As consumers get used to the idea of arranging for same-day delivery of our online orders, more and more retailers and their suppliers are scrambling to upgrade their ability to fulfill that promise. But they’re learning that it’s dangerous to make service promises on the customer-facing side if their logistics service side still hasn’t caught up.
That realization is probably why the global market for Warehouse Management Systems (WMS) grew by 8 percent in 2012, according to the latest research from ARC Advisory Group. Companies are quickly replacing their old legacy systems to bring them into the omni-channel fulfillment world. WMS replacement is responsible for much of the recent growth in this mature technology.
“Omni-channel retailers are integrating brick and mortar and e-commerce distribution channels,” says Clint Reiser, enterprise software analyst and the principal author of ARC’s “Warehouse Management Systems Global Market Research Study.” “Traditional warehouses are being outfitted with WMS functionality to support the individual item handling requirements of e-commerce fulfillment.”
But it will take more than just WMS upgrades to make retailers and manufacturers omni-channel ready. This was a major topic of conversation during a recent gathering of MH&L’s editorial advisory board. Our roundtable report will be coming out in the September edition, but I thought I’d give you a sneak-peek, since one portion of our discussion offers a bit more on what it will take to make omni-channel well-received by consumers.
Tan Miller, director of the global supply chain management program at Rider University, noted the need for better physical as well as data warehouses, using his own experience working for major manufacturers as an example.
“In one company I worked for, we figured out that in the interface between the ERP system and the data warehouses there were issues in terms of the configuration,” he said. “We were losing one half of one percent on our fill rate per year. We were back ordering some customer orders where, in fact, the inventory was available but not reserved. It was sitting in a warehouse. So you still need to get back to the fundamentals. There tends to be underinvestment in data warehousing.”
Joe Andraski, founder of Collaborative Energizer LLC and formerly with the GS1 standards making body for automatic data collection, noted that wider adoption of radio frequency identification (RFID) technology, along with information system upgrades, would go a long way toward improving the quality of data stored in those data warehouses.
“A major retailer took to their board of directors an investment proposal for a substantial hundred million dollars in RFID technology,” Andraski said, further explaining how that investment was justified. “When you take inventory today with bar codes, it has to be line of sight. You have got to shoot it from 9 inches away. With RFID, it was done in less than two minutes, just walking around, and it was done and accurate.”
John Hill, director at the St. Onge Co. supply chain consulting firm, noted that standards development and technology advancement have gone hand in hand in getting us to the point where retailers and manufacturers can now work on their omni-channel business models together.
“Given agreement on standards for the format and content of messages for trading partner dialogue, those standards have and will continue to trigger further refinement and new development of tools and systems used to support them,” he said. “And the cloud platform further opens the door for use of EDI messaging by a much broader number of companies, particularly those who simply could not afford to invest in the necessary IT infrastructure.”
To close the loop on that inter-partner messaging Mr. Hill mentioned, I talked to Rick Chavie, vice president of Omni-Channel Commerce for hybris—an e-commerce software company that was just acquired by the ERP giant, SAP. Chavie added to this discussion the importance of giving consumers control of that last phase of the same-day delivery process: appointments.
“The routing of trucks to consumer locations must be improved,” he said. “That 4 or 8 hour window won’t be acceptable anymore. Order orchestration will help the shipper navigate the exact timing and routing of his or her order. Optimization of routing will be tied into real time traffic monitoring. Amazon will be focused on making that work well, so every retailer will want to go down that path.”
That path has a signpost labeled “personalized logistics.”