The world has changed in the past five to ten years, and no industry is more indicative of that change than retail. Forbes is reporting that 98% of consumers believe that purchases, deliveries and returns should be easily available across multiple channels. According to Aberdeen, companies with omnichannel engagement strategies retain 89% of their customers compared to 33% for those with weak omnichannel engagement.
Raghav Sibal, Manhattan Associates’ Managing Director for Australia and New Zealand, looks at the three levels of inventory insight that retailers need in order to gain omnichannel profitability.
Adapting to an omnichannel environment
For most modern retailers, the need to move to an omnichannel operations model is a given in order to compete for the connected consumer. The enablement of the store network as distribution points for inventory should be an advantage against online competitors that have no physical footprint. However, without investment in systems designed for omnichannel from the start, those stores begin to drag margins down instead of raising them up, because of all the appeasements and workarounds required to deliver on the customer promise.
Back when online orders were fulfilled from a warehouse or three, and you trusted the inventory accuracy, it was a simple decision as to which facility to source from. You selected the facility that 1) has available stock, 2) is the closest geographically to the recipient, and 3) the facility with the cheapest parcel agreement for the route needed. As online selling became more complex and inventory levels became more ‘real-time’, advancements like selling against inbound inventory or inventory located at third-party drop-shippers became more commonplace.
Global inventory visibility
These capabilities require global inventory visibility, the first level of inventory for a modern retailer. Retailers, distributors and manufacturers have been talking about a global enterprise visibility picture for a long time, and it is the most basic capability retailers need to enable omnichannel operations – but consistent inventory accuracy is a major concern when retailers begin to expand the number of ship nodes available in their network.
When we enable the store to become a point for pickup or shipping, new kinds of constraints come into play. Since stores are not just fulfilling digital orders but are also filling on-demand requests from in-store shoppers, we have to consider that demand when sourcing inventory from that store for other channels or stores.
Constrained inventory availability
If the first stage of maturity for an omnichannel retailer is global inventory visibility, the second is constrained inventory availability. Because while you cannot sell what you cannot see, you should not always sell everything you can see.
It is instead necessary to provide a ‘view’ of our global inventory that is filtered, or constrained, by the other requirements in real time to the commerce engine. There could be many of these ‘views’ created and dynamically delivered to the appropriate channel based on customer need, such as an overnight delivery requirement, or a network impact, such as reduced store labour capacity.
But while a view of inventory corrected for needs and capabilities certainly helps with the commitment to the customer and fulfilling that promise, they do not, necessarily help us determine the most profitable way to deliver on that promise.
Real-time inventory sourcing optimisation
The third phase of inventory maturity for our omnichannel retailer is, perhaps, the most crucial – real-time inventory sourcing optimisation. It is important to offer omnichannel services to our customers in order to compete but being able to deliver omnichannel profitably is needed to survive.
There is no way for a human to consider the number of constraints required today to determine the most profitable way to source an item, when hundreds of options are available and many of them are active stores serving a local market. Even after limiting the viewable inventory available to meet the needs of the customer, there may still be dozens or hundreds of options that could meet the customer promise of configuration and delivery or pickup time. Heuristic computer problem-solving creates the opportunity to consider thousands of potential options in real-time to determine the most profitable option. Real-time sourcing optimisation is fast becoming critical for omnichannel merchants who are trying to maximise their margins and deliver on their customer promises.
Manhattan Associates has launched an Adaptive Network Fulfilment (ANF) ROI calculator. The ROI calculator will assist Australian and New Zealand retailers to measure how optimising fulfilment, delivery and store use can help their business maximise margins and profitability in the digital commerce marketplace. To access the omnichannel fulfilment ROI calculator, please click here.