By Kiran Kumar Malathkar, Kiran_kumar@mindtree.com
In today’s world of ubiquitous connectivity, a multichannel retailer should have a robust fulfillment system with proper procedures and processes. By leveraging existing systems, including fulfillment, retailers can mitigate the risk of affecting customer touch points by providing various methods of delivery of orders placed from various channels. Consumers expect a flawless and multichannel experience. When new channels are introduced, redesigning multichannel commerce solutions bring about their own challenges and can impact the entire supply chain. As retailers face cost pressures on the sales floors and in-store shelves inventory, the clear solution for retailers lies in servicing customers via different channels leveraging web and mobile solutions. For a seamless shopping experience retailers have to consolidate and optimize order fulfillment process and leverage technology for cost effective ways of multichannel retailing and fulfillment. .
Optimized and cost effective ways for consolidating and optimized order fulfillment
Irrespective of channels that consumers uses to place an order, companies need to process orders accurately and route them through a fulfillment center that is equipped with the best process and technology infrastructure to fulfill the order based on consumer requirements. Retailers who fail to fulfill the orders in the way consumer needs then they are running the risk of customer disengagement with reduced consumer base and segment.
Distribution centers are typically the primary fulfillment channel for orders via the Internet. However, fulfillment via online ordering and pick-in store saves shipping charges and provides immediate purchase gratification to customer. Retailers can also make use of pick-up point using wide spread national postal service.
Shipment directly from vendors minimizes delivery time because the shipment does not have to come into company’s distribution network; instead shipment is drop-shipped to the customer directly. This saves time for the customer and potential cost for the retailer.
The most efficient and fastest way of fulfillment is order online and pick-in store. The challenge is inventory should be available in store when the customer arrives. This saves shipping charges to the customer, overhead potential handling and shipping cost for retailer and fulfillment is at the customer’s convenience.
Retailers have a challenge in meeting inventories to maximize availability to their fulfillment network. One possible solution is to adapt a process to physically/logically segment the inventories to meet fulfillment. Segmentation should happen in store shelves, back rooms, distribution centers and other fulfillment sources. Other options are, not to enable out-of-stock products for purchase online or display stock availability (numbers, yes or no) to avoid call center calls.
Another process retailers can adopt is to first verify the fulfillment options directly from vendors or order online and pick from stores. With this, fulfillment will be faster, more cost effective and convenient to customer.
Challenges in meeting optimized fulfillment
There are various challenges in meeting the ever-changing customer expectation. These changes can be categorized broadly into Order Processing, Order Picking, Delivery, Reverse logistics and Infrastructure challenges. From order processing, the challenges are pricing inconsistencies, order visibility and tracking throughout order life cycle, out-of-stock during peak traffic, structuring of order to ship to multiple locations.
For order picking, challenges are store level inventory tracking, pick modification (out-of-stock, last minute location updates from consumers), multiple shipping of items to different locations of same order and others. For order delivery, challenges are labor management, customer labeling, inventory storage. Returning process challenges are processing returns from customer location, customer rejections, and damaged products. Infrastructure challenges are centralization of store operations, integration of core fulfillment applications and integration with legacy systems.
Leveraging technology for multichannel retailing and fulfillment
One of the major challenges retailers will continue to face throughout 2012 and 2013 is that consumer demand is fickle, because the majority of super connected consumers will study and compare prices, offers and promotions online. Therefore, it is challenging to have the right inventory in the right place at the right time in order to support the consumer who is willing to spend.
Retailers need to deploy the right infrastructure and adapt the right process to address the above mentioned challenges related to robust multichannel and fulfillment solutions. The first step is to identify the requirements that need to support infrastructure and process leveraging web or e-commerce channel.
Inventory management, order management and warehouse management systems have to be tightly integrated and play critical roles in providing an economical solution for fulfillment across channels. They also form a strong base for future initiatives. When evaluating technologies this base has to be taken into consideration for a strong fulfillment foundation across channels.
The multichannel applications and infrastructure should have visibility starting from order offerings (catalog) to order fulfillment and returns. The infrastructure should support legacy systems, customize business processes and efficiently handle large volumes to support during peak traffic.
For example, the infrastructure should support a view of same catalog and branding across all channels (call center, kiosk, online, mobile, stores). Secondly, it should provide support to multiple fulfillment options such as buy online and pick up -in store, ship to business or house at customer convenient time, or third-party address. Third, systems should have an option to configure the same pricing across channels. Fourth, it is imperative that there be inventory synchronization from anywhere (warehouse, stores, online). Fifth, it is important to provide global visibility of all orders across channels. Sixth, the visibility of the entire supply chain and automatically monitor and trigger exception and recovery measures when necessary. Seventh, there needs to be warehouse management supporting standardization and management of common processes and facility specific processes. Eighth, there also needs to be integrated transportation management for monitoring shipment status, auditing invoices and making freight payments.
Delivery is a service, price and promotional parameter and has greater impact on customer satisfaction levels if service levels are not met. The business model of a retailer has to support multichannel and fulfillment systems mainly to improve operational efficiency from a time and cost perspective. At the same time the model or framework should also support meeting expectations from customers as well as support economic performance to meet revenue and profit bottom lines. The adapted framework should support global and economic conditions influencing consumer buying patterns, business continuity and face future challenges.
Many opportunities exist for retailers to continue to evolve their supply chain network and leverage the changing cost environment. By finding ways to reduce costs, they can continue to leverage the capital to drive the growth cycle.
Kiran Kumar Malathkar is senior project manager, manufacturing, retail and CPG solutions at Mindtree Limited, and has experience in service delivery, customer relationship management, consulting and pre-sales support in retail and services domains. Kiran can be reached at Kiran_kumar@mindtree.com.