Omnichannel supply chains provide a variety of well-integrated order fulfillment and distribution channels to efficiently reach and serve consumers in the digital age. While multichannel supply chains also provide a number of channels, they are not nearly as well-integrated and well-coordinated as they are under the omnichannel approach. Thanks in part to the rapid rise of e-commerce, omnichannel supply chains are changing the landscape of the logistics industry while strongly impacting consumers, shippers and third-party logistics (3PL) providers.
The logistics industry
Before the rise of e-commerce, supply chain executives tended to focus primarily on keeping the cost of shipping down. However, in the digital age, sophisticated, customer-driven supply chain management (SCM) is rapidly moving to the center of strategic discussions. Consequently, supply chain decision-makers are shifting their focus toward value and customer satisfaction. For the logistics industry, this new executive focus translates to a more agile, flexible, responsive, omnichannel supply chain.
Yet matching inventory demand in an omnichannel world requires increasingly sophisticated solutions and expertise. While some enterprises aim to have inventory shipped to customers directly through a central distribution center, others try to steer customers toward in-store pickups. Still others focus on a deliver-from-store approach. However, most enterprises are opting for an integrated strategy that reflects a variety of customer demands by combining centralized and in-store distribution. Either way, omnichannel solutions require a new level of sophisticated coordination between stores and supply chain managers.
Of course, embracing omnichannel solutions without careful consideration of the options and consequences can lead to mistakes. To succeed, the transition should not simply follow from the latest industry trends. Rather, it should follow from an in-depth analysis of recent consumer behavior with respect to one’s specific enterprise.
With the rise of e-commerce, consumers are now at the center of the supply chain management system and are enjoying the benefits of their central role. Shorter delivery times, and less expensive shipping, are two of the strongest emerging customer expectations in 2017. At the extreme end, we have the increasing demand for same-day delivery and free shipping. Customers also have the power to choose their channel for purchasing (generally online vs in-store), as well as their channel for distribution (generally home delivery vs in-store pickup).
However, with increasing efforts to please the customer with the fastest possible shipping to the nearest possible location at the lowest possible cost, there is a growing strain on shippers and distributors that haven’t streamlined their operations for an omnichannel world.
In 2017, the logistics of shipping is no longer a matter of keeping stores stocked to meet in-store demands. Increasingly, shippers are embracing advanced, agile, flexible systems that accommodate smaller, faster shipments to a wider variety of locations. Yet shipping smaller quantities to multiple locations, while keeping costs down, is a formidable logistic challenge. To respond to it, many shippers are transitioning to a one-inventory approach to distribution management. This does not mean that all inventory is centralized in a single location. Rather, the one-inventory approach is an omnichannel SCM mindset that considers inventory located in various locations as a single pool for the purposes of order fulfillment. For example, shippers would treat both in-store inventories and distribution center inventories as part of the same pool of options for fulfilling an e-commerce order.
As demand for omnichannel solutions increases, so does the demand for third-party logistics (3PL) providers that specialize in flexible, agile logistics. In today’s customer-driven supply chain, the 3PLs that succeed are the ones that know how to coordinate the various distribution channels and silos into a well-orchestrated whole. Moreover, at a time when retailers are struggling to fulfill the demands of immediate order fulfillment, the 3PL providers with the speed and sophistication to meet that demand are the ones that are thriving. Finally, considering the fact that stores have now become distribution centers themselves, the most successful 3PL providers have quickly evolved to embrace the store-distributor aspect of the new supply chain.
Omnichannel supply chains provide a variety of well-integrated and well-coordinated channels to meet increasingly demanding consumer expectations in the digital age. The rapid shift to omnichannel solutions is strongly affecting the logistics industry, consumers, shippers and 3PL providers. The logistics industry is shifting its primary focus from cost-reduction to consumer satisfaction. Consumers are enjoying the benefits of fast or even same-day delivery; inexpensive or even free shipping; and the option for home delivery or in-store pickup. Shippers are rapidly transitioning to a one-inventory mindset to streamline distribution. Finally, 3PL providers that specialize in omnichannel, agile, fast and flexible logistics are taking the lead.