Peter Bradley is an award-winning career journalist with more than three decades of experience in both newspapers and national business magazines. His credentials include seven years as the transportation and supply chain editor at Purchasing Magazine and six years as the chief editor of Logistics Management.
Omnichannel has become an omnipresent topic of conversation among retailers and their suppliers. Questions ranging from the seemingly simple (What exactly is it?) to the complex (How do I get there?) abound.
Retailers are seeing an omnichannel strategy as an imperative, driven by the rapid growth of online sales and fierce competition from online giants like Amazon. "Store visits are down, while e-commerce is growing by double digits," says Jerry Koch, director of corporate marketing and product management for Intelligrated, an automated material handling technology provider that works with customers on omnichannel implementations.
Bob Babel, vice president of systems engineering for Forte, a firm that designs and builds distribution centers for its customers in addition to developing warehouse execution software, says, "Almost every customer of ours thinks e-commerce will grow by 10, 25, 30, 40 percent. You can fall behind very quickly."
Consumers, Koch says, have learned to expect a perfect order—delivered on time, where and when they want it, at a price they are willing to pay. Meeting those demands while controlling costs means getting a lot of pieces in order.
That creates real complexities for retailers with respect to inventory management, fulfillment operations, and store management. But the end goal, Koch says, is always the same: "You want to find the best way to delight the customer at the lowest cost to serve."
GET THE INVENTORY RIGHT
The first step to achieving that is knowing exactly what it is you have to sell and exactly where it is. That creates two closely linked requirements—dead-on accurate inventory and clear visibility into it across the entire network of DCs, stores, and even suppliers.
"The first thing you need to think about is visibility to inventory," says Michael Khodl, vice president of Dematic, a supplier of automated material handling and logistics systems. "What that [translates to] is the need for a software system to bring visibility to inventory wherever it exists. I think that's the biggest challenge."
Koch agrees. "You want a view of inventory across all your locations and in the stores," he says.
That's particularly challenging at the store level, where inventory accuracy is typically much lower than at the DCs, Khodl adds. And it's vastly complicated by the fact that it requires not a snapshot, but a real-time view into all of the inventory. That's not easy. "When you bring in the stores, you have a measurement of real time that is different," Koch says. "If I do direct-to-consumer, the inventory I'm going to fulfill from is a dynamic thing. No longer can I be on a traditional plan-execute-monitor-report system. I have to be transaction-based with up-to-date information for each transaction."
A view of inventory alone is not enough. Determining where to position inventory is a crucial part of the strategy development, says Koch. Expand stores' backrooms? Use central or regional DCs? Rely on third parties? Have suppliers fulfill e-commerce orders? Consolidate inventory within a DC or segregate store-bound goods from those designated for e-commerce? All of those questions must be addressed as part of an omnichannel implementation.
But the answers vary markedly. The solution for a fashion retailer will be different from the solution for a general merchandise retailer or a grocer. And even businesses in the same sector will have different issues to address. "That's a philosophy discussion inside the customer's operation," Khodl says.
Koch cites one customer he recently visited that is looking to combine wholesale fulfillment, store replenishment, and e-commerce in its operations, with orders varying from heavy boxes to individual items or "eaches," and without adding new real estate. "That's not an isolated discussion," he says. "It's one playing out among different folks in that circumstance: How do I leverage my assets—the buildings doing fulfillment—and leverage my inventory? The discussions center on what software can help me and how my [material handling] equipment can help me."
DIFFICULT DECISIONS
Developing a strategy for responding to these changing requirements can be difficult. Babel says the major issue for most retailers faced with growing e-commerce demand is the need to bring "each" picking into DCs that previously shipped full cases or split cases to stores. For DC managers, he says, that often means making tough calls, such as whether to add the labor needed for "each" picking or make sizable investments in automated solutions such as goods-to-person systems.
And the question of whether and how to fulfill online orders from stores can be a difficult one as well. For one thing, there's the matter of how to best allocate store labor. Consumers expect fast and accurate shipment of online orders. But a clerk boxing an order in the backroom is not meeting another consumer expectation: service on the store floor.
"How you manage the fulfillment process in the stores is an open discussion, and I think it's often forgotten about," Khodl says. It creates multiple issues for store management—including who will pick, pack, and ship orders; what shipping supplies to keep in the backroom; and how to manage cutoff times. It also raises questions for DCs shipping to stores—such as how frequent those shipments should be. The complexity of fulfilling e-commerce orders from stores has led many retailers to decide not to engage in the order-online/ship-from-store piece of omnichannel.
That's distinct from order-online/pick-up-at-store, in which consumers can have visibility into store inventory and reserve an item, a much simpler piece for store management and one that has rapidly become widespread. But as retailers move toward giving consumers the option to order online and pick up at the store, they should be aware of the repercussions upstream, Babel says. "There are various permutations," he says. It might mean picking from store inventory. Or it could mean boxing an item at the DC and including it in a shipment going to the store. Or it could mean that picking from store inventory triggers a replenishment order at the DC. Whichever way it plays out, filling orders at the store might require more frequent shipments to stores. In other cases, he says, retailers are asking suppliers to manage some e-commerce fulfillment from their facilities. "If you decide to go to servicing e-commerce from a DC associated with manufacturing, that's a big change for the manufacturer," he says.
OMNISCIENT SYSTEMS?
Putting all the pieces together—inventory management and visibility, a fulfillment strategy that has inventory in the right place at the right time, integrating DC and store operations—requires robust systems. Retailers face the challenge of blending multiple systems—corporate enterprise resource planning (ERP) systems, DCs' warehouse management systems, stores' inventory systems—to provide a single view of inventory and then creating a single fulfillment engine. "That's our number one challenge," Khodl says. "It's a data challenge. It's not a fulfillment challenge."
"Systems are evolving toward making decisions dynamically versus having long batching and planning cycles," says Koch.
Referring again to his recent customer visit, Koch says the systems discussion centered on how software should view inventory—as a shared pool for all channels or as a single pool. "Our answer is that you have to look at it as a shared pool that you are going to execute orders against, and you don't care if it's case, "each," direct to consumer, or shipped to the store," he says. "You can plan your execution against it and make your allocations against the same inventory pool."
But that's not universally accepted. Babel says customers vary in how they approach the issue. "We have clients that upon receipt are separating inventory and allocating for the e-commerce business." Others, he says, are having suppliers break down shipments to separate goods bound for stores from those destined for e-commerce so that they're segregated when they arrive at the DC. That option, he acknowledges, may be available only to large retailers with enough clout to demand that service from suppliers.
Omnichannel implementation, retailers have come to understand, allows them to strengthen their hand in the battle for consumer hearts and dollars by taking advantage of assets the big online giants don't have—their stores. Yet implementing the strategy remains a daunting challenge.
"I don't know if anyone has quite figured it out," Khodl says. "Everyone is searching."
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
Serious inland flooding and widespread power outages are likely to sweep across Florida and other Southeast states in coming days with the arrival of Hurricane Helene, which is now predicted to make landfall Thursday evening along Florida’s northwest coast as a major hurricane, according to the National Oceanic and Atmospheric Administration (NOAA).
While the most catastrophic landfall impact is expected in the sparsely-population Big Bend area of Florida, it’s not only sea-front cities that are at risk. Since Helene is an “unusually large storm,” its flooding, rainfall, and high winds won’t be limited only to the Gulf Coast, but are expected to travel hundreds of miles inland, the weather service said. Heavy rainfall is expected to begin in the region even before the storm comes ashore, and the wet conditions will continue to move northward into the southern Appalachians region through Friday, dumping storm total rainfall amounts of up to 18 inches. Specifically, the major flood risk includes the urban areas around Tallahassee, metro Atlanta, and western North Carolina.
In addition to its human toll, the storm could exert serious business impacts, according to the supply chain mapping and monitoring firm Resilinc. Those will be largely triggered by significant flooding, which could halt oil operations, force mandatory evacuations, restrict ports, and disrupt air traffic.
While the storm’s track is currently forecast to miss the critical ports of Miami and New Orleans, it could still hurt operations throughout the Southeast agricultural belt, which produces products like soybeans, cotton, peanuts, corn, and tobacco, according to Everstream Analytics.
That widespread footprint could also hinder supply chain and logistics flows along stretches of interstate highways I-10 and I-75 and on regional rail lines operated by Norfolk Southern and CSX. And Hurricane Helene could also likely impact business operations by unleashing power outages, deep flooding, and wind damage in northern Florida portions of Georgia, Everstream Analytics said.
Before the storm had even touched Florida soil, recovery efforts were already being launched by humanitarian aid group the American Logistics Aid Network (ALAN). In a statement on Wednesday, the group said it is urging residents in the storm's path across the Southeast to heed evacuation notices and safety advisories, and reminding members of the logistics community that their post-storm help could be needed soon. The group will continue to update its Disaster Micro-Site with Hurricane Helene resources and with requests for donated logistics assistance, most of which will start arriving within 24 to 72 hours after the storm’s initial landfall, ALAN said.