Omnichannel & Micro-Fulfillment Strategies: Adapting to E-Commerce
No matter what business line, when a segment of the industry doubles in scope, decision-makers need to take notice. According to research from eMarketer, e-commerce in the U.S. and Canada has seen a 129% year-over-year growth from April 2019 to April 2020. A study by Shopify expects e-commerce sales to reach $4.2 trillion by the end of the year.
Consumer behavior is changing, and each aspect of the retail supply chain needs to adapt. “Doing what always has been done” is not a sustainable strategy during a time of rapid change. In adapting to e-commerce, warehouses and distribution centers are combating SKU proliferation and shorter cycle times, combined with different pick processes required to meet increased consumer expectations. Without adapting, it can be challenging to get products out the door.
So, how can these businesses adapt?
Omnichannel Fulfillment Strategies
Before the rise of e-commerce, most distribution centers were set up for business-to-business (B2B) shipping strategies. Workers could build pallets with regularly-ordered products without a need for dynamism in order fulfillment. While some centers were beginning to adapt to the smaller orders with quicker lead times, their core business model has changed with the uncertainty in 2020.
Thus, omnichannel fulfillment became an answer. Omni-channel fulfillment happens when technology enables the fulfillment of B2C orders from multiple different locations inventory may be located throughout the supply chain. The B2C is growing at a rapid pace and supply chains need to be flexible or agile enough to fulfill the order at the lowest cost for the retailer, combined with the best service for the customer. They need to find that “sweet spot” in between profitability and rapid response.
What has changed most, though, is the necessity for these companies to know everywhere that product is in the supply chain – from the brick-and-mortar retail stores to even shipping directly from a manufacturer. Thanks to special software and technology, companies can know where a product is at all times – and the cost associated with delivering it — because they may need to use that specific item in fulfilling an order, no matter where it is in the supply chain.
For instance, in any place that inventory is housed, you need to determine the least costly fulfillment method to maximize profitability by finding a mix of the lowest cost to fulfill the order and the best chance to meet expectations. Today, companies need to know that answer, even if that solution does not come from their own warehouse.
Now, fulfillment centers need to know the costs associated with each element of the supply chain to minimize fulfillment costs – including even their suppliers’ warehouses. Currently, orders could come from a brick-and-mortar store, and they could come from a warehouse or come from a supplier directly. When adjusting to facilitate more e-commerce, the most successful companies will need to have visibility on all potential fulfillment opportunities supply-chain-wide. Ultimately, they need to know the lowest cost to meet the customer’s expectation level.
From a picking standpoint, the goal is all about being able to support these processes in portions of the supply chain not previously used for fulfillment activities. This may lead to new equipment or technology requirements to allow these portions of the supply chain to efficiently fulfill orders in addition to the other supply chain functions they handle. So, the optimized supply chain needs to be equally as flexible as the environments from which their orders arise are.
The ability to facilitate this operational flexibility in multiple different types of environments takes creativity and in-depth knowledge of equipment & technology options. You need to be able to come up with a cohesive strategy, which can be challenging. We encourage you to talk to a Storage Solution expert; we know retail strategies and “e-tail” strategies, and we know how to merge them in the name of efficiency.
Through any facility where inventory is stored, there are impacts on storage methods and workflows within the facility. When you are executing on omnichannel fulfillment, it takes a strategy specifically designed for your products and order patterns. We are here to help you execute on those strategies!
A Micro-fulfillment center is a small fulfillment facility that is strategically placed near urban centers. Instead of a warehouse operating out of a massive facility spread out throughout the country, these businesses use multiple smaller hubs in each region. From there, the product is delivered directly to the end-user.
As with the shift in omnichannel fulfillment, this change in strategy helps to shorten delivery times to meet the same-day or next-day delivery offered by competitors. These centers hold the company’s most popular SKUs to provide higher service levels on the most popular products. The other, less-popular orders may be in the more extensive facilities for the two-or-three-day delivery. Sometimes, these facilities may even utilize their own delivery fleet to ensure the quickest distribution.
While micro-fulfillment may not be for every business, we see that larger retailers may be utilizing some of their shopping or storage space to act like a micro-fulfillment center. Others are being developed in former shopping centers that do not have large footprints or tons of inventory on hand in the facility.
If you are missing dates and not meeting customer expectations, you could get frozen out to the competition that delivers on those expectations. With both omnichannel and micro fulfillment centers, companies are developing sustainable and scalable workflows and processes.
The good news is that we can help you figure out the right level or mix of solutions to meet your business needs. You may not require a high degree of automation. If you do, we can help, but if you can get by with a more-manual and lower-cost investment, we could help develop that. Give us a call today and let us know the challenges you are seeing, and we can talk about how changing strategies could deliver a return on investment and scalability for your business to grow.