Omnichannel retailing, or using store inventory to fill e-commerce orders, is one of today's hottest trends. Here are two technologies that can help companies operate in this new environment.
Ian Hobkirk is the founder and managing director of Commonwealth Supply Chain Advisors, as well as a blogger for DC Velocity. His blog, "Getting it right in the distribution center," can be found here.
Anyone in the supply chain world who's attended a conference or leafed through a supply chain journal this year is aware that the consumer goods industry is obsessed with "omnichannel fulfillment." The concept of omnichannel fulfillment encompasses many things, but at the top of the list is the ability for a retailer to use store inventory to fill e-commerce orders in certain situations.
I don't recall the industry being this focused on a single idea since the days of the Walmart-driven radio-frequency identification (RFID) mandates in the mid-2000s. This current trend is, of course, different from the RFID craze in a key way: RFID in its initial iterations was a technology without a business case, while for many retailers, omnichannel fulfillment initially was a business concept that lacked a supporting technology set.
The good news, however, is the emergence of two key technologies that are now being used by a number of pioneering retailers with success. The first, distributed order management (DOM) software, handles the complex task of determining which orders to fill from distribution center (DC) inventory versus store inventory. The second, a modified version of warehouse management software (WMS) called "in-store WMS," enables the execution of those orders, which includes picking, packing, and shipping from the store. Figure 1 outlines the capabilities of the two solutions.
DISTRIBUTED ORDER MANAGEMENT
DOM technology itself is not new. It was developed at least a decade ago and, for a long time, was primarily used as a way to allocate in-transit inventory to customer orders before it actually arrived at the warehouse. This technology has been very successfully adapted to the task of deciding when to use store inventory to fill e-commerce orders. Manhattan Associates, one of the early pioneers of DOM, has reported that numerous large apparel retailers have rolled it out to support their omnichannel strategies. Most of these retailers declined to be mentioned in this article, as they view their use of distributed order management as a competitive differentiator, but having seen the list, I can attest that it's an impressive one. One retailer that has gone public with DOM deployment is Lilly Pulitzer, which has used that software to expand its market reach and drive online traffic to its stores.
Another early pioneer of DOM technology was Yantra, first acquired by Sterling Commerce in 2004 and then by IBM in 2010. Although IBM has not been visibly promoting DOM recently, a number of high-profile retailers use the application. One retailer, Cabela's, has been using the solution since at least 2007.
There also are examples of companies that have achieved distributed order management capabilities without using an "off-the-shelf" application. For example, Stage Stores, parent company of Bealls and Peebles department stores, deployed Oracle in 2003 to perform a number of supply chain functions. The company has configured Oracle to help make decisions about when to fill e-commerce orders from the DC versus using store employees and inventory.
Gough Grubbs, senior vice president of distribution and logistics for Stage Stores, stressed that the company's omnichannel strategy is shifting rapidly. "While there is a high level of satisfaction with the fact that our systems provide us a choice in whether to fulfill orders from the stores or the DC, the preference is changing as our online business grows and profitability track records provide better direction," he said in an interview. "Contrary to a recent article publicizing another retailer's shift to increase store fulfillment of online orders, Stage Stores is shifting more toward DC fulfillment. We don't believe there is a common one-size-fits-all solution across retailers. The answer varies by retailer based on store size, depth of product, and location."
Sears has also been leading the charge with a robust technology set to support its omnichannel distribution strategy. The company uses an internally developed system to perform distributed order management. It has actually developed one of the most advanced sets of rules that I have seen for omnichannel retailing.
Most omnichannel retailers favor using either DC- or store-based inventory and using distributed order management software to manage the exceptions to those rules. For example, Cabela's first seeks to use distribution center inventory and only goes to the stores as a last resort if the DC is out of a product. Stage Stores currently chooses to use store inventory whenever possible and only fulfills an e-commerce order from the DC if there is no other choice. But, as Gough Grubbs noted earlier, this strategy is shifting more toward the DC. Unlike these retailers, Sears uses a more nuanced approach and calculates the lowest-cost fulfillment path on an order-by-order basis to determine how to best source that particular order. There is no preference for either the DC or the stores—simply a preference for the most efficient fulfillment method.
For the time being, Manhattan Associates seems to be the dominant player in DOM technology—the only major player that is actively promoting a (relatively) mature DOM platform. However, Manhattan can expect to have some company soon. JDA (formerly RedPrairie) reports that it will roll out an integrated DOM system with interfaces to WMS in the fall. [Editor's note: In November, JDA and IBM announced a joint initiative that combines components of supply chain planning and execution with an end-to-end order management and fulfillment platform.] It wouldn't be surprising to see some mid-tier software providers roll out DOM platforms soon as well, providing a less costly alternative aimed at mid-market customers.
IN-STORE WMS
Once a decision has been made to fill an order from a retail store, it becomes critical for retail workers to be able to efficiently and accurately pick, pack, and ship it. Many retailers are deploying modified versions of warehouse management software in their stores to make this possible.
Sears is an excellent example. The company has been quietly building out an omnichannel network leveraging store inventory and can now serve 81 percent of the U.S. population via one-day ground delivery service. As part of this strategy, Sears recently began a pilot program using HighJump's WMS as the execution engine for picking these orders. The company realized that the average retail store worker represents a different demographic than the average warehouse worker: probably younger, less experienced with the concept of picking orders, and more familiar with a different generation of technology. Sears recognized these differences and chose to deploy the in-store HighJump WMS on iPads, using ring-style bar-code scanners. "The technology, which uses touchscreen user interfaces, is familiar to the average store worker, which reduces training time and improves pick speed," Jeff Starecheski, vice president of logistics services at Sears Holdings, told me.
The store planogram is loaded into the WMS, and workers are directed to pick orders by department, using a "cluster pick" methodology more often seen in a warehouse than in a retail store. During the most recent holiday season, Sears was able to process hundreds of orders per day from the store network and filled greater than 99 percent of those using two-day ground service.
Other software vendors have reported successfully adapting their WMS for retail store use. Manhattan Associates released an in-store inventory and fulfillment system module two years ago, drawing heavily on its WMS heritage. The company now reports more than 4,000 store locations currently using the software, which features touchscreen interfaces tailored to younger workers.
Retailers that are developing an omnichannel fulfillment strategy have no shortage of technology solutions to provide decision-support and execution capabilities. The coming year will likely see additional software vendors enter the market with offerings, adapting their WMS systems to support store fulfillment as well as developing distributed order management capabilities, thus allowing retailers to take flexibility and service to a new level for consumers.
This story first appeared in the Special Issue 2014 edition of CSCMP's Supply Chain Quarterly, a journal of thought leadership for the supply chain management profession and a sister publication to AGiLE Business Media's DC Velocity. Readers can obtain a subscription by joining the Council of Supply Chain Management Professionals (whose membership dues include the Quarterly's subscription fee). Subscriptions are also available to nonmembers for $34.95 (digital) or $89 a year (print). For more information, visit www.SupplyChainQuarterly.com.
E-commerce activity remains robust, but a growing number of consumers are reintegrating physical stores into their shopping journeys in 2024, emphasizing the need for retailers to focus on omnichannel business strategies. That’s according to an e-commerce study from Ryder System, Inc., released this week.
Ryder surveyed more than 1,300 consumers for its 2024 E-Commerce Consumer Study and found that 61% of consumers shop in-store “because they enjoy the experience,” a 21% increase compared to results from Ryder’s 2023 survey on the same subject. The current survey also found that 35% shop in-store because they don’t want to wait for online orders in the mail (up 4% from last year), and 15% say they shop in-store to avoid package theft (up 8% from last year).
“Retail and e-commerce continue to evolve,” Jeff Wolpov, Ryder’s senior vice president of e-commerce, said in a statement announcing the survey’s findings. “The emergence of e-commerce and growth of omnichannel fulfillment, particularly over the past four years, has altered consumer expectations and behavior dramatically and will continue to do so as time and technology allow.
“This latest study demonstrates that, while consumers maintain a robust
appetite for e-commerce, they are simultaneously embracing in-person shopping, presenting an impetus for merchants to refine their omnichannel strategies.”
Other findings include:
• Apparel and cosmetics shoppers show growing attraction to buying in-store. When purchasing apparel and cosmetics, shoppers are more inclined to make purchases in a physical location than they were last year, according to Ryder. Forty-one percent of shoppers who buy cosmetics said they prefer to do so either in a brand’s physical retail location or a department/convenience store (+9%). As for apparel shoppers, 54% said they prefer to buy clothing in those same brick-and-mortar locations (+9%).
• More customers prefer returning online purchases in physical stores. Fifty-five percent of shoppers (+15%) now say they would rather return online purchases in-store–the first time since early 2020 the preference to Buy Online Return In-Store (BORIS) has outweighed returning via mail, according to the survey. Forty percent of shoppers said they often make additional purchases when picking up or returning online purchases in-store (+2%).
• Consumers are extremely reliant on mobile devices when shopping in-store. This year’s survey reveals that 77% of consumers search for items on their mobile devices while in a store, Ryder said. Sixty-nine percent said they compare prices with items in nearby stores, 58% check availability at other stores, 31% want to learn more about a product, and 17% want to see other items frequently purchased with a product they’re considering.
Ryder said the findings also underscore the importance of investing in technology solutions that allow companies to provide customers with flexible purchasing options.
“Omnichannel strength is not a fad; it is a strategic necessity for e-commerce and retail businesses to stay competitive and achieve sustainable success in 2024 and beyond,” Wolpov also said. “The findings from this year’s study underscore what we know our customers are experiencing, which is the positive impact of integrating supply chain technology solutions across their sales channels, enabling them to provide their customers with flexible, convenient options to personalize their experience and heighten customer satisfaction.”
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.
National nonprofit Wreaths Across America (WAA) kicked off its 2024 season this week with a call for volunteers. The group, which honors U.S. military veterans through a range of civic outreach programs, is seeking trucking companies and professional drivers to help deliver wreaths to cemeteries across the country for its annual wreath-laying ceremony, December 14.
“Wreaths Across America relies on the transportation industry to move the mission. The Honor Fleet, composed of dedicated carriers, professional drivers, and other transportation partners, guarantees the delivery of millions of sponsored veterans’ wreaths to their destination each year,” Courtney George, WAA’s director of trucking and industry relations, said in a statement Tuesday. “Transportation partners benefit from driver retention and recruitment, employee engagement, positive brand exposure, and the opportunity to give back to their community’s veterans and military families.”
WAA delivers wreaths to more than 4,500 locations nationwide, and as of this week had added more than 20 loads to be delivered this season. The wreaths are donated by sponsors from across the country, delivered by truckers, and laid at the graves of veterans by WAA volunteers.
Wreaths Across America
Transportation companies interested in joining the Honor Fleet can visit the WAA website to find an open lane or contact the WAA transportation team at trucking@wreathsacrossamerica.org for more information.
Krish Nathan is the Americas CEO for SDI Element Logic, a provider of turnkey automation solutions and sortation systems. Nathan joined SDI Industries in 2000 and honed his project management and engineering expertise in developing and delivering complex material handling solutions. In 2014, he was appointed CEO, and in 2022, he led the search for a strategic partner that could expand SDI’s capabilities. This culminated in the acquisition of SDI by Element Logic, with SDI becoming the Americas branch of the company.
A native of the U.K., Nathan received his bachelor’s degree in manufacturing engineering from Coventry University and has studied executive leadership at Cranfield University.
Q: How would you describe the current state of the supply chain industry?
A: We see the supply chain industry as very dynamic and exciting, both from a growth perspective and from an innovation perspective. The pandemic hangover is still impacting decisions to nearshore, and that has resulted in a spike in business for us in both the USA and Mexico. Adding new technology to our portfolio has been a significant contributor to our continued expansion.
Q: Distributors were making huge tech investments during the pandemic simply to keep up with soaring consumer demand. How have things changed since then?
A: The consumer demand for e-commerce certainly appears to have cooled since the pandemic high, but our clients continue to see steady growth. Growth, combined with low unemployment and high labor costs, continues to make automation a good investment for many companies.
Q: Robotics are still in high demand for material handling applications. What are some of the benefits of these systems?
A: As an organization, we are investing heavily in software that will allow Element Logic to offer solutions for robotic picking that are hardware-agnostic. We have had success deploying unit picking for order fulfillment solutions and unit placing of items onto tray-based sorters.
From a benefit point of view, we’ve seen the consistency of a given operation improve. For example, the placement accuracy of a product onto a tray is far higher from a robotic arm than from a person. In order fulfillment applications, two of the biggest benefits are reliability and hours of operation. The robots don't call in sick, and they are happy to work 22 hours a day!
Q: SDI Element Logic offers a wide range of automated solutions, including automated storage and sortation equipment. What criteria should distributors use to determine what type of system is right for them?
A: There are a significant number of factors to consider when thinking about automation. In my experience, automation pays for itself in three key ways: It saves space, it increases the efficiency of labor, and it improves accuracy. So evaluating which of these will be [most] beneficial and quantifying the associated savings will lead to a “right sized” investment in technology.
Another important factor to consider is product mix. With a small SKU (stock-keeping unit) base, often automation doesn’t make sense. And with a huge SKU base, there will be products that don’t lend themselves to automation.
With any significant investment, you need to partner with an organization that has deep experience with the technologies that are being considered and … in-depth knowledge of the process that is being automated.
Q: How can a goods-to-person system reduce the amount of labor needed to fill orders?
A: In most order picking operations, there is a considerable amount of walking between pick faces to find the SKUs associated with a given order or set of orders. Goods-to-person eliminates the walking and allows the operator to just pick. I have seen studies that [show] that 75% of the time [required] to assemble an order in a manual picking environment is walking or “non-picking” time. So eliminating walking will reduce the amount of labor needed.
The goods-to-person approach also fits perfectly with robotic picking, so even the actual picking aspect of order assembly can be automated in some instances. For these reasons, [automation offers] a significant opportunity to reduce the labor needed to fulfill a customer order.
Q: If you could pick one thing a company should do to improve its distribution center operations, what would it be?
A: Evaluate. Evaluate the opportunities for improving by considering automation. In my experience, the challenge most companies have is recognizing that automation is an alternative. The barrier to entry is far lower than most people think!
Toyota Material Handling and its nationwide network of dealers showcased their commitment to improving their local communities during the company’s annual “Lift the Community Day.” Since 2021, Toyota associates have participated in an annual day-long philanthropic event held near Toyota’s Columbus, Indiana, headquarters. This year, the initiative expanded to include participation from Toyota’s dealers, increasing the impact on communities throughout the U.S. A total of 324 Toyota associates completed 2,300 hours of community service during this year’s event.
The PMMI Foundation, the charitable arm of PMMI, The Association for Packaging and Processing Technologies, awarded nearly $200,000 in scholarships to students pursuing careers in the packaging and processing industry. Each year, the PMMI Foundation provides academic scholarships to students studying packaging, food processing, and engineering to underscore its commitment to the future of the packaging and processing industry.
Truck leasing and fleet management services provider Fleet Advantage hosted its “Kids Around the Corner Foundation” back-to-school backpack drive in July. During the event, company associates assembled 200 backpacks filled with essential school supplies for high school-age students. The backpacks were then delivered to Henderson Behavioral Health’s Youth & Family Services location in Tamarac, Florida.
For the past seven years, third-party logistics service specialist ODW Logistics has provided logistics support for the Pelotonia Ride Weekend, a campaign to raise funds for cancer research at The Ohio State University’s Comprehensive Cancer Center–Arthur G. James Cancer Hospital and Richard J. Solove Research Institute. As in the past, ODW provided inventory management services and transportation for the riders’ bicycles at this year’s event. In all, some 7,000 riders and 3,000 volunteers participated in the ride weekend.