The challenges related to multichannel fulfillment forces all enterprise firms to minimize their fulfillment cost, maximize their inventory accuracy, and improve their customer experiences.
A major retail chain in North America that specializes in counterculture-related items, ranging from explicit clothing to costumes, has experienced this exact issue. This retailer also has another business line catered towards the plus size clothing market. They both share the same IT systems, warehouses, and resources across their business lines.
A contract was awarded to Itorizon to be their system integrator, and support their Supply Chain solutions ecosystems: Warehouse Management, Distributed Order Management, Parcel Solutions, Track & Trace Solutions, Material Handling Systems, and assisting them on their ongoing supply chain improvement projects.
Distributed Order Management played a critical role in multichannel fulfillment challenges. A system integrator with a comprehensive knowledge of end to end business models, insight into other business’ brand lines, retail supply chain experience, and (Manhattan) Distributed Order Management Solution expertise was essential to this retailer’s success.
As a first step, we discounted heavy foot traffic stores from our fulfillment rules. The configuration of Distributed Order Management works by considering the stores that have relatively less in-person sales and using them for fulfillment. This proposal keeps store associates busy and avoids store closings.
Allocation rules inside the Distributed Order Management Application were reoptimized to include the Geo-band and store capacity constraints on top of the store inventory validations.
Furthermore, “ship to store” offers were enabled for stores that have lower sales volumes or foot traffic. This move boosted the retailers’ sales volume and reduced shelf costs. This method also contributed to new customer acquisition and additional sales.
Upon an initial study of the problem statement, the team quickly improvised an idea to analyze the store’s sales volume and capacities to store Geo-bands. By adjusting the store’s inventory according to the volume, The ITOrizon team came up with a multi-phase plan to improve the store’s throughput.
Business Requirements: Reducing Fulfillment Cost
Exceeding customer experience comes with a price and is challenging to achieve. To improve customer satisfaction, retailers often offer free shipping, same-day delivery, Buy Online Pick- Up In-store (BOPIS), and the list goes on. If we fail to address this the right way, the cost gets displaced from one component to another.
Distributed Order Management (DOM) offers a variety of features, and one element is “Split Shipment.” The retailer attitude towards fulfillment is “Save the Sale.” Their approach to split Shipment decision is also the same. Fulfillment cost goes hand in hand with allocation logic. All-inclusive allocation logic should consider inventory availability from the closest fulfillment centers (DCs), store fulfillment opportunities, and shipping costs. The handling/processing cost of the warehouse where the labor charges are low is crucial to this process.
A closer look at the order consumption pattern revealed that the retailer was undertaking all these orders in the name of the “Save the Sale” mantra.
We reconfigured the Distributed Order Management routing and allocation logic to keep the actual inventory, preorders, drop shipments, returns, in-transit, and inventory across their network.
Defining inventory thresholds by each marketplace reduced the risks of cuts and cancels. These thresholds were configured in a DOM based on historical sales volume, pricing strategy, and channel priority. This move gave the retailer control over its inventory visibility.
Scrutinizing unallocated order, partially allocated order, and partially released order scenarios were essential to understanding the root cause of this issue — circumstances like these created inventory inconsistencies and impacted inventory accuracy.
ITOrizon balanced application features and operational changes as a means to deliver on the retailer’s multichannel fulfillment requirement, and it impacted revenue and customer satisfaction positively.
Without a doubt, real-time inventory visibility and inventory accuracy are the two main hurdles. Retailers often overpromise or undersell situations when directly asked by a customer.
Taking sales post inputs, historical sales volumes, sale patterns, fulfillment patterns, and fulfillment costs into account for future forecasting, inventory allocation, and allocation strategy is vital to improving inventory accuracy.
ITOrizon is a Global Services Company that combines industry experience with technical innovation to enable our clients to achieve their Omni Channel, Digital Business, and IT Objectives. We have an exceptional understanding of both supply chain and technology challenges, and we carry great pride in resolving those problems in the right place with the right tools.
Click here to view a related article about ITOrizon’s Supply Chain Programs’ Success Story.
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