Omnichannel or the art of stock management – part 2

It is not always easy. The challenge for retailers starts when they have to introduce the entire range of products available for sale at a brick and mortar store into the online or mobile channel. Not all retail chains in Poland sell in this way. And even if they do, the price of goods is often different, depending on the sales channel, e.g. it is not possible to lodge a complaint online for products purchased at a traditional point of sale or return the online purchase in a nearby shopping mall.

Experts from DB Schenker list two key areas that determine the success of a logistics operation for e-commerce: warehousing and transport. The former can be distinguished by efficient order processing, based on a high degree of digitisation and automation. It is the right merchandise management process (including returns), supported by a proper exchange of multi-channel information, that determines whether we have a chance to become the first choice operator for the customer.

The basis for the success of an e-commerce operator is the ability to operate in many distribution channels, the speed of response combined with the ability to eliminate factors that annoy the customer in the logistics process.

The critical issue is the ability to manage stocks across channels

The company must determine whether they will be split, allocated between channels (cross allocation) or fully integrated. Market practice shows that many retail chains use the most straightforward option, i.e. divide stocks and warehouses into two parts. One of them supports e-commerce, the other brick and mortar stores (stock is not moved between these channels). This does not provide the necessary efficiency.

The result is that the product is missing from the online store, but is available in traditional outlets. This applies to both regular sales and sale actions.

Allocation of stocks between channels allows for responding to places of demand. However, it requires a lot of work, as it is usually done through manual entry into the system, e.g. information about sending goods from a regular store to the customer who bought them online.

The integration of stocks and the free movement of products between channels requires the implementation of IT technologies that show in real time the availability of commodities both in the warehouse and in stores. This area still needs to be improved, so practice shows that in most cases stocks are managed separately for off- and online sales.

On the other hand, there are more and more companies (mainly large market players) that use fairly expensive methods, e.g. RFID tags and RFID technology in brick and mortar stores, which allows to increase visibility and ensure that the data about stocks is up to date. They enable reliable control of stock allocation, which in the case of the omnichannel is a key issue.

Thanks to this it is possible, for example, to flexibly choose a place from which a specific order will be delivered (usually based on the criterion of distance to the recipient or availability of products).

How does it work?

The e-customer buys a product, and the system suggests whether it should be sent from an e-commerce warehouse or from a particular store. In this system, goods returned to brick and mortar stores can, upon checking their condition, be either immediately put up for sale or sent back to a warehouse or another store where this assortment is missing.

For the split stock system, full stock up usually takes place in dedicated distribution centers. In the integrated system, a hybrid center will be appropriate, whose task is to handle orders from both sales channels. The number and location of warehouses will depend on the reach of the e-store, preferred delivery time and delivery costs. Internet order processing can also be carried out by the supplier in warehouses located on the outskirts of cities or in the backroom of stores as well as in brick and mortar stores from the stock that has accumulated in them.

A chain of brick and mortar stores may be an element of competitive advantage in relation to companies that provide only online services (e.g. fast delivery services). Albert Grudzień, sales manager at Logifact-Systems, points out how important the use of warehouse management systems (WMS) is for the omnichannel.

The growth in the field of WMS systems results directly from business requirements. Factors such as market competition, striving to increase efficiency, the need to handle ever-increasing flows, the requirement of quick access from anywhere in the world to data on warehouse operations for management staff or the focus on reducing the costs of labor influence the fact that WMS providers place great emphasis on their development – says Albert Grudzień.

On the other hand, the technologies on which WMS systems are based and which are used in warehouse operations are evolving. One of such global market phenomena is the development of the e-commerce market and the emergence of a new trend, i.e. omnichannel commerce.

– Multichannel and omnichannel sales can be achieved with properly organized logistics, which creates new challenges for WMS systems – explains Albert Grudzień. He points out that in order to face them, WMS systems are equipped with appropriate functionalities and mechanisms of integration with devices supporting the handling of increasingly complex logistic processes, dedicated to sales support in new channels.

Ever larger warehouse areas are assigned to handle a large number of individual orders, which in turn requires redesigning the picking process, an appropriate control system, expanding the packaging process support, close integration with parcel delivery systems, integration with weighing systems and of course connection of interfaces with ERP systems or data bus that send orders to the WMS from the e-commerce platform, etc.

Recently, Eastern European companies have more access to advanced warehouse automation systems.

The automation area is a tempting prospect for businesses due to the possibilities offered by state-of-the-art solutions. As a result, the competitive advantage for WMS system suppliers will be the integration experience offered and readiness of the WMS system to interface with the automation control system – inflexible and functionally hermetic by nature. Among the many technologies now available, systems using light technology such as Pick by Light / Put to Light, camera integration systems and voice systems are particularly interesting. In principle, there are no functional and technological limitations – says Grudzień.