A road map for omnichannel fulfillment

In stores, customers are facing out-of-stock inventory; empty shelves are detrimental to store traffic, pushing shoppers toward online ordering and away from in-store purchases.

Retailers should embrace technology with inventory visibility. There are instances where retailers’ IT systems have proven inadequate to meeting the needs of their omnichannel retailing ambitions. One key problem has been tracking inventory. This issue is a fundamental one that any brick-and-mortar company must address in order to know what’s in stock. Innovations such as radio frequency identification (RFID) tags embedded into a product’s packaging can help the retailer track the location of a given item.

Perhaps most essential is process discipline. A successful omnichannel retail strategy requires more than just deep cross-functional alignment. Many retailers are going further by unifying their P&Ls, organizations, and technology to ensure a focus on the needs of the customer rather than the needs of legacy channel structures.

The backroom in stores need an extensive reorganization. A change in supply chain is essential to encourage in-store pickups, especially considering the successful variety of online shipping methods and consumers’ demands for minimal or free shipping costs. As many retailers contemplate smaller backrooms to maximize selling space in the store, using the backroom space effectively is critical.

Another risk is the retail packages-per-order (PPO) ratio, which has an impact on customer satisfaction (split shipments), supply chain labor efficiency, and the transportation costs of shipping multiple packages.

One requirement of the omnichannel setup is leveraging inventory closest to the customer. Since available inventory is now more segregated to fulfill an online order, it could result in higher PPO being fulfilled from multiple locations. Additional fulfillment channels such as drop-shipping could increase PPO and add to the complexity of keeping shipping costs down, unless shipping is built into the cost of the SKU.

The importance is the impact on freight charges; the first pound for each shipment is the most expensive, so splitting shipments has an outsize impact on costs. Ideally, the PPO ratio is 1.00, where the retailer is shipping one package for every digital order, including all items.

Customers love convenience and choice—and free shipping. Plus, once the customer enters the store, there are even more opportunities to expand the customer experience and increase the size of their order.

Retailers can automate the fulfillment function, enhancing the ability to support omnichannel fulfillment at the storefront level. New technologies like heat mapping, embedded sensors, digital store tags, and connected assets allow customers, associates, and store managers to interact with each other based on geographic location and inventory availability. In addition to infusing greater customer engagement, these technologies set the stage for store associates to reasonably fulfill in-store orders in a matter of minutes.

Another consideration is the impact and risk omnichannel fulfillment could pose to human capital. Asking employees to multitask using current brick-and-mortar operations can result in a staff that, tasked with doing everything, manages to do nothing. In addition, store employees are filling online orders during store hours using products on the shelves, creating congestion on the floor and access challenges for store customers. This calls for serious staff training—frequent, bite-size learnings that need to be intuitive and become second nature to the workforce.

A human capital and cultural shift is also needed. It’s important to keep in mind that store managers and their staff are incentivized to make sales and satisfy in-store customers, not online customers. Addressing this issue will require change management among store managers and associates, which could include restructuring customer satisfaction metrics and compensation plans.

In addition to the changes described above, consumers now want a frictionless shopping experience to ensure their safety while in the store. More self-service stations will appear at checkout with contactless payment on the rise.