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Multichannel Fulfillment Is The New Normal

Analyst Insight: Multichannel fulfillment can be defined as optimizing the supply chain's capabilities to simultaneously receive and process orders from multiple ordering channels and fulfill them from the source that provides the highest level of consumer satisfaction and lowest fulfillment cost to the retailer. This model for fulfillment is both customer - and cost-driven and, therefore, the new de facto standard for the retail supply chain. - Joe Vernon, Manager of North America Supply Chain Technologies, Capgemini

Retailers are combining store and e-commerce into a single distribution center, and integrating their physical stores and online channels to better leverage demands from both in-store and warehouse inventory. With more customers shopping online and on their mobile devices, it seems imperative that retailers offer different channels for fulfillment to not only keep prices low, but to remain competitive and foster customer loyalty.

The shopping experience for consumers has changed as consumers push for more and better ways to be served.  If an item is purchased from a catalogue or online or from a call center, a customer may want to pick up that item from the closest store. This allows the consumer to inspect the item in the store or even try it on for size. If there is a question or concern, or if it doesn't fit, the consumer may want that issue to be resolved on the spot.

Macro Level Trends

Eighty-six percent of our global respondents and 65 percent of U.S.-based respondents currently shop across at least two channels, while 25 percent of global respondents and 21 percent of U.S. respondents are using four or five channels to shop.

Building a world class multichannel fulfillment network requires a number of best-in-class solutions working together, and optimized both individually and together as a cohesive system.

Implementing a successful multichannel fulfillment solution requires optimizing inventory across the entire supply chain (vendors, distribution centers and retail stores) in order to reduce lost sales due to stockouts, while also positioning inventory correctly to provide the lowest possible fulfillment cost per order. This optimization requires a set of systems working in concert, from inventory and planning to order management and through to supply chain execution.

Inventory and Planning

The first step toward unlocking the power of multichannel fulfillment is enabling real-time inventory visibility across the supply chain. It is crucial to the fulfillment system to know current inventory levels across all possible fulfillment locations, including stores, distribution centers and vendors who are drop-ship enabled.

Order Management

For multichannel fulfillment to work, the overall system must have a view into all orders and demand across all channels. This often requires interfaces with multiple order management systems for retail stores, e-commerce, and replenishment orders into the retailer's distribution network.

Fulfillment Execution

Supply chain execution systems take over the direct physical processing of the order. As a single location can fulfill multiple kinds of orders (i.e., a distribution center could fulfill either store or customer orders and a store could fulfill both walk in and e-commerce purchases), these execution systems must be robust enough to handle all possible order and inventory flows.

                                      The Outlook

Big box retailers have already made strides into multichannel distribution with plans to continue to modify their retail footprint, on-line presence and supply chain software solutions. Watch for innovations with the use of the kiosk and the virtual shopping experience. The consumer can look forward to an enhanced and more facile and fluid shopping experience.

Keywords: order fulfillment, merged channel retailing, omnichannel retailing, multichannel retailing, retail fulfillment trends, retail supply chain

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