In my last session I went through the Omnichannel Key Factors, but such a project is strictly dependent by the all processes supporting it, and one of the most important but sometime not duly considered is Fulfilment, that is a key element for Profitability
While executing on Omnichannel order management can be difficult enough, doing it profitable is more difficult still.
This is due to a variety of factors including: fulfilment inefficiencies and marketing costs as well as technology investments.
While Retailers say they are gaining sales from Omnichannel initiatives, it’s unclear how profitable they are in the process, as total costs cannot be easily ascertained because business challenges make it difficult to track what is actually going on in the execution of Omnichannel strategies.
To be more profitable companies, need to:
- Increase efforts to re-platform architecture to streamline development, while reducing costs
- Assess ways to improve fulfillment efficiencies around product delivery, which is expected to generate lower shipping costs
- Refine online assortments with a focus on unit profitability
In fact, the main reason is that Omnichannel distribution creates not only additional labor costs but additional shipping costs because you’re shipping multiple items per order.
It is therefore mandatory to analyze how spread out you want your assortment to be.
The more lower-price items you have in it, the less unit profitability you gain.
Wave-based order fulfilment in a distribution center, which periodically releases batches of customer orders, has worked great for a long time. But the growth of Omnichannel and eCommerce has led to challenges in wave systems, including bottlenecks and delays, poorly coordinated islands of automation and labor management issues.
With orders constantly streaming down to the warehouse floor, wave-less order fulfillment systems need to be tailor-made for the Omnichannel world.
As a consequence, also the facilities needs to be designed from the ground up as an Omnichannel operation environment. It is possible to keep together in the same environment multi-channels fulfilment centers, taking advantage in terms of inventory optimization, but the allocation methods should be clearly different and the consequent operations as pick & pack and shipping need to be specific for Omnichannel.
The Profitability will be gained thanks to strict control on the different processes, optimizing the installed capacity according to real-time needs.
In the next session we will go through a very popular strategy to gain profitability the is outsourcing the fulfilment operations.
Even in this case it is very important to put in place a robust and controlled process before outsourcing fulfilment operations as it is representing the backbone of the whole Omnichannel distribution.