As retailers continue to expand their omnichannel service offerings, they're increasingly turning to a traditionally underused resource: the brick-and-mortar store.
Ben Ames has spent 20 years as a journalist since starting out as a daily newspaper reporter in Pennsylvania in 1995. From 1999 forward, he has focused on business and technology reporting for a number of trade journals, beginning when he joined Design News and Modern Materials Handling magazines. Ames is author of the trail guide "Hiking Massachusetts" and is a graduate of the Columbia School of Journalism.
Talk to enough retailers, wholesalers, and manufacturers, and they'll tell you that building up their omnichannel fulfillment networks is imperative for maintaining market share. But dig a little deeper, and you'll soon realize that omnichannel retailing is not a single bullseye target, but rather a diverse mosaic of operations that can include everything from shuttling inventory between brick-and-mortar storefronts to offering BOPIS, or "buy online, pick up in store," services.
Many practitioners have traditionally defined "omnichannel" as "distribution from anywhere," including the distributor's DC, direct from the supplier, or shipped from a store or third-party logistics partner (3PL). But today, the term "omnichannel" seems to have almost as many definitions as the number of players in the marketplace.
To learn more about the current state of omnichannel fulfillment practices, DC Velocity teamed up with ARC Advisory Group, a Dedham, Mass.-based management consulting firm, to conduct an industry survey. Respondents answered 32 questions about their approach to meeting current challenges in omnichannel commerce, with a focus on order fulfillment and, especially, the changing role of the retail store in helping companies deal with a surging tide of online orders.
OMNICHANNEL COMES IN MANY SHADES
Our survey revealed that retailers deploy a broad spectrum of cross-channel tactics to support sales in today's challenging environment. When asked which omnichannel services they currently offer, the answers ranged from "order at store, fulfill from a warehouse (or another store)" to "return to store, even when goods are ordered online." (See Exhibit 1 for the full rundown.)
Each of those options requires its own assets and capabilities, so we also asked what particular tools respondents rely on to get the job done. The data showed that the most common technologies or applications currently used by respondents as part of their omnichannel initiatives are warehouse management systems (80 percent), transportation management systems (76 percent), and total-landed-cost analytics (61 percent). (See Exhibit 2 for the complete list.)
Of course, none of these tools is free, so we asked respondents how they recover supply chain costs. The numbers show that the most common approach is to collect fees for expedited delivery, cited by 51 percent of survey-takers. Next on the list was charging delivery fees for all orders (40 percent), followed by collecting fees for returns shipments (28 percent). (See Exhibit 3.)
Taken together, retailers' investments in their omnichannel capabilities (software, hardware, training, shipping, etc.) add up to serious money. So what's motivating companies to continue adding tiles to the omnichannel mosaic? We asked respondents for the top three reasons they were participating in omnichannel commerce or intending to do so and found that it all comes down to business. The number-one response was to increase sales (51 percent), followed by increase market share (50 percent), improve customer loyalty (45 percent), and increase margins (21 percent).
A GROWING ROLE FOR STORES
To get a feel for the impact of rising consumer expectations on retailers, we asked survey respondents how they currently fulfill e-commerce orders. Their answers showed that solutions come in many colors. The most common response was that orders are fulfilled through a traditional DC that also handles e-commerce (68 percent). Thirty-nine percent said items were shipped directly from the manufacturer or supplier, 32 percent said they filled orders through a Web-only DC, and 26 percent said orders were filled from the store.
The decision on when to fill e-commerce orders from a retail store involves many variables, so we asked respondents to share their main criteria. The primary reason cited was inventory constraints or stockouts at the local DC (63 percent). That was followed by distance to the customer delivery location (53 percent) and resource constraints at the DC (13 percent).
"Survey respondents indicated that they frequently use stores for e-commerce picking, packing, and shipping when DCs are unable to meet overall order volumes," said ARC Senior Research Analyst Chris Cunnane, who oversaw the research and compiled the results. "In this case, when the DC is flooded with orders and will not be able to meet delivery timeframes, it will [hand off] the order to a local store to make sure the customer gets the order when they expect it."
To get a better sense of store-based fulfillment practices, the survey also asked respondents how they handled e-commerce orders filled through a store. The overwhelming majority (94 percent) said the stores both picked orders and shipped them to customers. Another 59 percent said their stores picked orders and held them for customer pickup, while 47 percent said orders were shipped from the DC to the store for customer pickup. (Survey-takers were allowed to select multiple responses to this question.)
"The most popular method for store fulfillment, as selected by 94 percent of respondents, is to pick orders in the store and ship them to the customer," Cunnane said. "Compared to last year's survey, when fewer than 70 percent of respondents identified pick and ship from the store, this is becoming a bigger part of store operations."
With stores taking on a larger role in fulfillment, we asked respondents what capabilities were needed for a successful in-store fulfillment program. The top answers were visibility of inventory across all locations (58 percent), ease of use by store staff (53 percent), and training store associates to pick/pack/ship (42 percent).
"Training is a big part of ship-from-store, as the skills required for floor staff and warehouse staff are significantly different," Cunnane said. "Training store associates on how to properly pick, pack, and ship speeds up the process while helping to eliminate errors or damaged merchandise."
Given the need for additional investment in time and training, retailers appear to be somewhat selective about the stores they use for e-commerce fulfillment. When we asked respondents to what degree they used the stores in their chains for e-commerce picking, packing, and shipping, only 40 percent said they had enlisted all or almost all of their stores in the effort. From there, the numbers dropped off quickly. Twenty-seven percent indicated they handled e-commerce fulfillment at "a widespread selection" of stores, and another 27 percent at "a select subset" of stores. Thirteen percent said they used stores on a limited pilot basis, and 7 percent indicated that they didn't use stores for e-commerce fulfillment at all.
BRICK AND MORTAR IS STILL KING
The e-commerce revolution is happening fast, and our survey showed that most retailers are investing large amounts of time, labor, and money to keep up. But every gold rush needs a reality check, so it's worth reminding readers that brick and mortar is still king. Asked what percentage of their direct retail revenue currently comes from each channel, respondents said 57 percent came from brick-and-mortar outlets, 33 percent from online (including mobile) sales, and 14 percent from call center/catalog sales.
Still, it's clear where the trend line is going. Just five years ago, brick and mortar generated a full 64 percent of sales, according to the survey respondents. Brick and mortar's share has slipped to 57 percent today, and respondents expect it to slide further—to 50 percent—in five years' time. By contrast, survey-takers see online's share, which stood at just 22 percent five years ago, rising to 39 percent by 2023. (See Exhibit 4.)
WORK IN PROGRESS
Taken together, the survey results indicate that omnichannel fulfillment is still in a state of flux. As retailers scramble to adjust to a shifting marketplace, they continue to fine-tune their networks, processes, and technologies. At the same time, they're adding tiles to the complex omnichannel fulfillment mosaic. To make it all work, they're relying more and more on a resource that was once just a bit player in the omnichannel game: the retail store.
ABOUT THE STUDY
This year's omnichannel study was conducted by ARC Advisory Group in conjunction with DC Velocity. ARC analyst Chris Cunnane oversaw the research and compiled the results.
The study explored current challenges in omnichannel commerce, with a focus on order fulfillment and, especially, the changing role of the retail store. Respondents included logistics professionals from a variety of industry verticals, who submitted answers during July and August 2018.
As for the demographic breakdown, the majority (60 percent) of respondents sold goods through a combination of direct and indirect sales channels. Another 30 percent sold merchandise through direct retail only, and the remaining 10 percent through indirect sales channels only.
A report containing a more detailed examination of the omnichannel survey results is available from ARC. For order information, visit www.arcweb.com.
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.