Sep 27, 2022 13 Min READ

Definitive Guide to Building an Omnichannel Fulfillment Strategy

13 Min READ
Definitive Guide to Building an Omnichannel Fulfillment Strategy

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Omnichannel fulfillment is a new frontier for the ecommerce warehousing and fulfillment industry. It's become a driving force that creates a seamless experience across every channel while paving the way for growth and greater profitability.

An effective omnichannel fulfillment strategy helps ensure ample inventory is accessible across all channels. It covers order placement to final delivery and everything in between.

In the last couple of years, the need for omnichannel fulfillment has never been greater due to the accelerated growth of B2B and B2C ecommerce. From 2020 to 2021, ecommerce sales grew close to the $1 trillion mark, driving home the "necessity of having an omnichannel fulfillment strategy” to meet the expanding needs of retailers, logistics providers, and consumers.

In order to stay ahead of the competition, an omnichannel fulfillment strategy is no longer a luxury but requirement. The approach has proven to bring greater consumer satisfaction, which inspires ongoing loyalty with everyone involved including ecommerce retailers, and third-party logistics (3PL) warehouses. It has a direct impact on the efficiency and profitability of brands and the third-party logistics providers that strive to meet their needs.

Size doesn’t matter when it comes to the need for omnichannel fulfillment. Small businesses and large global organizations are all making the shift to ensure that they deliver the sales and revenue needed for continued scaling and success.

What is Omnichannel Fulfillment?

The term ‘omnichannel fulfillment’ has become very popular, but what does it mean? 

Omnichannel fulfillment is a strategy of having a unified approach to managing inventory and order processing from a variety of channels. Basically, it allows a 3PL warehouse to streamline the fulfillment processes and distribution of orders from multiple selling channels. The key here, however, is unified.

A successful omnichannel fulfillment strategy should allow for the same inventory, order, and return processes, regardless of channel, to help a 3PL warehouse meet the needs of their customers more efficiently.

With omnichannel fulfillment, all processes work like a well-oiled machine: seamless, effortless, and effective. The strategy relies on data to sync everything into a single source. A 3PL provider not only fulfills orders from a single store but also allocates inventory from a variety of different locations using an omnichannel fulfillment strategy. The process accounts for all products to prevent overstocking and overselling. A third-party logistics provider that is not just fulfilling orders from a single store but has launched an omnichannel fulfillment strategy allocates inventory from a variety of different stores and makes sure all of the products are accounted for to prevent overstocking and overselling.

Omnichannel fulfillment occurs at 3PL warehouses, in-store, and other locations. The goal is always to get the products into the consumers hands quickly and efficiently. Syncing data using various technologies and sources creates a single streamlined source of orders and warehouse inventory regardless of sales channel. An omnichannel fulfillment strategy effectively allocates inventory for a wide array of stores and ensures that the products aren’t under- or over-stocked.

It is critical that all data is contained and organized within a unified platform to create the inventory visibility needed to manage the ever-changing stock numbers. The right multi-channel software automates the store fulfillment process, so it becomes agile and accurate.

Is Omnichannel Fulfillment the Right Choice for Your Business?

Retail has become a competitive and crowded industry. Owners are constantly seeking ways to scale up to increase revenue. Online shoppers have become very savvy. They take the time to research, compare prices/products, and weigh shipping options. Omnichannel selling pairs with fulfillment operations and lets customers move from channel to channel to find what they are seeking. Once the consumer feels comfortable with the choice, then retailers are taking the extra steps to create a memorable experience which increases long-term sales while inspiring brand loyalty.

Third-party logistics companies that are struggling to elevate the experience of their customers and inspire loyalty need an edge over the competition. Integrating an omnichannel approach increases operational efficiency and streamlines personalized services to better meet growing requirements and demands from brands who also utilize omnichannel selling strategies.

Many leading brands have embraced the omnichannel framework to meet their burgeoning order volumes:

  • Ulta Beauty
  • PetSmart
  • Dick’s Sporting Goods
  • Nordstrom
  • DSW
  • And more

5 Big Benefits of Omnichannel Fulfillment

Below are several benefits of omnichannel fulfillment:

Improved Order Performance

Taking multiple channels and synchronizing them with a single platform simplifies all parts of the system from warehousing to packing to delivery. Cross-channel fulfillment becomes orderly and eliminates ongoing issues.

Unparalleled Accuracy

Omnichannel fulfillment provides the ability to monitor the performance of all channels for greater accuracy and to improve success. Accurate reporting offers real-time summarizing via software which lets you stay up-to-date with all channels. You can instantly evaluate your key performance indicators (KPIs) to pinpoint areas that may need improvement.

Greater Order Efficiency

The simplified process of taking your selling channels and streamlining them into a single platform creates greater cross-channel fulfillment with improved order management across all avenues. You’ll enjoy far greater consistency and efficiency.

Satisfied Customers and Consumers

At the end of the day, it’s all about ensuring customer and consumer satisfaction. Omnichannel fulfillment helps meet the needs of consumers by providing timely home-delivered goods, in-store pickup (in some cases), and more. Consumers want the best service at affordable prices. Customers want to make their brands look good and keep consumers coming back from more. Luckily, in the digital era, omnichannel fulfillment ensures that all needs are met across the board.

Greater Brand Awareness

Customers want to build their brand and improve their image. Providing access to products with in-store pickup, online store browsing, and speedy home delivery helps hone a brand into a leader. Offering omnichannel fulfillment for your customers will help them solidify their brand image as dependable and forward-thinking.

What are the Challenges of Omnichannel Fulfillment?

No process is perfect and there are hurdles when using omnichannel fulfillment.

Difficulty Maintaining Accurate Counts

When working across a multitude of channels, you’ll need to maintain an accurate inventory count, but keeping tabs isn’t always foolproof. When you sell the same product across different channels, you might end up double- or triple-counting your SKUs, but in reality, they are the same item just classified under another listing. Using a warehouse management system (WMS) that offers proficient inventory management gives real-time inventory data, so you don’t accidentally over-stock.

Using Outdated Infrastructure

Are you trying to operate with an outdated technology infrastructure? Paper-based and manual methods are time-consuming and rife with human error. You simply cannot use these processes and keep up with omnichannel fulfillment. Using tools like RFID tags and barcode scanners gives you an edge. You can clearly picture your inventory for improved reliability.

Losing Sight of the Your Inventory Status

You have to know the status of your inventory wherever it might be–in a warehouse or out for delivery. The entire process becomes extremely complicated during particularly busy times of the year such as during the holidays when 3PL warehouses are at their busiest. Navigating the complicated supply chain becomes difficult unless you partner with a warehouse management system that will assist operations.

Getting Started with Omnichannel Fulfillment

Are you wondering how to start the process of omnichannel fulfillment? When trying to figure out which omnichannel format to use, you’ll need to examine software solutions.

An order management system (OMS) tracks orders, inventory, and fulfillment. It can also make replenishment recommendations and automatically issue POs based on current sales velocity, lead times, and seasonality. It can help customize inventory so you can unify your channels throughout the fulfillment process. Coupling integrations with preferred software is a perfect starting point for your omnichannel fulfillment process.

An order management system lets you consolidate channels for a streamlined fulfillment strategy, manage inventory, automate processes, and enjoy complete visibility. Integrating an OMS with a WMS in a tech stack enables a tech-driven 3PL to help brands of all sizes provide an impressive customer experience across a multitude of channels. Using order and inventory management meets and exceeds expectations.

Extensiv 3PL Warehouse Manager Software provides the following:

  • Tracking of every item via the cloud
  • Shopping carts and API/EDI integrations to automate orders
  • Directed putaway
  • Storage of all inbound inventory
  • Scalable workflow
  • Accurate real-time information
  • Complete billing workflow services

Omnichannel Fulfillment Processes

A retailer must meet consumer demands, which are becoming increasingly complex as major online sites such as Amazon offer two-day shipping options. A third-party logistics provider is also faced with delivery to other brick-and-mortar stores and working with a variety of ecommerce businesses. All factors complete the omnichannel fulfillment process.

Greater Communication

An effective omnichannel fulfillment service provides a seamless experience throughout services and platforms which takes communication to a whole new level. Use all of the processes to your advantage.

Improved Order Processing and Confirmation

Receiving and confirming an order is a crucial step in order processing. With omnichannel, the difference is that the consumer can place an order via a mobile device, computer, phone, or other avenue, pick their shipping choice, and have the benefit of knowing when to expect a delivery. From start to finish, everything is wonderfully transparent so consumers are never left guessing or worrying if or when they will receive their item.

Warehouse Management

Warehouse management software allows you to easily process and fulfill orders in real time. The process covers 3PL fulfillment, warehouse fulfillment, and in-store fulfillment. Traditional fulfillment methods lack flexibility and efficiency.

Shipping and Last-Mile Delivery

Advanced shipping software lets customers and consumers pick the ideal shipping mode such as the following.

  • Ship from Warehouse
  • Ship from store
  • Ship to partner

Omnichannel v.s. Multichannel: What’s the Difference?

Omnichannel and multichannel sound the same and they do have some similarities, but they are different in key ways. The omnichannel commerce process is a fully integrated customer journey that focuses on all touchpoints.

A consumer uses a multitude of channels to better engage with a brand before deciding and going forward with the purchase. Omnichannel unifies the journey for the consumer. Boundaries are removed that stand between the sales and marketing channels to create a streamlined integration process.

Multichannel lets consumers purchase from a multitude of channels, but the entire journey remains segmented instead of flowing. The consumer starts and ends in the same channel even if they use several when browsing.

Examples of a multichannel experience include shopping at a business’s online or brick-and-mortar store. However, the process becomes omnichannel when both the online and brick-and-mortar stores work strategically with each other.

Let’s take a moment to closely examine how omnichannel works in stores.

When browsing at an ecommerce store online, the consumer finds a chair that they add to the shopping cart, but they leave the site before finalizing the purchase. This is known as ‘browsing online with cart abandonment.’

Once the consumer leaves the site, targeting starts with a series of ads that display the chair they abandoned. They can also be offered a coupon via Instagram, Facebook, or YouTube. The retargeting process takes place over a week. In addition, personalized emails with a coupon are also sent out. The coupon helps entice the consumer to click on the email, fill out the shipping information and decide whether or not to buy the chair on the final confirmation page.

Additional retargeting includes detecting the consumer’s address to see if it is located close to a brick-and-mortar store or showroom. If nearby, the consumer will then be sent a personalized invitation via traditional mail methods so that they have the option of viewing the chair in-person. The hope is that the consumer will visit the showroom and finalize the purchase to buy the chair.

Omnichannel fulfillment comes into play once the consumer purchases the chair, regardless of which sales channel they use in the above example. With omnichannel fulfillment, the 3PL fulfills the order regardless of sales channel and ships the item to the consumer's desired location.

Why 3PLs Need to Focus on Omnichannel Fulfillment Strategies

Consumer buying channels have evolved and expanded at a rapid rate, which is impacting logistics providers and their partners in ways not previously projected.

The COVID-19 pandemic impacted online sales, causing them to skyrocket in 2020 to an all-time high. Some projected that once the pandemic was resolved via vaccinations, etc., the numbers would fall, but that hasn’t happened. Ecommerce continues to climb. In 2021, sales reached $1.2 trillion with retailers, wholesalers, and manufacturers providing services and products online.

Online buying has become the preferred shopping method for most consumers, which is directly impacting how 3PL warehouses rise to the challenge to provide omnichannel fulfillment strategies. 3PLs have started to scramble to build fulfillment strategies to meet the demands by improving warehouse operations.

If you are a 3PL provider, then you might wonder exactly what you need to do to optimize your warehouse to offer complete omnichannel fulfillment to meet the needs of your customers. You probably also have questions about how all of the changes will impact your business growth.

With omnichannel fulfillment, a 3PL warehouse can better consolidate all fulfillment processes from multiple channels to create a unified process that also considers the inventory, ordering and turn processes with the goal of better meeting the needs of customers.

What Drives Omnichannel Growth?

3PLs who want to grow their business and better meet the expectation of consumers must implement an omnichannel fulfillment process or risk being left behind by the competition.

The 2021 3PL Warehouse Benchmark Report noted that 85% of 3PL providers experienced growth in 2021 with the highest percentages of volume growth noted in 3PLs that implemented omnichannel strategies.

A 3PL warehouse works directly with the manufacturer or consumer as their single fulfillment partner while managing multiple selling channels. The partnership usually proves valuable for everyone involved. The warehouse can pick, pack, and ship directly from the warehouse to the consumer, a store, or pickup location. The process of returning an item also flows smoothly. Consumers faced with returning can easily ship their returns directly to the warehouse.

What is Needed for a 3PL to Offer Omnichannel Fulfillment?

Your customers will depend on your 3PL to build a warehouse technology stack that offers ongoing reliability. The technology lets a 3PL process orders across numerous selling channels and the integrations spur order growth. An innovative warehouse management system (WMS) has quickly become the most widely implemented technology for 3PL usage.

Additionally, most widely adopted tech tools include mobile barcode scanning and an order management system. All of the tech advancements are focused on improving processes and providing greater visibility for the customers and consumers. 

Tips on How to Maximize 3PL Efficiency for Omnichannel Fulfillment

An effective omnichannel fulfillment strategy maximizes the efficiency of a 3PL which bolsters a brand’s reputation and ensures ongoing, loyal consumer business.

Visibility of All Inventory

As already mentioned, visibility is improved with an omnichannel process in place. You’ll know where products are at every juncture of the supply chain. Customers and consumers are never left guessing about the location of an item while in transit. There is always real-time visibility to all SKUs whether they are in the fulfillment center, store, or out for delivery. 3PL crews can rapidly make decisions on where to place inventory and which location is best to fulfill specific orders.

An order management system provides a seamless experience by tracking and monitoring orders. The entire process becomes easier for the 3PL, brand, and consumers with more intuitive inventory management. No one wants to be in the dark about valuable inventory. Lost or misplaced items can quickly lead to huge financial losses plus cause consumers to lose faith in the brand.

Nowadays, it’s common for customers to want to evaluate a 3PLs warehouse management system to ensure visibility satisfaction. It's important to make sure that the WMS is updated frequently, doesn’t lag, and continues to provide a competitive advantage to meet the needs of customers and consumers.

Flexibility and Scalability

Many 3PLs flourish at providing dependable and predictable fulfillment of regular volumes, but when the volume starts to spike, they start to fumble the job. Unanticipated volume spikes will cost a 3PL and its customers time and money. Sometimes, the 3PL simply lacks the temporary labor needed to meet the demand, or their system might not be up to the task of handling the surge.

Omnichannel distribution readies a 3PL with real-time visibility to ensure accurate availability for volume spikes whether due to the season, a special promotion, or increased/improved marketing of products.

Will the 3PL be able to scale with the needs of their customers by moving beyond their current footprint and expand to additional locations if necessary?

This is a huge question as brands have started to promise two-day shipping in an effort to remain competitive in a world where most consumers are turning to Amazon Prime to meet their shopping needs quickly and efficiently. With Extensiv Network Manager, Extensiv 3PL Warehouse Manager customers can work together to form 4PL networks for geographically distributed inventory to meet these rising customer needs.

Providing Efficient Picking Operations

Labor intensive pick and pack operations cost a 3PL a substantial amount of money due to the increased labor costs involved in the processes. Most 3PL owners are looking for ways to minimize labor costs. A WMS works efficiently with an omnichannel fulfillment strategy to provide efficient picking operations.

A smart warehouse management system has become more than a luxury but a necessity, especially when carrying out an omnichannel fulfillment strategy. Unfortunately, not all fulfillment companies have jumped into digitization, and they still cling to their traditional (outdated) manual processes which slow them down, cost them customers, and impact their bottom line. Yes, there is an initial cost involved in transitioning to a cloud-based WMS, but the benefits far outweigh the monetary investment, and a company will rapidly make the money back.

Brands that are evaluating a 3PL want to make sure that the logistics company can perform the following tasks:

  • Analyze similar orders and combine them on the pick chart to lower travel time. Picker productivity remains a huge profit driver that is more than a luxury but a necessity.
  • Automatically choose the correct carton size to lower shipping costs and save labor time. Also, it lowers dim weight charges that can occur if the box size is large.
  • Ensure all products are scanned as they are picked.

If a 3PL does not offer these basic services, it may result in a higher error rate and increased costs, which could negatively impact a brand's reputation, thus making it harder to remain competitive.

Multiple SKUs and Pre-Kitting

A WMS works well by flagging common orders so that they can be pre-built in an efficient way. An omnichannel fulfillment strategy working with an innovative WMS streamlines the entire process for greater efficiency in carrying out often complicated tasks.

With B2C, orders tend to contain the same SKUs. If two products are ordered together with another SKU, then instead of picking all three items for each order, the worker can pre-pick and box the two items with the same SKUs so that only a single pick is carried out to complete the order. The pre-kitting process is conducted in volume so the picking of full pallets and pre-building is conducted as a fluid function.

A 3PL must manage bulk distribution for B2B and pick and pack operations for B2C with an omnichannel process to remain competitive. Remember, the processes used for bulk are dramatically different from the direct-to-consumer. If the 3PL lacks experience in B2C fulfillment, then a customer will probably want to seek a different partnership with a more skilled 3PL that will better meet their needs.

How Does a WMS Fit In?

Omnichannel fulfillment is easy with sophisticated warehouse management system software. It will quickly function as the cornerstone of any 3PL warehouse and lets the entire inventory be managed from a single convenient location. The software provides integration between systems within the 3PL and the customer's systems.

Capabilities include:

  • Inventory Management: The WMS records and manages inventory by key characteristics such as quantity, serial number, expiration date, lot date, and warehouse location.
  • Order Status: The status of all orders such as when they were received, shipped, and tracking information are all displayed in real time.
  • Label generation: The creation and printing or shipping labels when a consumer orders an item. Consumer orders also trigger labels for their individual specifications.

These are just a few capabilities that have rapidly become a game changer for 3PLs and their partners.

B2C Fulfillment

A 3PL must integrate with a customer's chosen ecommerce platform, whether Amazon, Shopify, or any other shopping cart. When orders come in, the WMS functions by providing details about the item such as location. Shipping labels and scheduled shipping is then launched. Items are packed with labels and a final quality inspection is performed before shipping.

A leading 3PL should ship the same day the order is received, usually by mid-day or somewhat later. The exact time of shipping is usually worked out between the customer and the 3PL at the time of negotiations. Most 3PLs handle ecommerce fulfillment with a variety of carriers which lets them constantly negotiate the best rates.

B2B Fulfillment

A WMS is just as effective with B2B fulfillment. All customer orders are fed into the software to effectively coordinate outbound shipments either with internal transportation or via an external provider.

Outbound distribution is time consuming so most 3PLs prefer that B2B orders be submitted before the end of the day to ensure next day shipping. However, all supply chains are different, so a customer will want to find out about the particular 3PL's shipping policy. Will they honor same day shipping, or will it be next day shipping on B2B? Most offer same day shipping when possible.

JIT Delivery

Just-in-time delivery (JIT) is not offered by all 3PLs, but it is another form of fulfillment. The process of JIT delivery involves having 3PL store kits and parts used for assembly. They will then deliver those items to a manufacturer at certain predetermined intervals which might be up to several times per day. However, the parts are only delivered when they are needed. A WMS provides improved integration and flow for all aspects of the order processing. The new orders are triggered when the manufacturer has the space and focus for the production process. This saves valuable space for manufacturers.

Conclusion

Whether you are ecommerce business or a 3PL, a strong omnichannel strategy is no longer simply an option but a necessity that solidifies relationships and ensures all-around satisfaction between all parties involved. An omnichannel fulfillment strategy ensures that a 3PL gets products, whether B2B, B2C, or JIT, fast and at an affordable price. The foundation of that strategic plan is having in place cloud-based warehouse management software that all parties can depend upon, which is where a 3PL can help provide solutions.

Contact Extensiv today to learn about our Extensiv 3PL Warehouse Manager, a leading cloud-based WMS system. Become a part of our network of over 12,000 3PL professionals who rely on our software for complete omnichannel fulfillment services.

 

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