3PF Centers are Driving Logistics and Supply Chain Efficiency-Is Yours?

Published : October 22, 2014

fulfillment-channelsDuring the Council of Supply Chain Management Professionals (CSCMP) 2014 Global Conference, held several weeks ago in San Antonio, Texas, Chris Cunnane— a senior analyst with the ARC Advisory Group— shared findings from an omni-channel fulfillment survey that he conducted with Clint Reiser, James Cooke and DC Velocity. The goal of the survey was to determine how best companies drive their logistics and supply chain efficiency. And how they could go about creating a better overall brand experience for customers who engage across a variety of channels. We'll share with you here some of the insights they reported, but first we should probably lay some groundwork.

Just what does fulfillment for a multi-channel organization entail?

As Cunnane noted, the challenge to any organization that banks on a multi-channel sales strategy is trying to unify brand messaging. Each channel brings a unique experience to the consumer, so developing and implementing a strategy that integrates them all and plays to their complementary strengths can be tough.

“A lot of retailers think that the customer wants to replicate a single experience from one channel to the next channel. That's really not a possibility. Each channel is its own interaction point. It's its own opportunity to sell. And it's not about replicating that experience,” Cunnane said.

"What the customer is really looking for is a more of a brand experience."

To provide that total brand experience, the various components of an organization's logistics and supply chain, as well as its marketing, sales, operations and communications teams, must all be working in synch toward developing and presenting a common core message. And the retailer itself must be able to deliver: whenever, wherever, however.

Yes, but don't we all expect e-commerce to eventually win out and become the channel?

While it's true that e-commerce sales continue to soar and sales at traditional brick-and-mortar stores continue to fall— at least for mid-sized to large chain retailers— there is a general sense in the industry that storefronts aren't licked yet. They may just be evolving into something else.

According to Reiser, consumers are increasingly using storefronts as points for time-sensitive customer service contact— essentially, as a 4-D call center. Many consumers order several items online from a retailer's e-commerce portal, try them out, then keep one and return the others at the retailer's traditional store. From the consumer's perspective, this eliminates the hassle of shipping and handling on returns— many consumers are comfortable receiving goods at home, but aren't quite savvy about shipping back out.

Consumers also seem to use stores as pick-up points for last-minute or hurry-up purchases. Retailers can benefit from this by keeping stock at store locations and having it ready to go when harried shoppers come rushing in the door to pick up their items. But an under-realized and potentially lucrative method for increasing marginal sales revenue, Reiser said, is in the ability of store-based associates to cross-sell or up-sell items to consumers when they pick up net purchases or return unneeded items.

So retailing is becoming… more people-oriented?

Precisely.

Consumers don’t just want low prices, many choices and convenience— they also want to deal with real people. In a sense, people still want a middle man, but thy want that middle man on their terms. The implication is that retailers who forego fielding traditional storefronts do so at the peril of their brand.

For a company moving toward integrated service, this is a particularly interesting concept. The shipping and call center portions of the fulfillment chain can easily be outsourced and handled by a third-party (3PF) provider, resulting in significant cost savings, while the traditional storefront presence can serve to augment the brand's presence and serve the human-to-human contact point that so many consumers continue to value.

We’re moving closer, but we’re not there yet.

According to Reiser, there are still obstacles to the all-encompassing fulfillment experience.

For one, in-store employees need to be well-trained in identifying and taking advantage of opportunities to cross-sell when they encounter customers who are picking up e-commerce orders. Failing to do so can result in a significant loss of "cheese" revenue: accessories, complementary items, batteries, extended warranties and other boosters. Although it is more expensive to fulfill e-commerce orders from the store, implementation of effective cross-sales techniques should more than offset the expenditure.

Moreover, although Reiser didn't say so, failing to train in-store associates in friendly service and cross-selling techniques could result in a lost opportunity for branding reinforcement. If in-store associates are timid or just going through the motions of picking and fulfilling an e-commerce order, or of processing returns, the customer will be put off.

Another barrier to effective omni-channel fulfillment is lack of fluid communication and real-time inventory management across channels. If you are still tracking inventory on paper in the store, but you're tracking via database for e-commerce sales, you're risking needless picking errors and delays. Again, this is an area in which retailers can truly benefit from outsourcing back-chain operations to a third-party fulfillment provider that specializes in multi-channel solutions.

It's all about doing what you can to support the brand to drive logistics and supply chain efficiency.

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Topics: Supply Chain Logistics

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