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Is a change in logistics needed to support an omnichannel strategy?

Having a game plan with alternatives and costs already known will allow you to influence a customer's omnichannel strategy to your advantage.

First, an omnichannel strategy is not a new issue for manufacturers. By whatever name they call it, manufacturers...

have direct sales, resellers, distributors, channel and customer sales, catalogues, trade shows, e-commerce sales, as well as servicing customers through call centers, service network partnerships and customer Web self-service. All these options have been deployed over the past few decades. In addition, sales staffs are armed with mobile devices that allow them to drill into the heart of the process to configure, order and check status.

Second, the manufacturer most often is the supplier. So the customer -- the OEM or retailer -- may have an omnichannel strategy that leans heavily on the manufacturer's logistics processes to be successful.

So what does this mean for the manufacturer's logistics strategy? Let's look at a few key issues:

Offshore might have to come inshore

For an omnichannel strategy, slow and steady may no longer do. The very nature of an omnichannel strategy is spontaneity -- demand volatility -- due to the diversity of selling channels. Rapid fulfillment may require establishing manufacturing back in the local market. Not a strange idea, because in decades past the major reason for international manufacturing was to have a presence in the customer's market.

Third-party warehouse strategies

We don't want to build more warehouses or maintain more inventory, but we need to be closer to customers to respond to more dynamic and unpredictable demand patterns. A variety of warehouse options use the space of the parcel carrier -- even  the post office is getting into this -- to support same- or next-day deliveries. Or, you may partner with affiliates in your market -- eBay, Amazon or Sears -- as   well as utilizing third-party logistics.

Visibility

Visibility is not stale EDI signals, but real-time asset and inventory locating, aligned to specific business processes. Here we want to know: Where in the world is the product? How much is in stock?  Where is the best location to support current demand

In essence, this means systems-wide inventory management capabilities. Many manufacturers also keep track of inventory within the channel because they can buy back or cross-sell through another channel if one is performing better than another. Users are not used to this type of real-time integration, yet they are used to making phone calls and probing systems for more information about shipments. So it will be a change in work style.

Item-level logistics

Most manufacturers think in terms of volume shipping -- case and pallets. But an omnichannel strategy is diverse -- most often one-each shipments. As demand forecasts change or orders come in, deliveries may be redirected to other destinations. This is a new flexibility -- proactive versus reactive -- and will take time to learn.

Consumer direct

For some manufacturers this is a new approach -- a different model that affects the whole organization. Home Delivery systems, processes and staffing will take investment and some new logistics software, as well.

IT Systems

Supply chain needs to be thought about today in the cloud. Logistics is an inter-enterprise, multisite, multidata protocol environment. The cloud enables multiparty integration to handle diverse fulfillment options as well as meet specific customer routing or carrier's instructions. Many excellent logistics system exist in the cloud to provide inventory status, visibility into assets and shipments in motion, as well as collaborative supplier management.

Many major firms have realized that their ERP systems, although good for company financials, does not deal with the multi-multi world of logistics. The supply chain data model housed in the logistics systems, especially with the addition of Internet of Things data, is evolving too quickly for most ERP systems to keep up. And all those mutipartner communications need to be translated and acted upon quickly. Examples of companies that offer such systems are GT Nexus, Descartes Systems, JDA, Logility,  e2open,  NTE, HighJump and MercuryGate.  

As your major customers start moving to an omnichannel strategy they will seek methods and partners who can make the transition with them. So being ready, at least with ideas, a strategy, or an infrastructure in place may present some important new opportunities to enhance the relationship with your OEM or retailer.

Having a game plan where the alternatives and costs are already understood will allow you to influence a customer's game plan to your advantage instead of being burdened with a less than optimal approach dictated by your customer.

Next Steps

Learn the logistics execution process

How to select SCM logistics software

This was last published in July 2015

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