Retailers: Why Omni-Channel Distribution Matters

Now, more than ever, shoppers want products fulfilled their way. But you have to make money too.

mobile store open
When an online order comes in, how do you want to fulfill it? And where do you want to fulfill it from? The store with the most inventory? Lowest throughput? Biggest markdowns?

By Nicola Kinsella

May 29, 2020

Long gone are the days when the only way to purchase a product was to go into a physical store. Today, customers shop for items 24/7, expecting their orders to be fulfilled how, when and where they want. For retailers, what began as relatively simple cross-channel fulfillment has expanded into omni-channel distribution. Let’s take a look at what omni-channel distribution means and why it’s a crucial strategy for every brand.

Once customers began to shop online, the question of where and how to fulfill became retailers’ top priority. Suddenly, store associates were asked to perform new tasks like picking items and reserving them for customers to collect in-store. As new means of fulfillment arose, the line between distribution centers and stores blurred.

Ways to fulfill product orders

Consider the following fulfillment logistics and you’ll see that retailers need a comprehensive and seamless distribution strategy to succeed:

  • Buy online, pick-up in store (BOPIS)
    A customer makes an order online, the store pulls it (either from its own shelves or a Distribution Center) and the customer collects it in the store.
  • Buy online, return in store (BORIS)
    A customer purchases a product online, no longer wants it, and returns it to a physical store.
  • In-store purchase, home delivery
    A customer purchases items in your stores and asks you to deliver it to their home address or other location.
  • Buy online, drop-shipping
    A customer purchases something on your website, then asks you to ship it to their home or other location.
  • Ship from store
    A customer purchases something on your website, then you pick it from your store and ship it to their home or other location.
  • Drop-shipping
    A customer purchases something on your website, then you ship it from a third party Drop Ship Vendor (DSV) to their home or other location.

As you can tell just by browsing this list, complex fulfillment logistics demand systems that manage inventory globally and transparently.

What is omni-channel distribution?

Simply put, omni-channel distribution unifies operations and product flows across all channels so you can provide a seamless shopping experience. This means customers can complete a purchase and receive products from any channel they choose. It can even include reverse logistics, as when a customer returns a product.

Unlike multi-channel distribution, which provides ways for customers to purchase online and in brick and mortar locations, omni-channel distribution has a “one-touch” integration, which allows for customers to buy in-store, online, or both, from a single point.

Omni-channel distribution challenges

As with any technology solution, not all omni-channel distribution solutions are created alike.

Inventory visibility and virtual inventory segmentation

For starters, you’ll need a system that offers global inventory visibility. If you and your customers can’t see what you have available to sell, then you’ll never be able to succeed in omni-channel distribution. This means seeing not just what items are on-hand, but also stock in transit.

You’ll also need technology to support virtual inventory segmentation. This gives you the ability to control what stock is made for sale in each market, or channel. It also lets you manage buffer or safety stock, which might differ by channel, to prevent overselling and canceled orders. In addition,  you’ll want a flexible way to manage your fulfillment locations. This will including grouping them into logical networks that can be used to in your sourcing rules. That way you can set up rules to prioritize sourcing from one network over another. Why is this flexibility important?

Sourcing and fulfillment optimization

Margins. While basic inventory and order routing capabilities will let you fulfill online orders from stores, they’re not optimal. Only flexible fulfillment logic lets you fine tune your rules over time. And without this flexibility you have no way to maximize the margin on each order. But  an enterprise distributed order management solution will ensure you fulfill orders in the way that works best. Not just for the customer but the business too. For instance, say a product is available from two stores. Where do you want to fulfill it from? The store with the most inventory? Lowest throughput? Oldest inventory? Or biggest markdowns? All these factors can impact your margins. Preservation of profits is key.

Reverse Logistics

Finally, you’ll want a system that can handle reverse logistics. Remember the customer who decided they didn’t want the product they purchased? The only way to process this is through reverse logistics. You need to allow stores and Distribution Centers to receive products back from the consumer. Or even send unsold merchandise back to the manufacturer so it can be taken apart, sorted, reassembled or recycled.

In short, omni-channel distribution is not easy. But to serve today’s demanding customers, it’s a must.

For more information on how Fluent Order Management can help you solve your omni-channel distribution challenges, Contact Us today.

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