Integrating the options

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As retail channels proliferate and customers expect instant and accurate information about orders and availability, supply chain systems have moved into pole position enabling many of tomorrow’s ‘must-have’ attributes.

Time was when warehouse management systems were confined to the warehouse; transport management was the domain of the supply chain execs, while the logistics guys were preoccupied with fleet management applications. Goods moved from producer, to warehouse to store to customer in what was – for most of the time, at least – a one-way route.

In today’s “omni-channel” world it is rather different. Not only is “drop ship” or direct delivery from supplier to customer increasing, but stores have become “warehouses” and goods may travel between some of them before finally being collected by the shopper. The journey is also increasingly two-way as the old “mail order mentality” affects internet shopping with customers ordering the same item in two or three sizes and then returning the ones that didn’t fit. In the 1980s the “returns rate” in sectors such as women’s fashions were commonly quoted at 40 per cent and the same is starting to be true for some online categories as well.

Accessible data

Those dedicated IT solutions – such as the WMS or TMS – which were generally of little (if any) concern to store staff must now be available to many more parts of the business, providing shops and e-commerce with a single view of stock availability or a raft of costed delivery choices to balance maintaining margins with meeting customer demand.

Small wonder that software suppliers report growing interest in solutions targeted at streamlining the omni-channel world. Top of the list for some is integrated order management with technology capable of processing orders from every channel, matching them with stock records, delivery options and possibly even individual customer transaction records. The result is the necessary information to drive the “availability to promise” response, but potentially also to give an assessment of whether it really is worth losing money on the deal by bringing goods from a Newcastle store to satisfy a high spending loyal customer who wants to collect from the Newbury outlet.

That “total cost to serve” is becoming more important as the delivery options proliferate. Manhattan launched a system for calculating these total costs earlier this year and already has two users for the suite – one in the US another in the UK. For David Hogg, commerce solutions lead with IBM, those costs have to be quantified and included in the strategic plan. “Maybe a retailer will budget for five per cent of orders being in that ‘difficult’ category where they could lose money, but the numbers of those orders then has to be tracked on a daily basis,” he says. “If the number goes beyond five per cent then there has to be a proper assessment and decision.” Continuing to accept ever more “difficult orders” clearly would do very little for the bottom line.

Others are focusing on the drop ship market with established mail order players Shop Direct, J D Williams and Scotts & Co already using Kewill’s “Trade DD” package. For some retailers direct despatch is seen as a cost effective way of experimenting with new merchandise sectors: no need to buy in stock, simply sign up a supplier, pass on the orders and let them handle fulfilment. That may work for some in the short term, but if brand image and customer experience are to be consistent then the supplier has to be integrated into the full order management cycle, so that stock level data can be accessed, and a realistic delivery date can be forecast when shoppers place their orders.

While drop shipment is still largely at the experimental stage in Europe and the UK, in the USA it is big business with well-established networks of direct-to-consumer suppliers working with many of the leading players. Home Depot, for example, has around 50,000 SKUs in its stores, but 500,000 on its web site thanks to the direct delivery business.  As such the retail web site is no longer simply an alternative channel for the brand but becomes a marketplace or portal – rather like Amazon.

Minute management

To deliver an accurate “availability to promise”, retail systems need to poll their drop shipment suppliers’ stock records every few minutes. This is already happening with some US companies although is less commonplace on this side of the pond. Such co-operation not only requires long-term commercial agreements but good systems integration.

Further along the supply pipeline similar co-operation and integration is needed between e-commerce and carriers. Currently many retailers simply opt out of the parcel tracking business and e-mail their customers a link to the 3PL’s web site. For consistent brand messaging and enhanced customer services, however, retailers will need to provide such information via their own web sites. That means yet more integration and translating the tracking data into a user-friendly format and language the average online shopper will understand.

In an increasingly omni-channel world, it would seem, greater B2B co-operation is just as important as cross-channel integration.

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