Commentary | IT Matters

Searching For the New Perfect Order

Tags: Inventory Management, Retail, E-commerce

Peter Zaballos is Vice President, Marketing at SPS Commerce, 612-435-9400.

The growth of omni-channel retailing has driven a shift in what constitutes the “perfect order” — from a traditional, sequentially linear design to an exponentially more complex, interconnected model. It’s a shift driven by customer demand that requires the retailer to manage orders, shipments, payments, and returns within the retailing organization and across a vast number of trading partner relationships spanning multiple channels.

In 2009 the Vendor Compliance Federation gave a 100 percent perfect order score when the vendor shipped the order on time, damage-free, with accurate documentation. In today’s omni-channel world, all trading partners must operate in unison to provide product information, social validation, inventory information, competitive pricing, convenient fulfillment, and convenient returns. This makes the perfect order a tall one.

Most retailers’ infrastructures are rooted in traditional single-channel order and fulfillment practices. But omni-channel consumers now demand that items be available quickly, and that they be competitively priced—online, in stores, and in catalogs.

Seamless Fulfillment for Omni-channel

The traditional retail supply chain fulfilled orders to stores. Retailers ordered items from vendors, who shipped them to the distribution center (DC), and DCs shipped to stores as inventory was needed. Customers bought their merchandise at the store and returned it, if necessary, at the store.

In the early days of e-commerce, many retailers separated their web operations and fulfillment infrastructure, or outsourced to third-party logistics (3PL) providers. It may have simplified life for the retailer, but it isolated the customer experience between channels, created duplicate inventory centers, and prevented retailers from meeting demand from the most appropriate inventory source – be that the store, the DC or the supplier.

Now omni-channel customers are looking for delivery channel options, flexibility on timing, and free shipping. All four primary disciplines of order fulfillment—orders, shipments, payments, and returns—have become substantially more complex. Retailers’ legacy back-end system architectures and business processes are largely unequipped to support this complexity and deliver the simplicity the consumer demands. They need technology that supports growing, changing fulfillment requirements, such as:

  1. Buy online, pick up in store.
  2. Try item in store, deliver to home if item out of stock.
  3. Order online, deliver to home, return to store.

 

Decisions, Decisions, Decisions

More channels mean more decisions about efficient fulfillment. For example, if a customer places an order online to be picked up in the store, should this order be shipped from the DC? Or shipped directly from the vendor to the store? How much more inventory of this item should be ordered?

If this item gets returned, should the returned item be kept in store or shipped back to the warehouse? Or the supplier? Where should replacement items be sent from? How should return shipping costs be handled?

In addition, many retailers have extended supply chains that include global trading partners such as 3PLs, factories, and sourcing companies. Retailers need full visibility with all of their downstream supply chain partners to balance inventory demands across channels.

360-Degree Visibility

Omni-channel order fulfillment is a constant balancing act. Retailers seek to hold minimum inventory, while also striving to have the right inventory in the right store. When fulfilling an order, they must walk the tightrope between missing an order due to out-of-stock items and ordering too much inventory. And customers often expect near real-time delivery.

For retailers with hundreds or thousands of vendors and extended supply chain partners, achieving seamless order fulfillment across all channels is a challenge. Technology and processes that provide 360-degree visibility into orders, shipments, payments, and returns are a must-have for the omni-channel retailer.