Article

The Omnichannel Inventory Imperative: It Starts with Visibility

By John Konczal,
The Omnichannel Inventory Imperative: It Starts with Visibility

Not long ago, retailers had a clear separation of sale channels – and they only had a few channels. Inventory located in a store was consumed only through that store, and inventory located at a warehouse was only consumed through replenishment orders placed by stores or orders placed by customers via the phone and now, ecommerce.

Advanced distribution strategies and technologies, such as warehouse management solutions, RFID, mechanical automation and robotics, intelligent demand forecasting and others, are now commonplace, helping distribution center inventory accuracy rise to 99 percent in most cases. As a result, fulfillment from a retailer’s warehouses is highly reliable ensuring that fulfillment promises, such as a specific delivery date, are almost always met.

With omnichannel selling, retailers can no longer rely only on the optimized inventory management and order fulfillment operations from a few strategically located warehouses. Retail stores are now in the fulfillment mix. More and more, retailers are using their stores as fulfillment points, particularly as customers demand faster delivery options. A BRP Consulting survey sponsored by Manhattan Associates found that shoppers aged 18 to 37 are 77 percent more likely to choose a retailer if it offers same-day delivery. Using stores as distribution hubs offers the advantage of potentially closer proximity to a customer’s delivery location to help the retailer meet a request for faster delivery, like same-day pickup or ship to home. Also, Cap Gemini found that for same-day delivery, last-mile delivery costs from a store are 16 percent lower than delivery from a distribution center. Stores look more attractive as a primary fulfillment option every day.

Square Peg in a Round Hole

Store fulfillment offers a significant business opportunity for retailers to exceed customer expectations for fast delivery and build loyalty. But transforming stores into reliable fulfillment operations is a challenge. Stores are not warehouses constructed and optimized to manage perfect inventory or ensure customer delivery commitments are always met. They are first and foremost centers of commerce designed to manage customer interactions, not manage orders. Moreover, there is large number of stores, each with their own operational nuances, to bring together into an accurate global view of available inventory for fulfillment.

However, here we are, trying to fit a square peg in a round hole by transforming the store into a mini-distribution center. Is it possible to make this transformation work and ensure stores can fulfill customer promises, and do so profitability? Absolutely. But it takes some steps to get there, including improving store inventory accuracy, equipping store teams to efficiently and effectively manage fulfillment and optimizing how and when stores are used for fulfillment to maximize customer value and omnichannel profitability.

Let’s first look at the foundational steps a retailer should take to transform its store network into a viable and reliable part of its overall omnichannel experience: integrating stores into global inventory visibility and availability.

It Starts with Visibility

When online orders were fulfilled from a few warehouses, a retailer could trust the inventory accuracy, and it was a pretty simple decision of which facility to select for sourcing. Fulfillment decisions involved selecting the facility that: 1) had available stock, 2) was the closest geographically to the recipient and 3) had the cheapest parcel shipping agreement for the route needed. As online selling has become more commonplace, retailers have adjusted inventory and order fulfillment processes to include real-time capabilities, including selling and fulfilling against inbound inventory or inventory located at third-party drop shippers.

Global inventory visibility powers these business capabilities, providing a critical level of inventory information that is the foundation of omnichannel retail. Think of it as knowing where everything is, all of the time. Retailers, as well as distributors and manufacturers, have been talking about a global enterprise visibility picture for a long time. Consistent inventory visibility becomes a significant business need – and challenge – when retailers begin to expand the number of fulfillment nodes available in their network – like stores.

As retailers enable dozens to hundreds of stores to become points of fulfillment, the complexity involved in achieving global inventory grows exponentially. These stores, along with warehouses or third-party drop shippers, must become part of a seamless view of the global inventory network. An omnichannel order management system (OMS) with enterprise inventory capabilities, like Manhattan Order Management, can provide a complete and real-time view of perpetual inventory across any and every fulfillment location in the enterprise, including stores, in-transit, on-order and third-party owned/fulfilled inventory. Using open APIs to synchronize inventory positions across a retailer’s network and external applications in real time, an omnichannel order management system achieves the global view of inventory a retailer needs to power omnichannel commerce. With complete inventory information made available to any sales channels, retailers can confidently offer customers the ability to order products for store pickup or same-day delivery.

Enhancing Visibility with True Availability

If the first level of inventory maturity for an omnichannel retailer is global inventory visibility, the second is constrained inventory availability. While a retailer cannot sell what it cannot see, a retailer may not always sell everything online that can be seen. Let’s consider a typical complexity that store inventory and fulfillment introduce.

Suppose a retailer has a customer buying online, and he is shopping for a medium, navy blue, crew neck sweater. Let’s suppose he needs gift wrapping and needs to get the item within one day for a party tomorrow evening. He has constraints that need to be applied to the retailer’s global inventory to ensure the retailer does not promise the customer something that cannot be delivered. The retailer would not want to show this customer every single blue sweater in the retailer’s network. Customer frustration and a lost sale would likely occur if he went to pick up his order from a store that showed the item available, but that could not be picked and staged for pickup, including gift wrapping, in time for his party. The retailer’s view of global inventory needs to be smarter.

To enable accurate online ordering, a retailer’s ecommerce solution needs a view of global inventory that is filtered or constrained by configurable business requirements. While the above example is fairly simplistic, there could be many of these views configured and dynamically delivered to the appropriate channel based on customer need, such as an overnight delivery requirement, or a network impact, such as reduced store labor capacity.

True inventory availability is achievable with order management systems that provide advanced constraint-based capabilities, like Manhattan’s Available to Commerce. Available to Commerce (ATC) within an order management system enables business users to catalog and manage inventory separately for each brand, location, product, or channel, by creating rules in accordance with the business goals per delineation. Retailers can use this capability to create constraints on the 'views' of inventory provided to web stores, marketplaces, point of sale, etc. Once availability is calculated, organizations may configure basic or advanced alerting (by product, product category, channel) and manifest the same inventory differently for the different user profiles.

Omnichannel Inevitability

For most modern retailers, the need to move to an omnichannel operations model is a given to compete for the connected consumer. The enablement of the store network as a distribution point for inventory should be an advantage against online competitors that have no physical footprint. However, that advantage can only be gained with the right infrastructure to present accurate inventory availability to any sales channel, at any time. Learn more about how the Order Management capabilities of Manhattan Active™ Omni deliver the infrastructure to capitalize on the immense opportunity of omnichannel commerce.

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