When it comes to the challenges of providing omni-channel fulfillment, your first thought might be “click-and-collect” or item picking in the distribution center (DC). But when PwC asked CEOs in a recent survey (Global Retail and Consumer Goods CEO Survey: The Omni-Channel Fulfillment Imperative) what areas most needed their additional attention to achieve omni-channel fulfillment, 88 percent said it is their transportation and logistics operations. The second area most-cited as needing improvement was planning. These findings suggest that those who are worried about reconfiguring stores or warehouses to pick online orders faster might be better off to first look at the supply chain basics of planning and transportation. They are two important building blocks for customer-pleasing omni-channel fulfillment.
Transportation is an Afterthought
There is a good reason why transportation is of key interest to CEOs when planning their omni-channel strategies — increased transportation cost is a big contributor to escalating fulfillment costs for omni-channel operations. In the PwC survey, 67 percent of CEOs said their fulfillment costs were increasing and the cost to ship direct to customers (67%) and to ship to stores for customer pick-up (59%) were the second and third biggest contributors to these rising costs (just behind the cost of returns at 71%).
The rising costs for fulfillment have frustrated efforts to turn omni-channel operations into profits. In fact, in the JDA Vision 2015 Supply Chain Market Study, only 16 percent of respondents reported they could fulfill omni-channel demand profitably.
Other data from the JDA Vision study help explain why profitability has been a challenge, and why CEOs feel they need to focus on transportation improvements. While omni-channel by its nature is an enterprise-wide operation, 53 percent of survey respondents are still managing their transportation operations by location or division, ignoring the opportunities for centralized consolidation, routing and procurement that can cut costs and improve service. In addition, 54 percent have no core carrier program. Even more surprising, 31 percent have no transportation optimization capabilities, or use only faxes and phone calls for this purpose. For those companies, it appears that transportation is merely an afterthought, much as distribution used to be.
Consumers demand for “buy anywhere, pick-up anywhere, deliver anywhere” shopping experiences won’t let transportation be an afterthought any longer, however. Not if retailers are interested in making a profit.
Fail to Plan | Plan to Fail
The old saying “fail to plan, plan to fail” is one of those truisms that is self-evident, yet often ignored. In all of the rush to get the right mechanisms in place to pick, pack and ship or deliver omni-channel orders, the need to carefully plan exactly how much of which inventory needs to be positioned in each location to make the pick, pack and ship possible can be easily overlooked. That is why it is gratifying to see that planning was the second most-cited (86%) area for improvement identified by the CEOs in the PwC survey.
I think the high interest in planning for omni-channel fulfillment is a natural outgrowth of the increased focus on sales and operations planning (S&OP) in many organizations. In the JDA Vision study, the disconnect between S&OP processes and detailed planning decisions was a top concern across many internal domains, and thus S&OP integration was a top initiative for 2015. With companies struggling to be profitable with omni-channel operations, it isn’t surprising, then, to see CEOs’ desire to extend S&OP efforts to fulfillment planning.
An Integrated Approach
If there is one thing omni-channel is teaching us, it is that the old siloed approach to channels and fulfillment doesn’t work any longer. The high interest in both planning and transportation demonstrates that in the omni-channel world, all aspects of the omni-channel fulfillment process, from planning to delivery, must be integrated into a single, seamless operation supported by integrated planning and execution systems.
Most of the industry isn’t there yet, with only 43 percent of respondents to the JDA Vision study currently using a commercially available transportation system and only 26 percent employing a shared services model for transportation. Thus, it isn’t hard to understand why only 16 percent of CEOs say they are delivering on omni-channel demand profitably. The winners going forward will be those who can integrate their omni-channel processes and technology first and deliver the seamless shopping experiences consumers now demand.
In his role as Director, Thought Leadership at JDA Software, Jim LeTart is responsible for developing thought leading content to support JDA’s Plan to Deliver suite of integrated retail and supply chain plan and execution solutions. Jim came to JDA in 2013 through its merger with RedPrairie, where he spent over 13 years in various marketing leadership roles. Jim has over 35 years of sales and marketing experience in the computer technology industry, and is a frequent speaker, writer and blogger on how technology can improve business processes and outcomes. Jim has an MBA from the University of Michigan and a BSME from Marquette University.