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What is Omnichannel Fulfillment?
Omnichannel fulfillment or omnichannel strategy or omnichannel order fulfillment is a new way of selling in online marketplaces as well as in physical stores. The omnichannel process is the combination of activities where orders are sorted, packed, labeled, and shipped from a central location in a synchronized manner.
Basically, from the moment a customer has placed the order to the moment, it is being shipped, the process is covered under omnichannel fulfillment. This method makes sure that the inventory is available for all the distribution channels from one location. The distribution channels include online e-commerce stores, physical shops as well as warehouses, and order fulfillment stores. This further allows to cut down the cost of maintaining several fulfillment centers with few workforces.
With the boom of e-commerce stores during the recent past, especially with the COVID pandemic, demand for omnichannel strategy has also grown up. The US alone earned dollar billion 470 revenue in 2021 through online markets. This further confirms the growing demand for online shopping and the requirement of looking for cost-effective mechanisms by vendors.
Supply chain optimization is a key element in cost reductions and securing good profit margins while assuring the best quality services to e-buyers. The big players like Amazon, Walmart are ahead of time to serve the customers with efficient services. In order to provide convenient services and to have a competitive edge with other e-commerce players, omnichannel fulfillment would be a great opportunity to try out.
Some people tend to prefer delivery at their doorstep option while some go for buy online pick up in-store (BOPIS) or curbside pickups. These strategies not only support the customers but also the stores to avoid peak hours with crowded stores.
Omnichannel fulfillment can be arranged in the order fulfillment store, order fulfillment centers, or at warehouses. Buy online pick up in store (BOPIS) or curbside pickups could also arrange under omnichannel fulfillment.
Traditional Order Fulfillment Vs Omnichannel Fulfillment
In the traditional order fulfillment process, products go from manufacturer to distributor to retails and to the customer up to the end consumer. Customers either visit the physical store or order the products online. If procuring is done physically, customers may visit a few shops to buy varieties of products needed. To serve both channels seller has to keep stocks ready at two locations or at two distribution points as per the traditional order fulfillment method. With Omnichannel having stocks at two locations to serve two distribution channels are no longer needed.
It is essential for sellers to look for better mechanisms to optimize supply chains and focus on customer experience. The omnichannel cut down the upper stream and downstream partners between the manufacturer and the consumer. This further reduces the bulk stock levels throughout the supply chain.
If three different sellers ship the products at different times and products will be shipped individually. Sometimes the customer has to pay shipping charges separately for all three products. If the products are “On free delivery” the seller’s profit margin becomes less by spending separately for shipping.
Imagine, once you order three products from three different stores, the seller sends the product to a fulfillment center or a warehouse. A team at the fulfillment center console three products from different sellers to the customer into a single packing. And arrange the shipping for one parcel. Earlier the three products reach the customer as three shipments.
With the omnichannel fulfillment concept, it is easy to promote cross-docking strategies to smooth the product flow. So the three products reach the customer as a single product. This reduces shipping charges for all three sellers or from the customer’s side. At the same time, the supply chain of the items is optimized by removing repetitive actions like packing, labeling, shipping. Here the product may send by the retailer or by the manufacturer itself.
Having a central location for product consolidation and distribution from their onwards or an omnichannel customer’s order could be fulfilled from a central point. So the products will be delivered by the seller to the closest location to the customer where omnichannel is managed.
Retailers can automate the rightful omnichannel fulfillment method to speed up the process. For a successful fulfillment method, a reliable warehouse management system is a must. The use of technology could supports in reducing the inventory levels, provide transparency of the channel leading to improved profit margins.
Free shipping was a key point to have a competitive edge until the recent past. The speed of delivery has overpassed the free shipping and becomes an important element in competition. This could be further supported by automated inventory management and warehousing systems.
Omnichannel Order Fulfillment Methods
In-store purchase, home delivery
This is where customers prefer to sit comfortably on a chair and procure online. And they expect the store to deliver the ordered products to the doorstep.
Click and collect (Buy online, pickup in-store)
Some customers do not want to stand in a queue to select goods. They prefer to order them online. But prefers to collect them from the store at a convenient time. For example, you can order the home necessities during your lunch break and collect them in the evening on the way home.
Buy online, dropshipping
Dropshipping is another popular e-commerce method in procurement. Drop shop vendors get the support of an order fulfilling team to ship out customers’ orders.
Order online/return to store
Here customer has the ability to procure products online. Thus, if they prefer to return the products, customer has to physically visit the store and return the goods.
Why Omnichannel Fulfillment is Important?
The omnichannel order fulfillment method cut down the intermediary parties of order fulfillment. This reduces the echelon inventory levels reducing the cost of holding and maintaining inventory.
Having multiple distribution channels and having a presence in different marketplaces is a good branding technique for the company. Further, the customer becomes confident to buy from a shop when a company has a strong presence in different channels meeting the customer’s requirements.
Since the different channels increase the customer base, the overall profit of the company increases. Further omnichannel makes sure the vendor has one central distribution center rather than having a few centers to serve different channels. This helps in cutting down costs of maintaining few distribution locations and a big workforce.
The customer receives the ordered items faster if the distribution location is closer to the customer under omnichannel fulfillment. Further, buy online pick up in-store (BOPIS) or curbside pickups could be arranged as same day delivery which increases customer satisfaction.