What is Omni-Channel Retailing and What Does it Mean for Logistics?

Omni-channel retail selling does not involve the same list of considerations as omni-channel fulfillment for logistics planning, but it does correlate. Whenever a truly disruptive business development impacts an entire industry, it is almost certain that there will be ramifications for other industries. In this case, the transformative effect of the internet and ecommerce has radically reshaped the nature of retail and, as such, the nature of supply chain logistics for retail operations. This post puts some definition around omni-channel retail selling and discusses the implications for logistics and transportation management.

What is Omni-Channel Retailing?
The rise of eCommerce has transformed the way consumers interact with retail businesses. Customers today have grown accustomed to a seamless omni-channel shopping experience. This includes new and exceptionally convenient ways of shopping and buying like:

  • Buying online and picking their purchases up in the store (think: Walmart, BestBuy and others)
  • “Showrooming” or trying a product in the store, then ordering it online and having it delivered to the home (think: BestBuy, PC Richards, Home Depot)
  • Placing an order via mobile devices and getting assurance that the item is available, with exact shipping cost and delivery times/dates (think: Amazon)
  • Order online, have it delivered at home and return to the store or distribution point if it doesn’t fit (think: Kohl’s, Old Navy or Zappos)

This new array of purchasing and delivery options and the corresponding array of fulfillment nodes is forcing retailers to reconsider and modify their transportation methods.

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Particularly on the inbound logistics side of the retail equation, the added complexity of the push toward omni-channel is making it all but impossible to succeed in the highly competitive retail environment without leveraging tools like TMS, YMS, WMS

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What are the Impacts and Implications for Transportation and Logistics?
The retailers able to adapt to the new paradigm for shopping and fulfillment and overcome the challenge are the ones that have invested in the technologies and business process changes required to gain better understanding and visibility around their inventory levels, distribution locations, transportation plans and how to leverage that understanding. They’re developing a more regionalized distribution strategy focused on:

  • Increasing the number of shipping points
  • Reducing the length of hauls
  • Driving smaller average shipment sizes
  • Gaining better inventory visibility including visibility into shipments in transit or at consolidators

Yet, it is essential to focus not solely on the outbound piece of the equation. Simply increasing the number of shipping points and reduced length of hauls as part of efforts to improve customer service and shipping costs runs the risk of adding more to the inbound costs than the reduced distance saves on the outbound freight. It is also essential to carefully weigh the choices when considering a modification to the location and nature of distribution/fulfillment centers. Peak season selling routinely drives volume surges of 10 times or more the normal workload; if only for a few weeks. Without some degree of consistency in workloads, flexing to meet those staffing swings can impact on cost and efficiency savings. Combined Distribution/Fulfillment operations may be able to shuffle people from other jobs/roles to reduce the temporary pain. Stand-alone fulfillment centers are forced to depend on temporary labor that may or may not be available. Even if temp labor is available, it typically comes at a premium price and delivers less than normal output.

If all these concerns sound complicated, that’s because they are. As with all complex business processes, technologies exist to address and manage the multitude of variables involved in accurate and efficient operations. Particularly on the inbound logistics side of the retail equation, the added complexity of the push toward omni-channel is making it all but impossible to succeed in the highly competitive retail environment without leveraging tools like TMS, YMS, WMS and others which are crucial to orchestrating these more complex moves and maintaining real-time visibility.

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