In prior Supply Chain Matters commentaries, we have noted how both the small parcel delivery and third-party logistics services landscape is changing very quickly. The recent added rate hikes and surcharges proposed by FedEx, UPS and the United States Postal Service are added dimensions of cost burden for both online and Omni-channel fulfillment process needs. The current wave of acquisition and consequent consolidation occurring within the third-party logistics and fulfillment sector will likely continue and add further unknowns as to cost and services impacts.
Change surrounds today’s Omni-channel environment and teams need to be prepared.
As the 2015 holiday buying surge is about to kick-off, many retailers will remain challenged in managing the various implications of today’s quickly changing online and Omni-channel fulfillment business models. Manufacturers can be caught in this changing dynamic since 40 percent of manufacturers now sell direct to consumers.
Consumers demand more and broader selections in product offerings and in fulfillment channel, and yet, will often balk at paying high shipping charges. Many consumer surveys reinforce that reality. There is a building trend for consumers electing free shipping through pickup and pay at a local retail outlet. Similarly, online consumers expect the convenience of hassle-free return at a similar local outlet, which in-turn, must ship returns to another inventory processing center. The local physical store or pickup point has now become another online fulfillment node in a more complex Omni-channel network.
Online fulfillment costs are therefore exploding and some retailers are becoming more and more blindsided by such costs. Positioning inventory to support multiple fulfillment channels is now a necessity to insure margin goal performance, yet only 40 percent of retailers have network-wide visibility to such inventories. Logistics, transportation and service cost factors are now a critical input toward insuring overall business profitability. This is especially evident with the latest round of expected parcel logistics and transportation cost increases.
Augmented technology will certainly play an enabling role in overcoming such challenges. However, technology selection teams will need to determine that such technology has the ability to span supply chain planning, inventory, and Omni-channel fulfillment information streams in supporting more informed decision-making and to contrasting service needs with cost and overall profitability impacts.
Today’s Omni-channel supply chain is a literal network and requires technology that supports more informed decision-making with context to the entire network. There is a now a more important requirement in the ability to synchronize fulfillment execution with network-wide inventory management and inventory policy decisions with logistics and transportation cost implications. Distribution and fulfillment center support systems and transportation management systems can no longer exist as stand-alone information sources. Root cause analytics that offer recommendations and simulation modeling as to the cost impact of various fulfillment scenarios are other important considerations.
Beware that there are just a few technology providers that can provide such advanced technology in a packaged software offering.
The coming months are sure to provide further implications and realities to an ever-changing online fulfillment dynamic. Insure that your organization takes a cross-functional and cross-channel perspective to the overall process, decision-making and technology support implications of such changes.