The increasing demand for omnichannel retail experiences is driving many companies to scale fulfillment operations quickly, stressing the entire supply chain. In many cases, this can create a big mess when the necessary physical and software infrastructure required to scale properly isn’t in place.
Warehouse management is becoming more complex than ever before as retailers compete to get merchandise out faster and faster. Is your omnichannel warehouse ready to take the next step?
What defines a omnichannel warehouse?
Omnichannel retail integrates digital and physical selling into one cohesive fulfillment channel. For customers, that means having the option to get merchandise shipped directly to their home or plucked from the shelves at the local brick-and-mortar for pickup. In addition, it means buying products online, then returning them easily in person. The goal is to create an interconnected ecosystem that enables the consumer to choose how they wish to engage with a brand.
Omnichannel retail sounds simple — in reality, it relies on a complex inventory management systems that track inventory and optimizes its path through the supply chain. Each omnichannel warehouse needs to be a dynamic partner that meets shifting fulfillment needs of client-facing retail interfaces — both digital and otherwise — as needed. This added flexibility for consumers requires some specific tech capabilities to seamlessly deliver on the fulfillment end.
What hangups can prevent you from smoothly scaling your warehouse for omnichannel retail?
1. Overly segmented supply chain
Without deeply integrated inventory systems for both your ecommerce and brick-and-mortar channels, visibility can be impaired. This can throw off inventory forecasting, stock allocation and replenishing, and attempts to optimize the supply chain for speed and efficiency. It can also make accurately planning for seasonal shifts in demand near impossible.
Most retailers start with a single-echelon inventory control system that focuses on inventory management on a location-to-location standpoint. In order to scale operations, you’ll want multi-echelon inventory management software that can track merchandise from the warehouse to the distribution center and back again if necessary, from the time it arrives from the supplier to last-mile fulfillment.
Thankfully, solutions are available. Advanced inventory management software that can track up-to-the-minute product availability across a network of retail stores and in DCs is becoming more widely adopted. With that software in place, retailers can perform more advanced omnichannel operations, like ship-from-store picking for ecommerce purchases.
If you’re running fulfillment operations from several single-echelon WMS systems, you might not be ready to scale up.
2. Over reliance on safety stocks
Additional supply chain channels means a higher potential risk of stockouts. Without adequate visibility and forethought, these stockouts can lead to big problems for companies — dozens, even hundreds of lost customers.
To prevent stockouts, a lot of companies will invest in safety stock. But many in the inventory management world see safety stock as simple — and potentially costly — cover-up for a lack of stock management diligence. If you don’t have proper oversight over your stock management, diving into omnichannel fulfillment will only exacerbate your problems further.
Keeping safety stock requires a costly up-front investment — one that can lead to waste down the road. For clothing retailers, safety stock may go out of season before it’s sold, leading to a batch of product that never touches a rack at full price. Worse, that product may find its way into a landfill with all its tags still attached.
For these reasons, companies that aren’t ready to use effective stock management will find that they likely aren’t ready to make the full omnichannel leap.
3. Not using regional stock management strategies
Moving stock between brick-and-mortar stores and regional ecommerce DCs is essential to running an effective omnichannel strategy. Without fluid movement to compensate for imbalances in demand, you’ll find yourself with all your stock in the wrong place at the wrong time.
For companies managing a network of regional warehouses, moving stock between local and a regional facilities can open up valuable space that feeds next day and same day fulfillment.
While augmenting your stock management strategy to include omnichannel capability, including a 3PL partner in your safety stock strategy can help you buffer against miscalculations. In the long term, keeping some stock at the port of entry is a way to prepare for shifts in demand. 3PL warehousing allows you to keep additional stock for popular items without expanding your existing warehouse operations, and offers a place to move stock during lags.
Without a strategy to shift stock and meet regional demand, you likely aren’t ready for scaling up.
4. Fragmented reverse logistics
Returns are a fact of life for ecommerce retailers. Nearly 30% of product bought online will be returned, which is a rate more than 3x higher than brick-and-mortar stores. Consumers expect companies to have lenient return policies. For companies that means having logistics in place to handle returned items, mitigate product loss, and protect the bottom line. If your company doesn’t have a well established reverse logistics plan in place, you likely aren’t ready to scale.
Scaling to meet demand is tough enough when you only have one fulfillment channel. Add in a network that includes dozens of retail stores and regional DCs and you have a whole different problem. Thankfully, companies who want to scale up have a lot of options, from 3PL partnerships to software solutions and beyond.