BY MARK B. SOLOMON, EXECUTIVE EDITOR – NEWS
OPTIMIZING FREIGHT SPEND
strategicinsight
The challenges of omnichannel
fulfillment don’t end with order
picking. There’s also the
matter of controlling shipping
costs in a wildly unpredictable
“buy anywhere/ship
anywhere” environment.
A CONSUMER IN JACKSONVILLE, FLA.,
orders several products from a retailer’s web-
site. As soon as the order is received, the
retailer’s omnichannel platform scans inven-
tory records for a store in Hilton Head Island,
S.C., 170 miles to the north. The retailer sees the
products are available at the Hilton Head store and
are classified there as “excess stock.”
The retailer’s transportation management system
(TMS), which is seamlessly integrated with its omnichan-
nel network, compares parcel rates from the Hilton Head
store and from the retailer’s DC in Topeka, Kan., and finds
it would be 25 percent cheaper to ship from the Hilton
Head store. The order is forwarded to Hilton Head, where
the merchandise is picked from inventory in the backroom,
packed, labeled, and scheduled for pickup later that day.
The customer gets the products as scheduled (and gets
free shipping to boot), the retailer cuts its transport spend,
inventory is optimized that would otherwise be sitting idle
in Hilton Head, and the laggard store gets a sales boost of
sorts.
The hypothetical scenario is what omnichannel fulfill-
ment could look like for traditional retailers. But it can’t
be consistently executed without the end-to-end visibility
needed to fulfill from multiple locations in concert with
dozens of suppliers and carrier partners. It’s a code the
marketplace has not been able to crack in a sustainable
manner to date.
To complicate matters, the technology that helps ship-
pers perform load planning based on mode and carrier is
not linked to a retailer’s inventory, according to a survey
released in late May. The annual survey, conducted by the
publication American Shipper, benchmarked transportation
procurement attitudes and activities of 103 large compa-
nies, nearly 60 percent of them retailers and the remainder
manufacturers. About 64 percent of the retailers said trans-
portation’s role was critical to their company’s omnichan-
nel strategy. However, only 41 percent said their transport
procurement was “very closely” tied to their inventory
strategy, the survey found.
Eric Johnson, the study’s author, said the gap under-
scores a fundamental problem facing traditional retailers.
“If a company doesn’t have a handle on where it wants
inventory or isn’t able to throttle the pace of inventory
to meet demand, it can’t effectively serve multiple chan-
Optimizing freight spending
in an omnichannel world
