change – sometimes dramatically.
In this article, we explore the top six challenges distribution companies often struggle to address as they adopt omnichannel commerce. Then we offer tips on how to overcome each of the hurdles.
- How omnichannel commerce is different
- Sellers can choose the most profitable fulfillment path
- Buyers want convenience, fast delivery, and transparency
- Why e-commerce and multichannel commerce are no longer enough
- Blame Amazon for setting expectations so high
- It’s only a matter of time before Amazon attacks your business segment
- Six challenges and many suggestions for multichannel commerce
- Fulfilling multiple order types under the same roof
- Maintaining accurate, real-time inventory counts
- Achieving full inventory visibility
- Fulfilling orders the same or next day
- Meeting your customers’ labeling, packaging, and shipping requirements
- Managing personalization, light manufacturing, assembly, or kitting
- Get flexible
- How Generix Group can help
- Technology is the easy part
How omnichannel commerce is different
Let’s be clear about what we mean by omnichannel commerce. Here are its key elements:
- Customers browse and learn about products wherever they like – at a physical location, online, on mobile devices or through social media.
- They can easily buy wherever they prefer to shop. Many customers want to be able to buy products through major online retailers, including Amazon.com, eBay and others.
- They have a consistently easy buying experience across all channels.
Sellers can choose the most profitable fulfillment path
Omnichannel fulfillment enables sellers to choose the location from which they ship the product. You can ship from a location near their home or you can ship it from a distribution center.
A good order management system (OMS) can automate that decision. It can use algorithms that weigh the cost to serve, availability of the product, and other factors affecting profit.
Buyers want convenience, fast delivery, and transparency
At the time of purchase, customers want to know when and where the product is available and how soon they can get it.
They want to be able to pick the product up or have it shipped to a convenient location.
They want free or low-cost shipping.
They often want the product within two days and sometimes expect same-day delivery.
They want hassle-free returns.
Why e-commerce and multichannel commerce are no longer enough
The pioneers of e-commerce and multichannel commerce often used separate fulfillment operations for each sales channel.
They also maintained separate inventories. Some even operated separate warehouses to fulfill orders for brick-and-mortar, catalog, and e-commerce.
They did so, in part, because older Information systems were not integrated across sales or fulfillment channels.
This means inventory, order status, and other key information was not easily available across channels or stocking locations.
Blame Amazon for setting expectations so high
Let’s review the omnichannel performance standards your customers are likely to measure your company against today.
Consumers and businesses can buy 562 million products through Amazon.com.
Many of these products are available at lower prices than anywhere else.
On Amazon’s website, you know immediately whether the products you want are available in Amazon’s warehouses.
If you buy directly from Amazon rather than a marketplace partner, you know when the order is filled, when it ships, and how soon it will arrive.
You can have many of Amazon’s products delivered to your doorstep in one business day. In some locations and for some products, your shipment can arrive in a few hours.
With Amazon Prime, the shipping is free and Amazon’s prices are often lower than you can find offline.
If you want to return the product, the process is generally easy.
It’s only a matter of time before Amazon attacks your business segment
Amazon has long since moved beyond selling consumer products. Now their business-to-business division sells office products, auto parts, and health care products.
It’s anyone’s guess which B2B segments they’ll target next.
Even before they enter your market, they’ve taught your customers to expect more.
To satisfy those rising expectations, your warehouse operations must be relentlessly efficient. You must achieve greater throughput at a lower cost per unit shipped.
Omnichannel requires new capabilities in the warehouse
To provide omnichannel commerce, companies must invest in building both customer-facing sales channels and back-end fulfillment capabilities. Systems for both must be well integrated.
The shift to omnichannel commerce puts many new demands on warehouse operations.
The demands are hard to meet without a warehouse management system (WMS). Yet a third of warehouses have not implemented a WMS, according to the Warehousing Education and Research Council (WERC).
If you try to conduct omnichannel commerce with manual processes, you will have a hard time scaling your business and operating profitably.
Here are six challenges in adopting omnichannel commerce, with many suggestions for how to address them:
1. Fulfilling multiple order types under the same roof
For many companies, it’s inefficient to operate separate warehouses for different sales channels or order types.
Small and mid-sized operations are likely to be most efficient if they serve multiple channels from the same facility. This may be true even if you run multiple warehouses.
Let’s say you operate an east coast warehouse that fulfills e-commerce orders and a west coast warehouse that fills bulk commercial orders.
Your shipping costs will be high for e-commerce orders that go to the west coast and commercial orders that go to the east coast. Competitors that offer local distribution may be able to undercut the fees you charge for shipping and handling.
It may make financial sense to fulfill commercial and e-commerce orders through both warehouses.
Optimize your warehouses to handle multiple kinds of orders. In a commercial warehouse, introduce processes that enable you to fulfill many small orders of eaches. In an e-commerce warehouse, introduce efficiencies to pick, stage and ship full pallets.
You’ll need to be able to manage workflows for two or more different order types. Be sure your systems and processes are flexible enough to accommodate.
2. Maintaining accurate, real-time inventory counts
Not long ago, 90% of inventory accuracy was good enough.
But today a customer who needs a critical part may have a choice of multiple sources that offer next-day delivery. If the customer orders a part that appears to be in stock on your website, you must be sure you can fill it on time.
If for any reason you can’t ship, you may lose the customer’s future business.
It’s not enough to know how much inventory you have on hand. You must also know how much of your inventory is available to promise. Is it damaged? Expired?
Is it on reserve for another customer? Does it need inspection or assembly before you ship it?
If it’s a customer return, must it be inspected and possibly repackaged or refurbished before it goes back out?
A good warehouse management system (WMS) can help achieve and maintain accurate inventory counts at all times.
It can then send accurate, real-time inventory counts to your enterprise resource planning (ERP) system, order management system (OMS), and your e-commerce-system.
When your customers place an order, they can be confident their items are available for timely shipment.
To maintain accurate counts, reduce or eliminate paperwork.
Stop counting and tracking inventory by hand. Use barcodes and scanners to track whenever someone moves a product.
3. Achieving full inventory visibility
To ensure first-rate customer service, you must know where each item is at all times.
You must be able to see inventory across your inbound supply chain, your stocking locations, and your outbound supply chain.
For inbound orders, know which items are arriving from which sources and via which carriers. Also, know their expected date of arrival.
You can get such information through Electronic Data Interchange (EDI) and Advance Ship Notification (ASN) from your suppliers.
Once an inbound order has arrived at receiving, track where each item is within your facility. Is it on the dock waiting to be received? Is it “en route” to bulk or overstock locations deep in your warehouse or a forward-pick location near your staging/shipping areas? Is it headed for cross-docking to another facility?
Be able to see your inventory across all sales channels, all stocking locations, and all order statuses.
Once an order has left your facility, know when it shipped. Also know the address to which it shipped, the outbound carrier, and the carrier’s tracking number. Provide this information to your customers through an automated email system.
With full inventory visibility, a customer-service representative or warehouse manager has many options to provide exceptional customer service:
- He can promise next-day shipment for an order that’s at the receiving dock but not yet checked in.
- For a customer that expects 100% fill rates, he can hold an order until all lines are ready to ship in full.
- If a customer needs next-day delivery for one of several parts, the manager can break out that part from the rest of the order and ship it right away.
- The manager can have the item shipped from another facility or he can “borrow” inventory from a different channel or a reserved quantity.
4. Fulfilling orders the same or next day
Your customer may not need delivery for a few days. Even so, he may choose to buy from the supplier who can deliver the fastest.
The trend is toward faster deliveries. For example, Home Depot recently announced a $1.2 billion supply chain initiative to speed delivery to most of the U.S. market within a day.
You don’t necessarily have to invest a mountain of cash to fill orders faster. It will certainly help to reconfigure your warehouse workflows and processes to increase throughput and speed.
You can use a WMS that provides put-away logic so you can establish separate pick locations for full pallets and cases or eaches. Configure your forward-pick locations to make it fast and easy to pick items in high demand.
Place your forward-pick locations near your staging and shipping areas. Put your fast-moving inventory where you can reduce travel time in the warehouse. Forward-pick locations can also reduce the number of times your crews handle inventory.
Have your pickers pick multiple small orders at the same time. Use the dimensions of items to inform pickers in which packages will be needed to ship each order. With this information, they can reduce handling by picking to the final shipping container.
Also, use your WMS to reduce handling cost and warehouse travel distance for putaway and order picking.
Here’s an example. Let’s say you stock case packs and eaches in a forward-pick location. You stock full pallets of the same items in the back of the warehouse.
Based on the velocity of items in your forward-pick zone, you’ve decided to keep four days’ inventory there.
When you receive a new pallet of goods, your WMS checks the inventory at the forward-pick location. It’s down to three days’ supply.
The WMS quickly calculates the economics. It’s most efficient, it decides, to restock the forward-pick location before putting away the rest of the pallet. It sends a work order to the forklift driver’s hand-held device.
The result? Less handling. Less labor. Lower cost. Customer orders filled faster. Happier customers. More revenue.
5. Meeting your customers’ labeling, packaging, and shipping requirements
It’s an important element of omnichannel commerce to serve your customers where they prefer to shop. That means you must at least consider selling through Amazon, eBay, Jet, Walmart, and other big e-commerce sites.
You have a choice of working with these companies. You can drop-ship to their customers from your own warehouse. Or you can act like a wholesaler, shipping bulk orders to the retailers’ fulfillment centers.
Each option has different pricing and cost structure. And each requires different warehouse logistics. Either way, all the big retailers (and many smaller ones) have their own labeling, packaging, and shipping requirements.
Suppose you receive a drop-ship order through Amazon’s merchant program. You must print a label and a packing slip that meet Amazon’s specs. Your shipment will look like it came straight from Amazon. Similarly, if you drop-ship for Walmart the packaging and labeling must look like Walmart’s.
Many warehouse management systems meet the requirements of the biggest retailers. But they may be less helpful in working with smaller retailers.
To comply with the specifications of smaller retailers, you have three choices:
- You can reconfigure your WMS for each small retailer you work with. If your WMS is built with old technology, the configuration process can be time consuming and expensive.
- You can use manual processes for labeling and packaging. These are often labor intensive and prone to error and inconsistency.
- You can use a WMS built with more current technology that makes configuration relatively fast and inexpensive.
6. Managing personalization, light manufacturing, assembly, or kitting.
For some products, you may provide value-added services such as personalization, customization, light manufacturing, assembly, or kitting.
For example, you might assemble gift baskets, promotional value packs, or display packs.
In the food industry, you might assemble meal kits or offer custom-labeled products.
In the automotive aftermarket, you may bundle tools or supplies. You may ship matching headlamps pairs or offer auto tune-up kits for various car makes and models.
In apparel, you may offer monogrammed or custom-packaged products.
If such offerings are important to your business, it may make sense to pair your WMS with a manufacturing execution system (MES).
How might the two systems work with your ERP system?
Suppose you receive a customer order for 10 kits, but you have only four in stock.
Your ERP system generates a sales order for 10. It also creates a work order to assemble 6 kits. Your WMS generates a work order pick list to pick all the components or ingredients in the right quantities for the kits.
When all the components are in place, the MES ensures that the right items go into each kit.
The MES also assigns a lot number or serial number to each kit. And it tracks which combination of components, ingredients, and lot numbers or serial numbers went into each.
Then the WMS tracks which lot numbers or serial numbers go out on which trucks and to which customer locations.
You have full traceability and recall reporting through your facilities and out to your customer sites.
Customer expectations are rising constantly.
A slew of new technologies are on the horizon, and many are already in use.
They include the Internet of Things. Artificial intelligence and machine learning. Automation. Robots. Drones. Self-driving cars. Self-diagnosing systems and parts.
As your customers and competitors adopt these technologies, expectations are likely to soar even faster and higher.
For most businesses, it’s hard enough to keep pace now.
Among other challenges, the systems and processes they put in place a few years ago are holding them back.
But for companies that can adapt, the future holds great opportunity and promise.
In a fast-changing, uncertain world, flexibility, speed, and agility are more important than economies of scale.
How Generix Group can help
Generix Group builds software designed to be flexible.
We developed our platform to be highly configurable and flexible. Our use of low-code technology makes it faster, easier, and less expensive to reconfigure your systems as your business evolves.
With adaptable software, you will find it easier to achieve these goals:
- Provide the rising level of service your customers expect.
- Scale your operations efficiently and profitably.
- Adaptor reinvents your business model, if necessary.
Specifically, the Generix Group WMS enables you to:
Sell efficiently through major online retailers such as Amazon, Walmart, eBay, and others.
- Acquire new customers who have specific labeling, packaging, or shipping requirements.
- Work with a range of transportation carriers, including LTLs and parcel services.
- Adapt to changing sales volumes for key products.
- Accurately trace items through your operations and out the door to your customer sites.
Technology is the easy part
Putting in new software and technology is one of the easier parts of managing change.
The human elements are much more challenging.
Most people don’t like change. We resist it as long and as we can. We move forward only when we see that change is less painful than continuing with the status quo.
If you’re thinking about the need to change but aren’t sure how or where to start, let’s start a conversation.