Meeting Consumers’ Need-It-Now Demands
RIS: What are the biggest obstacles retailers face in meeting consumers’ elevated fulfillment expectations?
Snyder: Shrinking margins are a key issue as retailers strive to meet consumers’ heightened expectations for fast, flexible fulfillment and low- or no-cost shipping options. The need to support orders across the value chain creates various challenges including maintaining accurate inventory levels, managing the rising costs of fulfilling direct-to-consumer orders versus bulk deliveries to stores, intelligent inventory routing and placement in the most efficient locations, and rising transportation costs to fulfill those orders.
RIS: Why are retailers having trouble with inventory positioning?
Snyder: First, retailers historically plan inventory based on a store replenishment model, and e-commerce has been treated as if it is simply another store. While this model was not challenged when the volume from online orders was relatively low, today’s growing e-commerce volumes pose a different set of planning characteristics, such as different customer demand profiles. Also, adding in options to leverage physical store inventory for online order fulfillment has added more complexity.
Second, multiple fulfillment nodes present both opportunities and challenges. Having multiple nodes decreases your shipping time and transportation costs, but now you need to understand how to split your inventory across the nodes and determine rules for best shipping locations based on consumer orders. Multiple nodes also mean more inventory in different locations, equating to more inventory accuracy challenges.
And finally, the inbound side of the supply chain can also present issues. Lead times from overseas vendors are long, and customer demand forecasts often change. Retailers can use safety stock levels in their fulfillment centers to support stores and store inventory to backstop their fulfillment centers. In such a way, forecast variability can be mitigated without increasing overall inventory levels.
RIS: How can retailers overcome this inventory positioning problem as the e-commerce channel continues to grow?
Snyder:Retailers need to have the right technology and operations practices in place to profitably meet expectations and solve these challenges. A modern order management system (OMS) is critical. The OMS enables retailers to manage network-wide inventory in a centralized tool to identify the best fulfillment scenario to get orders to customers from the most efficient and profitable location. For example:
- Store associates can be leveraging warehouse inventory when something is not available to an in-store customer at that location and have it shipped directly to the customer.
- When a product is out of stock in the warehouse, retailers can leverage store inventory and ship-from-store to save the order, essentially eliminating out-of-stock scenarios.
- Every SKU may not be available in all locations, but with intelligent order routing, orders can be fulfilled from the most efficient point to get a complete order to the customer in a single shipment. This results in lower shipping costs and better customer experience.
RIS: Why is it important to connect a retailer’s customer service function with its order management and fulfillment systems?
Snyder:Customers expect a seamless experience regardless of which channels they shop and interact with. Therefore, service agents need to have access to a full view of the customer, including order history, service interactions and preferences. Having complete transparency enables faster service and happier customers. Agents can see where an order is in the fulfillment cycle, when it’s expected to arrive, and provide complimentary product recommendations and overall better service. This also gives full visibility into exceptions that might occur to resolve specific fulfillment scenarios. Using a combination of order management and fulfillment information, the retailer can provide proactive notifications to customers of order status and delays, quick resolution of any order concerns, as well as apply solutions to optimize future shipments.