Using Technology to Manage Expectations in an Omnichannel World, Part 1

The retail supply chain has experienced some dramatic evolutions over the last 10 years to 15 years. What started out as a straightforward process for getting goods from a warehouse or a distribution center (DC) and out onto the retail floor has become a central focus for companies managing a complex supply chain, including e-commerce, omnichannel, and brick-and-mortar.

No longer focused solely on storing and shipping pallets of goods, the true omnichannel warehouse must have the capabilities to intelligently optimize fulfillment and increase store efficiency by packing replenishment orders according to individual store layouts and preferences, as well as orchestrating the fulfillment and delivery of single orders to individual customers’ doorsteps. Covering this spread and keeping these order promises can be difficult, and presents high hurdles for retailers that rely on a hodgepodge of manual systems, spreadsheets and older technology solutions to run their supply chains. Concurrently, the lines between offline and online retail sales continue to blur, with offline players improving their online presences (e.g., Walmart’s acquisition of Jet.com) and vice versa (Amazon.com's purchase of Whole Foods). This, coupled with the sheer uncertainty over what channel a customer will eventually adopt, stokes the need for a more modern fulfillment operating system.

The fast-changing world situation has given retailers an opportunity to redefine the supply chain and step up capabilities to succeed in this new era. The opportunity is impossible to ignore.

E-commerce sales worldwide are expected to grow from $2.9 trillion in 2018 to $6.5 trillion by 2023, according to Statista. Mobile e-commerce is on an even faster growth trajectory, having increased from just under $1 trillion in 2016 to nearly $3 trillion in 2020.

Through it all, retailers — like most other organizations — also want to increase their bottom lines and cut costs. In fact, the volume of inventory that retailers have to write off at the end of the year has become so significant that they’re looking at how they can move to a “one-inventory model” with more advanced fulfillment science that allows them to cut costs and reduce losses.

The current COVID-19 pandemic has disrupted the entire world; the need for a super resilient supply chain is now more critical than ever. This has accelerated e-commerce adoption across all segments, and may fast-forward this transformation by several years. This calls for a faster digitization of the supply chain using large-scale collaboration and innovation, leveraging scalable technologies and tools.

Retailers across all segments must cater to their customers’ unique needs in the most efficient, accurate and affordable manner possible in today’s age of immediacy. This, in turn, allows customers to access products in a seamless manner, get them shipped quickly to wherever they want, and then return those items either online or offline — all in a very cohesive, consistent way.

A true omnichannel supply chain strategy leverages the same assets — including warehouse space, inventory, workers and technology — to fulfill orders to all relevant channels, whether e-commerce orders to customers, store orders for replenishment, or distribution channel orders. However, retailers are struggling to merge their various selling channels into a single, streamlined experience due to outdated warehouse technology and infrastructure built for the previous era before Amazon changed the rules of the game. Every retailer is facing the heat and trying to figure out how to reach their customers easily and efficiently by "equalizing" their online and offline presences, something Amazon really hasn’t been able to do because it doesn’t have much of a physical presence.

There’s also increasing pressure on retailers to cut costs and increase their bottom lines, all while managing the growing onslaught of e-commerce returns. Those return volumes have grown from $143 billion in 2018 to $205 billion in 2020, and are on track to reach $348 billion by 2023, according to Business Insider. With the return process comprising 700 million square feet nationally, according to CBRE, reverse logistics has become a key concern for all warehouses and DCs.

As e-commerce became more popular, retailers attempted to provide an omnichannel experience by increasing their front-end channels and, thus, their reach. This meant creating separate, siloed supply chain models for these channels. In 2020, the omnichannel environment hasn’t improved much despite changing consumer demands and expectations. For example, store items and e-commerce items are still largely siloed within systems and inventory is still not omnichannel (it’s multichannel).

In part two of this series, I’ll outline five essential components that must be embedded in all omnichannel retail supply chains to be successful.

Jeff Cashman is the COO at GreyOrange, a global company that modernizes order fulfillment through artificial intelligence-driven software and AI-driven mobile robots built together so they cooperate in deciding on and executing warehouse activities that maximize payoffs and minimize tradeoffs to create the highest yield.