What is Omnichannel Distribution?
As the world continues to grow technologically at a rapid pace, it has become more and more important to add speed of purchase and delivery of goods in the supply chain at a level that has never been seen before. Offline purchases in physical stores are now a small fraction of the market. This has brought the larger companies to seek out innovative and groundbreaking opportunities in the field of warehouse management systems. With this the need to cut out the different channels, or middle men, as much as possible between the step of process to the step of shipment. This has brought about the need and ability of Omnichannel distribution. Companies like Amazon have made major advancements within this commerce strategy. This type of distribution is a multichannel approach utilized by some companies to give customers an ability to purchase and receive orders from several sales channels with one-touch seamless integration. This is one of several distribution types used within the larger ecommerce industry. Other forms of ecommerce distribution chains used are single channel and multi channel distribution.
Omnichannel Distribution Strategies
As the omnichannel distribution concept has grown at a rapid rate the strategy behind it has continued to grow at an equally rapid rate. Infact, it has become less about strategy and more about appropriately responding to the demands of the market to keep up on the front end of things.
Retailers have to keep the customer experience at the front and center of their efforts. From previous years where the strategy was much heavier on the end of obtaining the sale itself, there is a heavy reliance on the post sale specifics that determine if the customer is going to purchase through you or will go elsewhere. This requires fine tuning the process in whole from the customer experience through the sales channels, appropriately tracking inventory management and a quality automation system in place to help keep the transaction in motion from the supply chain and through the distribution center to make sure that you can avoid any lag in shipping after the purchase is made, and getting the product to the customer quickly and efficiently.
Common Omnichannel Distribution Challenges
In this section, we will break down some of the challenges that are commonly faced in the industry in regards to omnichannel distribution from retailers. Especially due the pandemic, the industry has been forced to make prompt advancements at a very rapid pace to keep up with the demand and varying manners of availability offered to the end consumer. By taking a closer look at each of these challenges, it will help provide a better understanding of the inner workings of this part of the industry and prepare you for the challenges you will undoubtedly face here.
When we break it down, we see that Omnichannel retail refers to the marketing and sale of various products across multiple commerce channels. Some of these sales channels are online based while others are offline based. No matter where they are housed though, they all fall into one distribution system. So here we face our first challenge, Inventory management.
Order management and inventory visibility are vital in this process. This side of things is greatly important as you can imagine and details the order into the otherwise chaos of keeping track of not only supply but location of all goods being stored and shipped to the paying customer in a timely manner. A gap in this part of the equation could prove costly with missed orders or even the loss of customers. Furthermore, if your service proves to be lacking, and an unhappy customer shares their experience with others, you may lose future customers before having the chance to prove yourself to the customer base again. Retailers need to make inventory management an overall priority along with inventory visibility across all channels.
Warehouses can be a tricky part of this equation, as we are limited to the space available to place a warehouse. However, the locations of warehouses should be optimal to your retail network. To put this in layman’s terms, your warehouses should be in an ideal location that conveniently connects your retail locations, distribution, and shipping channels. Essentially you want everything to line up with each other on main routes. If your warehouse is far out of the way then you are costing yourself additional time both ways in order to move goods from one point to another. Contents of a warehouse should also be well organized as well to keep stock more accessible to employees who manage the packing and shipping.
This will result in quicker turnover time and speed up the process all around instead of having to wait for the items to be found or accessed. The layout of the warehouse should be designed with omnichannel order fulfillment in mind.
Overstocking/Duplication of stock
Keeping an appropriate level of stock can be a fine art to learn but with real consequences on both sides if you get it wrong. Not enough stock and you can potentially lose sales, maybe even to a competitor. While on the other end of things, over-ordering stock by overestimating potential sales can also be very dangerous to your business. Another error we see made is when duplication of stock is ordered as a result of keeping incorrect inventory. These errors will tie up your working capital and can easily leave you in a tight spot.
Optimizing inventory management should be high on your priority list, especially if you are still establishing your business in omnichannel retail. This typically means you are operating on a tighter budget. The ultimate goal is to keep enough stock to cover your needs but that will not sit around for any lengthened period. You want to establish a system that has constantly moving inventory. This will allow you to supplement your working capital much quicker with less capital tied up into sitting stock. By using a good inventory management system, you won’t have to worry about understocking or overstocking issues.
In-store stock allocation to online channels
To sum it up, it is typically not a wise move if you are operating on any kind of a large scale, to operate in this manner. In person sales within a brick-and-mortar store then takes away from your online stock. Depending on the stock within a storefront anyways typically means that you are operating with a rather limited stock of that item and can cause issues between the two sales points.
When it comes to the technology demands such as software and connected systems, the omnichannel methodology comes with very complex and real-time operating demands. A major part of this is not just the back end processing of orders and stock levels but almost more importantly, the omnichannel customer experience. This includes needing a high functioning integration with the retailer’s mobile app to appropriately handle orders from mobile devices. When you are starting your business or moving a business in this direction you will want to allow plenty of thought in this regard. If you are starting a new business using this method, do yourself a favor and plan your business process around the needs of the software you are wanting to use. If you operate in the opposite manner you will hit some large snags that will cost you time and money.
Likewise, if you are moving a business in the direction of omnichannel distribution then you will want to allow extra time for planning and implementation as it will change your entire operations procedure to a degree and will need to be properly accounted for to get up and running as smoothly as possible.
How to Implement Omnichannel Distribution
So you have weighed your options and want to move your business in the direction of implementing an omni channel distribution strategy. It is no secret that omnichannel shoppers come with a rather unique list of needs to manage appropriately. Here we will talk through some of the points to consider in this process to ensure that your business is on a path for success.
Clearly, we have learned that you need to step back and get a good look at the complete picture before putting together your hard plan; and definitely before you move forward in the implementation of such a plan. The goal moving into this type of a strategy is to achieve not only a seamless shopping experience for the end customers but also the seamless integration layers that are needed to ultimately pull that off. Planning for this process would also include having a clear overview of the omnichannel marketing strategies, such as in the case of an online store.
As we mentioned about the utilization of industry software and needing to understand how the software works before developing your strategy, the same can be said for almost all touchpoints within this process. You will need to understand each of these areas and their individual needs for success to best understand how to bring together a full scale strategy. This includes understanding the sales channels and how they will integrate into the order management process and messaging between all systems and parties. Messaging is a large factor because, above all, transparent communication throughout the process has been shown to be a leading factor for omnichannel customer satisfaction.
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