December 2003 | Commentary | Viewpoint

Integrating Multi-Channel Retail Systems

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Many multi-channel retailers didn't start out that way. As new channels grow, it becomes necessary to integrate them to provide a unified customer experience. Unfortunately, this integration effort often encounters organizational, technological, and process problems that are the result of single-channel-focused solutions, or companies never imagining that they would serve more than one channel.

Most multi-channel retailers, therefore, have separate systems running applications for their e-commerce, retail, and catalog channels. But, by keeping these channels separate, companies end up owning significantly more inventory than they would if they looked at managing purchase orders as a unified, comprehensive process.

Elevating Service Levels

Here's another problem with individually focused solutions: when different product groups develop the same product, it may not be identical. In apparel, you run into dye or manufacturing issues when products are made at different times; furniture and other hard goods can differ by finish or color. Try explaining that to a customer whose sofa and loveseat fabrics don't match.

Customers see these inconsistencies and feel the pain. If customers try to return an online order at a store, they typically encounter an unfriendly experience. Or they may find an item in a retail catalog and try to purchase it at the store but the store clerk directs them back to the catalog. If the customer is lucky, the retailer will provide a phone in the store to place the catalog order. The fact is that most retailers still treat their channels separately and require their customers to do the same.

The Gap and Nordstrom's have tried to bridge their channels by giving the same number to a product sold through multiple channels. But these companies do a lot of work behind the scenes to make sure that happens.

A Unified Solution

To address these inconsistencies and their inherent inefficiencies, there needs to be a common inventory management process and order management system. Systems should guide companies toward the most cost-effective way to fulfill orders—considering all the inventory that is available while providing the best service for the customer at the lowest cost to the retailer.

Order management efficiency across channels is a foreign concept to most retailers that typically work with a hodgepodge of information technology systems. Many of these systems were never designed to work together, leaving gaps in order management processes that result in stock-outs, overstocks, and customer service problems.

Companies don't necessarily have to rip out the systems they have in place and start over. They can get around this by keeping the logical execution part of this process with existing legacy systems. All orders would go into a single order management system, which would manage the physical flow of merchandise whether it's to customers, stores, distribution centers, vendors, or returns.

Streamlining Order Fulfillment

Centralizing order management lends more flexibility to the retailer in filling orders. Today, more and more companies use multiple methods for fulfilling demand, such as third-party warehouse and fulfillment, temporary warehouses, vendor direct/vendor managed, internal warehouses, and pairing with disparate order management systems.

With proper order management, retailers can route the order to inventory, then ship to the store for pickup or directly to a customer's home. This flexibility just isn't possible with the systems most retailers use today.

With an order management system in place, logistics can track the physical changes in real time, so the DC always knows what to expect. From an execution standpoint, having this information enables companies to redirect product on the fly.

With the growth of non-store channels, and the increasing pressure on profit margins and profitability, retailers can no longer avoid these issues. By implementing a common order management system, all channels can see and act on orders to provide the level of service that customers expect.

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