DC Velocity - Omnichannel 2014

S-12 A SPECIAL SUPPLEMENT TO DC VELOCITY

Omnichannel has become an omnipresent topic of conversation among retailers and their suppliers. Questionsrangingfromtheseeminglysimple(What exactly is it?) to the complex (How do I get there?) abound.

Retailers are seeing an omnichannel strategy as an imperative, driven by the rapid growth of online sales and fierce competition from online giants like Amazon. “Store visits are down, while e-commerce is growing by double digits,” says Jerry Koch, director of corporate marketing and product management for Intelligrated, an automated material handling technology provider that works with customers on omnichannel implementations.

Bob Babel, vice president of systems engineering for Forte,
a firm that designs and builds distribution centers for its
customers in addition to developing warehouse execution
software, says, “Almost every customer of ours thinks e-com-
merce will grow by 10, 25, 30, 40 percent. You can fall behind
very quickly.”
Consumers, Koch says, have learned to expect a perfect
order—delivered on time, where and when they want it, at a
price they are willing to pay. Meeting those demands while
controlling costs means getting a lot of pieces in order.

That creates real complexities for retailers with respect to inventory management, fulfillment operations, and store management. But the end goal, Koch says, is always the same: “You want to find the best way to delight the customer at the lowest cost to serve.”

GET THE INVENTORY RIGHT
The first step to achieving that is knowing exactly what it
is you have to sell and exactly where it is. That creates two
closely linked requirements—dead-on accurate inventory
and clear visibility into it across the entire network of DCs,
“The first thing you need to think about is visibility to
inventory,” says Michael Khodl, vice president of Dematic,
a supplier of automated material handling and logistics
systems. “What that [translates to] is the need for a software
system to bring visibility to inventory wherever it exists. I
think that’s the biggest challenge.”
Koch agrees. “You want a view of inventory across all your
locations and in the stores,” he says.

That’s particularly challenging at the store level, where inventory accuracy is typically much lower than at the DCs, Khodl adds. And it’s vastly complicated by the fact that it requires not a snapshot, but a real-time view into all of the inventory. That’s not easy. “When you bring in the stores, you have a measurement of real time that is different,” Koch says. “If I do direct-to-consumer, the inventory I’m going to fulfill from is a dynamic thing. No longer can I be on a traditional plan-execute-monitor-report system. I have to be transac-tion-based with up-to-date information for each transaction.” But the answers vary markedly. The solution for a fashion retailer will be different from the solution for a general merchandise retailer or a grocer. And even businesses in the same sector will have different issues to address. “That’s a philosophy discussion inside the customer’s operation,” Khodl says.