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COVID-19 isn’t the world’s first global pandemic, and it certainly won’t be the last unpredictable disruption to life (and business) as we know it. Be it a pandemic, economic event, political upheaval, or change in consumer behavior, companies need to be able to respond to changing market conditions quickly and flexibly. When COVID-19 brought more and more shoppers online, for example, retailers saw a huge increase in demand for fast and affordable delivery options.
So how do you prepare for the unexpected?
Having flexible, omnichannel order fulfillment options at the outset allows companies to adapt quickly and sets them up for success, even in the most challenging market conditions.
3 key advantages of omnichannel order fulfillment
- Increase delivery speed
- Reduce delivery costs
- Ship globally, not just locally
Increase delivery speed
Distance is key to fast delivery, and presents unique challenges.
Companies who can ship products from a location nearest the customer will secure an advantage when it comes to speed.
For those who have more than one nearby location that could process the customer’s order, you may also want to factor in labor availability based on the number of ‘open’ orders that still need to be picked and packed.
Also consider that the closest location may be a 3PL (third party logistics) or Drop Ship Vendor (DSV). In this case you’ll need to think about whether you want to prioritize a 3PL over your store network, or a store over a DSV.
For enterprises that have invested in modern distributed order management, designed to adapt and scale rapidly, these calculations can be made quickly and easily, without sacrificing profitability.
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Reduce delivery costs
Often the best way to reduce delivery costs is to ship from the closest in-stock location to the customer, and while this is a good approach, there are other factors to consider.
What if the closest location is a store, but there is also a distribution centre (DC) nearby? Given that DC fulfillment is more efficient, you’ll want to make sure you can easily ship from the DC over the store if the two in-stock locations are within a similar distance from the customer.
But what if there is a closer location that’s expecting a new shipment of inventory that will arrive in time to meet the customer’s expectations? Then you’ll want to source the order from a location based on future stock availability.
You should also consider how busy the store is. If the closest store has a great sell-through rate but the second closest one has poor foot traffic, it might be better to dispatch from the second closest store so the lesser performing store can still sell their stock and the well performing store doesn’t run out.
Other factors include split shipments. While they can help get items to a customer faster, and eliminate the need for order consolidation, they’re still not great for margins as you’re paying to deliver twice. It also isn’t good for the environment. So, it’s important to balance speed and profitability by using rules to minimize split shipments, and/or set a minimum order value for split shipments.
Finally, if you have special, pre-negotiated contract rates with carriers for certain types of items (like oversized, bulky, or high-volume items), you’ll want to specify rules for which carrier can be used for shipping which items.
In this case, the most cost effective delivery method may be to split an order so a lightweight item is shipped via standard carrier, and the bulky item is shipped via special carrier. And ideally, you would try to group customers in a similar area and deliver all their orders on the same day.
The key to smart, omnichannel order fulfillment is to figure out the most efficient combination of all the factors.
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Ship globally, not just locally
When enterprises first start to ship globally, they typically ship all orders from their home country. But as businesses expand, that can change.
There are two approaches to global sourcing:
- In-country business unit autonomy: Here, you source all orders from a location in the same country in which the order was placed. This allows in-country business units to customize sourcing rules and fulfillment logic based on local consumer preferences and provide a differentiated experience that can give them a competitive advantage.
- Global expansion or business continuity using regional fulfillment hubs: This involves setting up a fulfillment hub in key geographic regions, and sourcing orders from the hub closest to where they are was placed. As new markets are entered, the regional hub can be used to fulfill orders from the new country until a local presence is established, at which point, you might want to ship from an in-country store to reduce costs and speed delivery. This approach lets you test demand in a new market before setting up a distribution network.
Regional fulfillment hubs can also be used to ensure business continuity. Since all hubs are set up to support international shipments, if one closes, perhaps due to a power outage, orders can be automatically sourced from the next closest hub.
The downside to this approach is the increased delivery time and complexity associated with customs processing and cross-border returns. In-country business unit autonomy eliminates the need for cross-border shipping and returns, simplifying operations and providing faster delivery, but with a bit less flexibility.
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Find a system that fits your business
Every enterprise is unique and the factors you need to consider depend on your customers, margins, and products. There is no one size fits all approach to speeding up delivery without compromising on profitability. To do this successfully you need a highly flexible, agile omnichannel order fulfillment system.
Embedded in a composable, headless architecture, you truly get the best of both worlds: the customization of an “in-house build” and the reliability, adaptability and innovation of best of breed software solutions. It allows you to calculate multiple variables quickly and apply the best strategy to every order.
That way you can continue to provide a great customer experience, whilst being able to respond to supply chain impacts and changing market conditions.
