A shift in consumer shopping preferences and behaviours is driving the growth toward multichannel retailing. This multichannel strategy has a direct impact on a business’ supply chain and creates different priorities for both retailers and their suppliers.
For retailers, supply chain priorities include increasing on-shelf availability while reducing inventory stock and growing multichannel capability. While for suppliers the priorities are to reduce operating costs while improving service levels, inventory control and forecast accuracy.
Consumers are browsing and buying online more frequently, and with this comes greater expectations regarding their purchase delivery and pick-up options. As a result, retailers must determine how to create a customer experience that is seamless, irrespective of channel, order size, origin and delivery choice.
To address the ongoing changes in consumer behaviour, retailers need to optimise their supply chains around these three key areas:
Product distribution is a critical process of the supply chain, and multichannel order fulfilment means retailers need to leverage supply chain operations and processes to fulfil traditional store orders while also competing with individual customer orders online.
To determine an optimal order fulfilment strategy, retailers must ascertain their customers’ expectations of multichannel experiences, then decide how to manage these expectations while managing the costs of carrying inventory stock and transportation costs. To help determine the best delivery method for their business, they must first understand the different types of fulfilment strategies currently available.
- Integrated fulfilment allows retailers to use existing facilities to leverage inventory stock across channels. Inventory stock is then segmented during shipping activity.
- Dedicated fulfilment through independent fulfilment centres develop and categorised inventory stock by selling channel. Tailoring operations within each channel based on specific order profiles, frequencies and the value-added service needs of each channel or customer type.
- Hybrid fulfilment provides a combination of integrated and dedicated fulfilment centres, allowing retailers to create their own models. For example, retailers can have separate inventory stocks for retail replenishment and consumer-direct orders in a single facility.
A multichannel service offer should consider special delivery options including speed and timing of delivery and real-time information on order status so that customers can track their purchases from order placement to dispatch and delivery.
Fulfilment systems should integrate logistics activities for warehouse operations, deliveries to brick-and-mortar stores as well as for the individual online customers.
Consumers are more likely to make online purchases with businesses that offer an easy and efficient returns policy. Regardless of channel, they expect returns to be processed quickly, to receive an exchange product or to get reimbursed the purchasing price. They are also increasingly more likely to purchase a product online from a company that offers free returns or the option to return an item to a store.
Therefore, today’s multichannel businesses need to have a robust reverse supply chain. By allowing customers the option of an in-store return or exchange, businesses can avoid the cost and time of returning via other means. At the same time, in-store returns provide an opportunity for retailers to develop the relationship between the customer and sales staff to encourage customer loyalty and to generate additional sales.
Inventory control efficiency is crucial for balancing and managing inventory stock between different locations.
A centralised, real-time inventory control system will provide transparency across all sales channels eliminating the risk of lost sales due to stockouts. Based on sales, you can project when stock will run out and make sure you replace it in a timely manner. It also allows you to transfer stock from one channel to another and offers the functionality to provide eCommerce shoppers with access to view inventory stock levels prior to purchase.
Retailers and suppliers who work together to improve products and operations can reduce material costs, improve delivery times and reorder flexibility. Suppliers will be more willing to work with you to solve problems if you have a mutually beneficial relationship.
Maintaining a good relationship with product suppliers can make the difference between inventory fails and successful inventory control.
Consumers research and buy products in many ways, across multiple platforms and channels, however, variables such as shipping cost and in-store pickup or delivery time can all impact the process. The challenge for a multichannel strategy is to anticipate consumer demand for various shopping services and create the supply chain capability to meet it.
Article by Melanie Chan in collaboration with our team of Unleashed Software inventory and business specialists. Melanie has been writing about inventory management for the past three years. When not writing about inventory management, you can find her eating her way through Auckland.