Omnichannel distribution is a multichannel approach some companies use to give customers a way to purchase and receive orders from several sales channels with one-touch seamless integration. The goal of an omnichannel logistics strategy is to reduce costs, improve transit times, and ensure the customer gets a great experience from click to arrival.
It’s important for brands looking to outsource logistics to assess the omnichannel distribution capabilities of their potential third-party logistics (3PL) partner. Implementing an omnichannel distribution strategy often leads to revenue growth as customers are likely to spend more online than in brick-and-mortar stores.
What is Omnichannel Fulfillment?
Meaning “all channels”, omnichannel fulfillment is a strategy that handles all inventory, going to many different places, from one location or supplier (like a 3PL). With omnichannel fulfillment, your 3PL manages your entire inventory, optimizing their operations for picking, packing, and shipping to whatever channel your product will go to next. Products are pulled from the same inventory pool, which can be distributed among your 3PLs fulfillment centers, and prepared for shipping.
The following 5 tips will help you maximize efficiency in your omnichannel fulfillment strategy.
Maintain Visibility of All Your Inventory
Knowing where your products are is a critical requirement for omnichannel distribution. You need real-time visibility to all your SKUs, whether they are located in a fulfillment center or at a store, to make decisions on where to place inventory and the best location to fulfill specific orders. If you plan to use a 3PL, make sure you test out their inventory management system (IMS) to ensure that you have the necessary visibility—it’s important that it’s easy for your team to use as well. It is also important to understand the frequency with which the IMS is updated.
Choose a 3PL That can Offer Flexibility and Scalability
Some 3PLs are very good at regular, predictable fulfillment volumes, but have a tough time managing unanticipated volume spikes without a significant increase in time and costs. They may not have a good solution for temporary labor, or perhaps their systems aren’t up to the task of managing these spikes.
In omnichannel distribution, you need to be ready for these spikes, be they seasonal, due to special promotions, or increased marketing in relation to your products. Discuss this key requirement with your 3PL until you have a comfort level with their process and capabilities to efficiently handle large volume swings. When demand requires expansion beyond the current footprint, can your 3PL scale with you and offer additional locations? This has become more important as brands needs to meet a two-day shipping promise.
Make Sure Your 3PL Provides an Efficient Picking Operation
Particularly for labor intensive pick and pack operations, you want to minimize labor costs. That requires a smart warehouse management system (WMS), and not all fulfillment companies have made this investment. Any WMS that you evaluate should be able to perform the following tasks:
- Analyze and combine similar orders on the same pick cart to reduce travel time. Direct labor costs are about 35–40 percent of total operational expense, so excellent picker productivity is a real profit driver.
- Automatically choose the right carton size to minimize shipping costs. This saves time involved in determining the right box to use. But more importantly, the system minimizes dim weight charges from carriers that kick in when shipping box sizes are larger than needed.
- Scan products as they are picked to reduce costs and improve accuracy. Make sure your fulfillment partners have this capability or you’ll pay the price in higher error rates and increased costs to fix picking errors.
In 2022 DIMs are becoming a major factor in overall shipping costs. The larger carriers established DIM weights in 2015, but many smaller carriers and regional carriers are now introducing DIM weights to remain competitive.
As shipping volumes continue to increase at an historic rate, carriers are looking for ways to maximize the space on their trucks, planes, and shipping containers. One way they are doing this is by establishing DIM weights where they didn’t exist before.
This is having a major impact on the cost of shipping a product and may require shippers to re-strategize the types of shipping boxes and product packaging they use.
Pre-Kit Orders Involving Multiple SKUs
In B2C fulfillment, often the same SKUs are ordered at the same time. A smart WMS system will flag these common orders, allowing you to pre-build most of the order in a very efficient manner. For instance, let’s say two products are always ordered together, along with another SKU. Rather than picking three items for every order, you can pre-pick and box the two popular SKUs so you are only doing one pick to complete the order. The pre-kitting process is done in volume, so you’re picking full pallets and pre-building the orders as your associates have the time.
Choose the Right 3PL Partner
Omnichannel distribution requires a flexible 3PL equally capable of managing bulk distribution for B2B fulfillment as well as the pick and pack operations for B2C fulfillment. The processes used for bulk versus direct-to-consumer are very different. Beware of 3PLs that lack the experience you need in B2C fulfillment. Tour each 3PLs fulfillment center before signing, and ask them to show you their operations as they relate to a client whose needs and volumes are similar to your own. That way you’ll get a sense of how your account might be managed.
“It’s hard to find 3PLs that have a deep expertise in dealing with Amazon, and all of the dot.coms, as well as dealing with brick-and-mortar. We feel like we really have a partner because DCL has that deep experience. DCL has a reputation for being very technology forward, helping companies drive from an omnichannel perspective for their business, not just traditional brick-and-mortar.”
If you are a growing ecommerce company, and are overwhelmed by the number of sales channels you deliver to, an omnichannel strategy is a great option. By partnering with an experienced 3PL you will have access to multiple fulfillment centers and relationships with major shipping carriers. Your 3PL can help get your products, whether B2B or B2C, into your customers hands faster and at a lower cost than fulfilling them yourself.
If you are looking for omnichannel fulfillment we would love to hear from you. Send us a note to connect about how we can help your company grow. You can read DCL’s list of services to learn more, or check out the many companies we work with to ensure great logistics support.