Omnichannel Fulfillment Explained: What It Is & Why It’s Important

Consumer buying channels have expanded and evolved, causing a ripple effect for logistics providers and partners. While the pandemic increased online retail sales 32.4% year-over-year in 2020, the rise in ecommerce has been steadily climbing for years, and in many cases grew more than expected. It isn’t just business to consumer (B2C) sales either; business to business (B2B) ecommerce has also grown as wholesalers, manufacturers, or retailers exchange products and services online. There has even been a rise in consumer to consumer (C2C) purchases as well.

As buying from online channels continues to be our “new normal,” this has meant changes for fulfillment strategies—especially third-party logistics (3PL) warehouses and ecommerce businesses. The first major change has been how to build a fulfillment strategy to meet the demands of modern commerce, wherever and however goods are sold. For many, this began with a strategy to improve warehouse operations that support ecommerce fulfillment centers.

Today, this means developing and implementing an omnichannel fulfillment strategy, and it's no surprise why this trend has become so popular over the last few years as it promotes greater satisfaction and consumer/customer loyalty. Whether you’re a small ecommerce business or an established enterprise brand, a local 3PL warehouse or node in a fourth-party logistics (4PL) network spanning the globe, a shift toward omnichannel fulfillment can deliver the sales and revenue needed to secure growth and long-term success.

But what exactly is omnichannel fulfillment? How is it different from multi-channel fulfillment? Is an omnichannel fulfillment strategy right for your business? We'll answer these questions and more in this article.

What is omnichannel fulfillment?

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

Unlike fulfillment from a single channel, an omnichannel strategy has to allocate inventory and products from different stores and warehouses to prevent costly overstocking (or overselling).

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

For this reason, it’s critical to sync omnichcannel order and inventory data within a unified and comprehensive platform so you have the inventory visibility you need to manage fluctuating stock counts and present an accurate available-to-sell to your online customers. By leveraging the right multichannel software, retailers can automate much of their store fulfillment processes—from picking to packing to shipping—while achieving tremendous agility and accuracy to wow their customers.

What’s the difference between multi-channel and omnichannel?

Though often used nearly interchangeably, multi-channel and omnichannel fulfillment are fundamentally different in some important ways. The multi-channel strategy siloes inventory based on the individual sales channel. The most common example is Fulfillment by Amazon (FBA).

While this approach may seem easier to implement at first, it can become cumbersome for businesses who may look for additional delivery options or returns for online purchases as time goes by and can be especially hard when expanding sales channels. Additionally, when supply chain backlogs exist, accessing one combined set of inventory may offer the ability to more quickly fulfill orders versus having separately allocated inventory.

Is omnichannel fulfillment right for your business?

In the crowded and competitive world of retail, business owners are constantly looking for new ways to drive revenue, maximize capital investments, and scale up. The onset of omnichannel fulfillment services and software has revolutionized how modern selling is conducted by allowing physical stores and ecommerce teams to adapt to the growing demands of their customer base.

Omnichannel retail supports brands of all sizes in meeting consumers’ needs and provides increased inventory visibility since online shoppers can do their own research, compare prices, and buy the items from their preferred channel regardless of where the item is located.

If your business struggles to elevate the customer experience and/or ensure brand loyalty, omnichannel fulfillment may be just what you’re looking for. By integrating an omnichannel approach into your fulfillment operations, consumers can easily and seamlessly move between online channels to find what they need. And when customers have a positive, memorable shopping experience with your brand, an increase in sales isn’t far behind.

Plus, if you make the shift to an omnichannel fulfillment strategy and integrate in-store inventory into digital channels, you'll open up more options for your consumers and services that bring traffic into stores and better maximize your real estate:

Retailers must evaluate what is important to their audience and customer experience, then select what services to offer for their business. And, you’ll find yourself in great company among retailers like Nordstrom, Ulta Beauty, PetSmart, DSW, and Dick’s Sporting Goods when you embrace omnichannel strategies.

The Challenges of Omnichannel Fulfillment

Maintaining Precise Inventory Counts 

As great as it is, omnichannel fulfillment has its share of challenges—keeping tabs on your inventory counts being one. If you’re selling the same products on different channels, it’s tempting to double or triple count your SKUs when they’re the same item (under another listing). The good news is that a proficient inventory management system can provide real-time inventory data to ensure you don’t overstock or reorder in excess.

Implementing Safety Stock

Several variables in a store environment make it difficult for retailers to have an up-to-the-second view of in-store inventory. Customers may have items in hand or merchandise on display, or they could be lost, damaged, or, unfortunately, stolen. As a result, reducing your available-to-sell by a few units will reduce stockouts, order cancellations, and customer disappointment. Depending on the history and sales velocity, some retailers will set this across the entire chain, a region, or a specific store.

Using an Outdated Technology Infrastructure

One of the most common causes of inventory inaccuracy is operating with an outdated infrastructure; that is to say, using manual or paper-based processes to document inventory data. Not only is this practice error-prone and time-consuming, but it’s nearly impossible to keep up with when employing omnichannel fulfillment.

Utilizing technology will improve operations so you can easily process online orders from several selling channels and allow for seamless integrations to achieve order growth. This begins with a warehouse management system (WMS). You can also implement tools like barcode scanners and RFID tags to give you a clearer, more reliable picture of your inventory. Without these key technology components, businesses lack the required visibility for inventory and order management and picking, packing, and shipping using hands-free mobile barcode scanning.

Enhanced technology is your best opportunity to offer increased accuracy, optimized efficiency, and meet the needs of your customers— all with greater visibility into processes and labor. 

Navigating a Segmented Supply Chain

When dealing with omnichannel logistics, companies must know the status of their inventory, whether it’s sitting in a fulfillment center or en route to the customer. This becomes an even greater challenge during peak season, when distribution centers are typically at their busiest. To navigate a dispersed supply chain with skill and ease, businesses need to implement an order management system (OMS) that can guarantee each segment runs smoothly.

Setting Order Routing Rules

Before retailers enable their in-store inventory online, they must determine how their omnichannel software will assign orders to a store. Will orders be routed to ship from the store closest to the customer? From the store that can complete the order in one shipment? Or from the store that is assigned as a priority fulfillment location? Creating a prioritized list of omnichannel fulfillment rules is essential to minimizing shipping costs and ensuring profitability. 

How to Get Started with Omnichannel Fulfillment

Even if you understand the benefits of omnichannel fulfillment—and recognize what it takes to bypass its challenges—you may still be wondering how to get started with this process.

Many brands like to take a hybrid approach to omnichannel transformation, meaning they fulfill certain orders in-house but team up with other fulfillment companies (like 3PL warehouses) for specific selling channels. A practical example of this comes from FBA; Amazon has strict requirements for Prime shipping but also works with a 3PL and fulfills other non-Amazon orders themselves.

Perhaps the most important thing to consider before your company transitions to an omnichannel format is which software solutions to adopt that will allow you to consolidate channels for the most cohesive, streamlined fulfillment possible.

Specifically, you’ll want a fulfillment technology stack—including some combination of an inventory, warehouse, and order management system—to automate and customize your processes.

If you’ll be outsourcing fulfillment to a logistics provider, be sure they offer integrations with your preferred inventory software and the ecommerce platforms or online marketplaces where you plan on selling.

Improve Your Omnichannel Fulfillment Strategy with Extensiv

Extensiv remains a leader in inventory management and omnichannel fulfillment by focusing on improving the way you processes and manage customer orders and inventory across all ecommerce sales channels. Extensiv is a pivotal player in fulfillment optimization, ensuring orders arrive on time and at the lowest possible cost.

This system simplifies stock replenishment by creating a central platform with a single viewpoint into your inventory items. With Extensiv's Order Management solution, businesses can trust that current and future consumer demand is met while also balancing the need for improved budget control and back-office logistics. This software automates several necessary functions to unify your segmented supply chain: order routing, order splitting, bundling and kitting, inventory forecasting, and reordering (via automated purchase orders).

Additionally, Extensiv Integration Manager synchronizes all inventory and order data across systems, including those used by logistics partners, like Extensiv 3PL Warehouse Manager, for outsourced fulfillment operations.

Interested in how Extensiv can help your company join the omnichannel trend? Request a free demo today!