On Second Thought
with Tom Nightingale
We like to tell our customers that shoppers are never more than five feet away from their store. With PCs, tablets and smartphones, buying power is at shoppers’ fingertips anytime, anywhere. And as consumer activity in the mobile space increases year after year, retailers must respond.
The challenge is here and the stakes are high: Staying competitive in the market means establishing strong omni-channel capabilities to support omni-channel buying. No matter where your customers are, they must be able to count on an efficient, seamless buying experience. This challenge is further compounded by consumer expectations. Two-day delivery is today’s standard, and “out of stock” is not an acceptable response for consumers. To grow and thrive, retailers have to reach a higher bar.
Creating the ideal consumer experience starts with what the customer wants and then work back through the supply chain. With a system that’s designed for omni-channel logistics — simply solving for e-commerce and/or brick-and-mortar is no longer enough — retailers must successfully address the rapidly shrinking space between the consumer and the point of purchase.
What’s the ideal solution?
The simple answer is this: Get closer to the consumer.
The answer becomes slightly more complicated, however, when we look at the reality that the consumer is (through the power of technology) everywhere
. But, we know that it can and must be done: The supply chain can be designed to effectively store and ship inventory from multiple locations — both distribution centers and retail stores — all drawing from the same inventory.
Although the solution is unique for each retailer, the common denominator is flexibility. Companies need a third party logistics partner that provides options and can deliver a fully integrated solution. From the moment of the consumer’s purchase, your omni-channel solution will determine what location the product is shipped from and, through business rules, take into consideration inventory and cost of the freight. It is all about the customer experience, regardless of the channel they buy in. We have found that this type of real-time optimization can be the difference that enables our customers to make a profitable sale.
Building a “mini DC.”
The first key is establishing inventory in multiple locations. But as retailers address this by fulfilling orders and shipping direct from their stores, roadblocks arise. Retail locations were not designed to be DCs: picking, packing, dock productivity and carrier scheduling are challenges that require unique skills and systems.
Imagine a store manager in a busy retail location who’s now tasked with fulfilling online orders. There is infrastructure and support, both physical and technology-based, that’s necessary to be effective. Retailers must answer several questions: How are we staffing fulfillment? Is there room in the store for inventory? How will the employees pick and pack? What carriers do we use for outbound?
Sometimes, retailers can operate effectively with part-time employees, and in other cases, a full-time, dedicated staff is required to fulfill direct-to-consumer orders. No matter what the final solution, these retail locations (in addition to performing their primary function) must function like “mini DCs,” operating as efficiently and nimbly as the DCs are designed to be.
The right 3PL provider is one of the best resources for the retailer. A 3PL partner can help devise solutions for all related logistics concerns.
The last question that retailers must answer — and yet another challenge — is what to do about transportation. Many retailers who are transitioning into the direct-to-consumer space are not equipped to ship from stores. This, however, is essential to fulfilling the promise of the online purchase.
The last mile is becoming very relevant to the consumer experience, because consumers do not know or care where their purchase is coming from — only that an accurate order arrives on time. So, from the retailer’s perspective, shipping from the stores must be equally as seamless and efficient as shipping from DCs.
Similar to the process of in-store fulfillment, completing the last mile requires adaptation. Many stores use couriers to complete this last mile, simply because it’s the status quo for brick-and-mortar operations. However, the right 3PL can provide additional shipping options beyond that of the typical courier, leveraging systems and relationships that save time and money in final-mile execution.
For retailers, the ultimate omni-channel solution will likely require venturing into unfamiliar territory. But when it comes to the consumer experience, a successful omni-channel supply chain is all about creating a seamless, integrated solution from every touch point.
This solution must be designed to mitigate the additional costs attributed to staffing and storage. The retailer needs to balance costs with delivering a seamless customer experience. Today’s detailed data shows us that shipping from the DC is usually cheaper and easier for the retailer, but it’s not always the right answer for each transaction. Having the right process and the right business rules in place, all supported by state-of-the-art technology, will usually yield the right decision to ensure a seamless customer experience.
Finally, the system should always be developed and implemented to meet the needs of both brick-and-mortar stores, as well as e-commerce. The idea behind omni-channel management is that the supply chain is optimized for every channel and every challenge.
Nightingale is the president of GENCO Transportation Logistics and can be reached by email.