Analyst insight: Retailers are still tweaking their omnichannel strategies to leverage their distribution centers and physical stores in the new e-commerce economy. Inventory optimization across stores, DCs, and drop-shipping requires a move toward a unified view of all inventory, and achieving efficient and cost-effective storage, accessibility and movement. In addition, tailored order fulfillment programs from buy-online, pickup-in-store (BOPIS) to direct-to-consumer (DTC) are now vital parts of directing purchases for greater buyer satisfaction.
Retailers continue to fine-tune omnichannel strategies, fulfilling online orders from DCs, using stores for backup fulfillment, or making in-store fulfillment and returns a key tactic. In search of competitive advantage, they are revamping stores and updating technologies, tools, training and hiring.
Ship-from-store approaches remain challenging, since that option might be convenient for customers close to the retailer, but requires pushing inventory to stores where real estate costs and employee wages are higher than those of DCs. These are important factors for retailers when considering last-mile logistics, tighter shipping standards and shorter delivery timeframes. Better management of item availability at a store and sales velocity is critical. Another interesting twist: an intelligent order-management system, with customizable order and routing rules, can take into account the value of each customer and help balance the retailer’s sales, profits and customer-satisfaction goals.
Retailers also use BOPIS programs to drive customers to stores to pick up their online orders and enable upsell opportunities. These programs require hiring, training and technology investments to keep up with customers' high standards. Firms institute BOPIS with status meetings, generate reports that track key metrics, redesign stores, incentivize store associates, establish BOPIS processes, train customer service to handle inquiries, and create related marketing campaigns. These often begin with a pilot program that helps to gauge customer demand and identify operations beforehand.
For their part, retailers that fulfill subscription services face intense order volume spikes. As a result, they’re opting to invest in space, staff and workstations to fill boxes, especially for peak order processing. Retailers often need to control operational expenses such as shipping, and minimize transit time and costs to synchronize with tight delivery windows. We see retailers succeed with subscription fulfillment operations that are designed for optimal efficiency during peak order processing, but aren’t over-engineered with excessive, costly technology.
Technology remains critical for many parts of order optimization. Intelligent picking systems can simplify store associates' search for items to pull, showing employees each item location and recommending an optimal path to find every item on the picklist. Some retailers enable store associates to pull up an order, verify that the return window for the item hasn’t expired, and grant credit or authorize an exchange on the spot, further simplifying in-store returns.
When it comes to DC order fulfillment, increased transactional volumes, e-commerce, time-pressure demands and labor shortages mean technology and automation remain prime ways to gain efficiencies. There’s also more piece pick versus case pick, with a focus on the “perfect order.” Trends like these require more space, SKUs and picking technologies such as RF- and voice-assisted scanning.
Outlook
Retailers have gained much experience combining in-store and DC inventory, along with offering drop-ship options and BOPIS to meet increased demand. Whatever your omnichannel strategy, the right technology and training are essential. So is offering in-store pickup and return of online orders, and using all inventory, wherever it’s located, to fulfill online orders. It takes honed processes and well-trained employees to make order fulfillment work in an omnichannel approach.
