How All Things Omnichannel Work

Everything you need to know about Omnichannel

What is the Omnichannel approach?

The omnichannel approach to supply chain management offers integrated order fulfilment and distribution channels that effectively services consumers in the digital age. Omnichannel is unique because it is dependent on the customers having the ability to switch between multiple sales and communications channels while remaining connected to the retailer. By providing consumers with various media channels with which they can interact, the customer and their experience is positioned in the forefront of commerce instead of a product, brand, or service.

New technologies have emerged. Innovations in e-commerce have altered business-to-business and business-to-consumer relationships. Within the customer journey, the user experience has become paramount, critical to sales and revenue. Consumers find the ability to shop via customizable means to be highly desirable.

The advent of e-commerce has prompted retailers to utilize a direct-to-consumer model that offers the omnichannel customer an integrated shopping experience. Think about it. Today consumers shop using cell phones, tablets, laptops, and desktop computers, find and buy from social media sites as well as company websites. Consumers also visit brick-and-mortar stores to view goods, may buy in store or online and use a variety of shipping and pick up methods. Brands have expanded their reach across many channels and need to have consumers readily identify their company, no matter the brand. It is truly a complicated retail world.

Retailers often utilize third party logistics providers as an extension of their companies, outsourcing order fulfillment and package shipments. 3PLs may provide value added services such as gift wrapping, gift cards, returns processing and much more and provide branded portals for consumers to use.

Omnichannel commerce lets consumers engage with 3PLs and retailers through online and offline channels. This allows them to switch from a corporate webpage to its social media page or mobile device application to place orders. The unique “one-touch” aspect of omnichannel commerce lets consumers purchase at a brick-and-mortar location, virtually, or simultaneously from one place. Consumers can also alternate between sales channels and stay connected to the retailer or a 3PL company.

Omnichannel means “all channels.” The alternative approach that omnichannel commerce brings to supply chain management places consumers and the user experience at the center. Customer data plays an integral role because it is used to track customer engagement to build a personalized experience. The customer experience management integrates sales channels to effectively service consumers in the digital age.

The Building Blocks of Omnichannel Excellence

Consumer-centric supply chain strategy
Network and supply chain eco-system of the future
End-to-end planning and information flow
Omnichannel fulfillment: node operations
Omnichannel fulfillment: transportation and logistics-service-providers management
Operating model and change management
Digitization and process automation

– data from McKinsey & Company

The Role of Omnichannel Warehousing

In today’s complex omnichannel world, consumer demands directly impact warehouse operations. 3PLs that operate as omnichannel warehouses are configured to take and fulfill orders placed through multiple channels. These orders may originate from retail locations, e-commerce, or other warehouses.

Omnichannel warehouses can operate as either 3PLs or shared warehouse space for multiple companies which manage their own warehouse operations. Advanced technology and warehouse optimization efforts are necessary to manage dedicated warehouse space for each company. Due to this, configuring omnichannel warehouses can be complicated. Unlike distribution centers, omnichannel warehouses need to be optimized to efficiently manage the flow of goods to:

Physical locations such as other 3PL warehouses and fulfillment centers
Retail locations
Customers

For 3PLs to be successful in the digital age, they must be able to effectively restock large volume planned orders and spur-of-the-moment online purchases. Technology that integrates omnichannel warehousing gives 3PLs the necessary capability to handle these duties. They are then able to satisfy both business and consumer needs. The way that a warehouse is configured plays a critical role in those operations

Customer-centric business models and the increase in online shopping are shortening order fulfillment times. As e-commerce has proven to be highly popular, consumers have demonstrated that they want increased variety. SKU proliferation has become a significant issue. Because inventory is in stock for shorter amounts of time and orders continue to amass, the amount and variety of SKUs has increased. This puts stress on 3PLs and retailers.

Consumers have become accustomed to omnichannel retailing. When dealing with omnichannel ordering, consumers expect accurate inventory visibility and shipment tracking. The order fulfillment and delivery process is the single most important factor in determining future brand loyalty and a positive customer experience. To facilitate streamlined, accurate order fulfillment, many omnichannel warehouses are leveraging leading edge technologies. By fast-tracking order fulfillment using automation and leading edge best-of-breed warehouse management software, omnichannel warehouses can help ensure customer satisfaction, positive brand experience and customer journey.

The International Journal of Physical Distribution & Logistics Management posits the four most influential factors for omnichannel warehouse configuration.

Number of stock-keeping units (SKUS)
Order fulfilment times
Total number of orders
Goods size

– data from McKinsey & Company

3PL use of warehouse automation tools and systems has increased in the last several years. The technology has enabled retailers, shippers, and 3PLs to solve the complex problems that omnichannel commerce presents. McKinsey & Company states that the warehouse-automation market has been forecasted to reach $51 billion by 2023. One automated tool that 3PLs are investing in is autonomous mobile robots (AMRs). AMRs are designed to eliminate useless movements associated with operations within the warehouse. DHL is reported to be deploying up to 2,000 autonomous mobile robots by the end of 2022. The AMRs are reported to create value, reduce risk, and improve reliability.

Omnichannel Order Fulfillment

Omnichannel fulfillment is a method that 3PLs can use to manage inventory, picking, packing, and shipping across all sales channels. It is the entire process, from when a customer places an order to when that order is delivered. With omnichannel fulfillment, products are pulled from consistent inventory supply and distributed among 3PL fulfilment centers. There they are picked, packed, and prepared for shipping to the desired destination. Regardless of the sales channel the consumer uses, the omnichannel order fulfillment process ensures that the 3PL properly handles each order accurately and seamlessly.

Types of Sales Channels

Brick-and-mortar store Telephone order

Social media Mobile devices

Company website Customer Service

– data from McKinsey & Company

In a 2022 study, The Harvard Business Review found that approximately 73% of customers prefer shopping through multiple channels and 80% prefer omnichannel strategies. This means that omnichannel customers enjoy being able to search product information through social media, purchase it from a company website, and then pick up the item at a brick-and-mortar location.

Omnichannel commerce is defined by its ability to fulfill orders in online and offline sales channels. Online shoppers prioritize short wait times over cost, however operating costs are a critical issue to stores and distribution centers. Operating costs get passed on to consumers and warehouse customers and can limit a 3PL’s ability to compete. Due to this, order fulfillment, sometimes referred to as supply chain fulfillment should be designed to account for shifting physical and digital channels.

Omnichannel commerce has also helped to elevate customer brand awareness. In addition, omnichannel commerce enhances the customer experience by optimizing operations and adapting to brand trends. An elevated omnichannel customer experience translates to an increase in sales and revenue for 3PLs and retailers.

The omnichannel model is an asset for logistics providers. As e-commerce orders have increased and customer engagement has become a necessary value-added service, centralized data channels help 3PLs and retailers to assist and assess consumers. Companies use this data to help customers:

Research products
Evaluate prices
Purchase goods
Receive goods via multiple channels
Move between sales channels

Omnichannel Distribution

What is omnichannel distribution?

This is a strategy which merges wholesale, retail, and e-commerce channels so that retailers can provide a seamless customer experience across multiple channels. This involves providing an integration between online and offline retail stores so that consumers have more options to receive their orders. This includes options such as buy online, pick up in store (BOPIS), curbside pick-up and much more.

Collaborating with 3PLs creates opportunities for companies to invest time in other business functions that augment their omnichannel distribution operations. It is important for businesses to adjust their omnichannel distribution strategies to fit their business goals. 3PLs can help them do so by simplifying processes.

The primary objective of omnichannel distribution is to lower costs and improve the shipping process to benefit consumers. Because of its ability to streamline operations, the benefits of perfect omnichannel distribution outweigh the challenges. It can improve transportation efficacy and precision. It can also collect data such as customer feedback that can be used to improve the omnichannel customer experience.

Consumers want choices. They want to shop at online stores, pick up items at brick-and-mortar shops, or place orders at physical stores for shipment elsewhere. They want to elect to have push notifications sent to their mobile devices to track when products are in stock or where they are in transit. Consumers also want data. They want to know when, where, and how their order is being processed, and when and why any issues occurred. As a transportation strategy, omnichannel distribution helps to give consumers the things that they want. This enhances the omnichannel customer experience and accumulates loyal customers for continued business growth.

Types of Sales Channels

3PLs assist companies in optimizing their distribution channels by:

Highlighting necessary geographical zones
Improving outbound and return tracking
Fulfilling orders from the best locations

3PLs are utilizing omnichannel distribution to better manage sales channels as the line between brick and mortar and online stores continues to blur. Because of this blur, the return of goods from stores and customers is just as important as the distribution of goods to stores and customers. To address this issue, Omnichannel distribution strategies focus on forward distribution and backward distribution.

Forward distribution is the system that moves goods from sellers to consumers. Consumers rarely approve of elevated costs or postponed delivery. Forward distribution eliminates the distance between products and customers to speed the delivery process. 3PLs are integral parts of forward distribution because they unify the customer journey and the product journey.

Forward distribution is broken down into four types: same day, two-day, and standard are shipping choices that can be utilized for this type. On-demand delivery for scheduled dates is part of this system as well. All points that move goods to the consumer are included in the distribution types

Buy from an online store and pick-up goods at a brick-and-mortar store
Buy from an online store and have goods delivered to a location
Buy goods at a brick-and-mortar store and have goods delivered to a location
Drop-ship item from a warehouse to a location

Backward distribution is the system that moves goods from the consumer to the seller. Pickup and quality control are part of backward distribution as well as the replacement of faulty or errored goods.

Often called reverse logistics, this function is necessary to successful omnichannel commerce. This strategy focuses on re-collecting value from returned products, parts, or materials. The reverse logistics process can include:

Buy from an online store and return goods in-store

Buy from an online store and return goods online

Returns Repairs Recalls Repackaging Refurbishment Reselling Recycling Disposal

Businesses that have streamlined return services are able to boost profits by regaining product value. 3PLs with reverse logistics capabilities can assist companies by organizing their supply chain into a seamless operation. 3PL data collection can be used to reveal and explain patterns that can affect issues like quality control. Leveraging data about goods that are returned, products can be manufactured in a way that improves them. Systems and services can be modified to increase customer retention. By using modernized logistics software capable of identifying issues, 3PLs help companies save money and improve the customer experience

Supply Chain Visibility

Transparency of information across the supply chain is useful and often critical. The means of following a product or a shipment of products from various points to an end destination is supply chain visibility.

The issue of visibility has become more important as supply chains globalize and companies increase outsourcing. 3PLs can succeed by having developed infrastructure that provides seamless omnichannel customer experiences. This has become a hallmark of omnichannel commerce.

When utilizing omnichannel commerce 3PLs should:

Know what customers are going to order
When customers are going to order
When customers are expecting to receive their order
How they will help shippers to execute shipping

With omnichannel logistics, 3PLs handle inventory and manage client operations associated with picking, packing, and shipping. Knowing where products are in warehouses and while in transit is critical for successful omnichannel distribution. By offering end-to-end real time visibility, 3PLs can provide retailers and omnichannel customers accurate inventory locations and fulfillment times. This allows for faster decision making and adds security for customers and companies. Knowing where an item is located and where to place inventory gives 3PLs the best chance at lowering merchandise holding costs and improving delivery times.

Inventory Visibility

Inventory visibility shows clients and workers what inventory is in stock and where inventory is. 3PLs that utilize technology that provides high visibility often have greater insights into their inventory. Greater insights help 3PLs better manage inventory for companies across distribution networks. This reduces costs while simultaneously saving time.

In a customer-centric market, omnichannel commerce is designed to enhance the experience for customers. Choice is part of this enhanced experience. Customers can see what is in stock at brick-and-mortar locations or warehouses and make their own purchase and shipping choices.

Proper inventory visibility allows customers to choose what is best for them. Some benefits of improved inventory visibility are:

Maintained inventory
Improved efficiency
Better product demand forecasting
Enhanced customer experience

Shipping Visibility

3PL magazine reported that by 2023, over 50% of world businesses will use a transportation visibility solution. In the past, shipment tracking was mainly comprised of location and cargo status. Today however, customers and consumers demand more shipping details such as:

In-transit starts and stops
Arrival times
Weather
Temperature and humidity

Product demand has increased the importance of shipping visibility. Omnichannel commerce functions to allow carriers, customers, 3PLs, and freight forwarders to track and share shipment data in real-time regardless of transportation mode. 3PLs can use this tracking data to quickly identify costs, errors, and matters associated with shipping and adapt for a consistent experience.

To increase revenue when operating with omnichannel distribution functions, 3PLs must provide advanced visibility across physical and digital channels. Using resources that collect and communicate data across each step of the supply chain increases visibility. This can help to predict delays, send push notifications to inform consumers, and drive customer engagement and satisfaction.

Conclusion

Online shopping has affected the logistics industry by placing more focus on customer satisfaction and engagement rather than cost-reduction. By utilizing omnichannel supply chain solutions, 3PLs and shippers can meet consumer demands for integrated solutions and save money. COVID-19 continues to affect omnichannel strategies that 3PLs can apply. Having the technological means to assess cost and revenue in multiple ways will only assist 3PLs in proactively improving operations for the perfect omnichannel experience.

As we have learned, a standard omnichannel consumer experience is made up of different and integrated points of sale. The customer experience of today revolves around a smooth and unified shopping experience across all sales channels. Redesigned 3PL processes and structures around omnichannel commerce will improve 3PL capabilities and performance on the omnichannel journey.