Complete Guide: Omnichannel Fulfillment to Drive Success for 3PLs
Are you thinking about expanding your ecommerce business as a third-party logistics (3PL) provider to multiple channels? Learn everything you need to know about omnichannel fulfillment to drive success for 3PLs.
There is no denying the impact COVID-19 had on many of us. It brought changes to where we work, how we live, where we shop, and what we buy, so much so that U.S. consumers spent $211.5 billion during the second quarter on ecommerce purchases including everything from skincare products, groceries, to cleaning supplies.
As shared in the 2022 State of the Third-Party Logistics Industry Report, the United States saw historic progress with the equivalent of ten years of ecommerce growth in just three months due to the pandemic. So, what trend does your 3PL warehouse need to prepare for when looking to be successful this year?
Just about everyone is talking about ecommerce and omnichannel fulfillment, and for good reason. In 2020 alone, ecommerce grew by 44 percent! Furthermore, in the first and second quarter of 2021, that number only continued to rise!
While ecommerce fulfillment may have kept you busy and been the bulk of your revenue for last year, omnichannel fulfillment will definitely impact your business going forward. Omnichannel fulfillment has huge potential. 3PLs who offered omnichannel fulfillment were over 270 percent more likely to enjoy revenue growth! That’s a solid business opportunity, one that should be explored by 3PLs who are serious about growing their business.
What Exactly is Omnichannel Fulfillment?
Omnichannel fulfillment is the ability to fulfill orders from all purchasing channels your customers may use to sell their inventory. For example, your warehouse would have a fulfillment strategy for orders placed online, such as ecommerce, marketplaces, shopping carts, or from retail stores. Regardless of where the order was placed, shoppers should have a seamless end-to-end experience—and your customers will thank you for it.
Third-party logistics warehouses are the perfect fit to offer omnichannel order fulfillment. And 3PLs who can deliver will earn the loyalty of their customers while increasing order volumes as well.
Omnichannel order fulfillment comprises 5 basic processes:
- Warehouse organization: Management of merchandise, warehousing, and inventory
- Order Management: Order processing and order confirmation
- Packaging: Picking, printing labels, and packaging the orders for fulfillment
- Shipping and Returns: Delivery, shipment, payments, refunds, and the return of goods
- Customer communication: Contact with customers, updates, and customer care after the sale
While 3PLs work hard to deliver a consistent experience, regardless of the sales channel, their customers consistently look for ways to improve the consumer experience as well. It is the perfect tag team since warehouses can help with that too. That is where omnichannel selling comes in.
Omnichannel selling refers to retailers who sell in both physical and online markets—whereas ecommerce fulfillment is strictly online. For sellers looking to implement a more modern approach to marketing products across multiple channels, it can vastly increase orders. However, these sellers must find a 3PL partner who values the consumer experience just as much and invests in the technology and resources to fulfill those omnichannel orders.
In a recent Infosys Consulting study on the State of Logistics Outsourcing, 96% of 3PLs believe they offer innovative ways to improve logistics for their customers. When a warehouse is set up to fulfill orders wherever their customers sell, then they can focus on how to help with brand consistency, order efficiency, inventory reporting, and the seamless experience consumers now expect.
Shifting Shipping and Retail Landscape
The holiday shopping season is rapidly approaching, and it’ll look quite different than years prior. Many companies have suffered incredible levels of disruption, both because of changes in consumer preferences, behaviors, and safety protocols, as well as supply chain issues as a result of the pandemic. This has driven increased online and in-store shopping integration, which means that purchase and fulfillment is based on convenience, flexibility, and safety instead of satisfaction in one channel over another.
One approach that many retailers are using is the use of retail locations for omnichannel fulfilment, minimizing costs while using local store inventory.
The statistics show this trend is expected to grow as stores look for multiple ways to fulfill orders:
- 75 percent of retailers allow in-store returns of online merchandise.
- 76 percent of retailers use store inventory to fulfill online orders
- 86 percent plan to implement order order online and pick up in-store within the year
What does omnichannel fulfillment look like?
As demonstrated above, omnichannel offers flexibility and multiple ways to manage orders, such as:
- Store to consumer
- Warehouse to retail location
- Store to store
- Warehouse to consumer
- Customer to warehouse
- Warehouse to an alternative pick up location
- Customer to store
Despite the need for an omnichannel fulfillment system and the shift in the buying and shipping landscape, many 3PLs and third-party sellers reported difficulties in implementation.
A study of 150 supply chain professionals demonstrated that:
- 41% of professionals weren’t prepared to transform stores into fulfillment centers
- 34% said they don’t think they have the right partnerships to handle the supply chain demand
- 35% said that they didn’t feel they had an omnichannel strategy to match changes in consumer buying behavior
What does this mean for 3PLs?
An opportunity for growth and innovation to drive success.
The 3PL sector is well-positioned to partner with retail and take some of their business on. Third-party logistics ecommerce revenues are forecasted to rise exponentially. 3PL warehouses that also offered omnichannel fulfillment services are 271% more likely to be fast growers.
The Challenges of Accelerated Delivery for 3PLs
Speed matters. Amazon’s prime shipping has led the way in free delivery and two-day shipping. The ecommerce giant even has one-day shipping, depending on the product and the consumer location. Amazon remains a catalyst across retail. The disrupter has set a very high expectation for direct-to-consumer delivery. Many consumers don’t want to pay for shipping, or will pay for shipping, but demand that same two-day window to get the product that they ordered.
Consumers have grown to expect convenience and speedy fulfillment:
- 44 percent of consumers stated that they expected two-day delivery
- 77 percent of consumers cite convenience and free shipping as top reasons to shop online
- Consumers say that their delivery speed expectations are only met 45% of the time.
3PLs and retailers are doing everything they can to compete with Amazon’s delivery window, which means to drive success, you will need to as well. A recent survey of supply chain officers showed that the drive to accelerate fulfillment speed is underway:
- 75 percent of retailers pooled intend on building network capabilities, including omnichannel fulfillment, to accelerate shipping speed to two-day or faster delivery
- 42 percent are aiming for one day click-to-consumer lead times
Keeping consumers happy is more important than ever. With so many choices, both in brick-and-mortar stores, as well as online shopping, it is key to make sure that consumers are satisfied. Happy consumers are what sustains your business as a 3PL.
Benefits of Omnichannel Fulfillment
Omnichannel fulfillment is very important for a number of reasons. The first and foremost is meeting customer demands and expectations, regardless of how they want their orders filled. There are also incredible benefits to the third-party logistics company.
Increased Customer Satisfaction and Retention
Consumers have higher expectations than ever. They want shipping to come fast, and they want shipping to come when the brand says it will come. For most consumers, confusion about delivery and lack of communication about shipping is a deal breaker. In fact, 83 percent of consumers say that they focus on how brands treat them as much as the products they’re buying.
This means it’s more important than ever to achieve widespread customer satisfaction, and one of the best ways to do this is through omnichannel fulfillment. It’s far easier to achieve these high levels of customer satisfaction when fulfillment offers are aligned with choice and flexibility, which is something that many multi-channel merchants struggle with due to their siloed channels. Omnichannel fulfillment, on the other hand, allows 3PLs to have a powerful strategy to meet the demand for seamless shopping experiences, thus achieving customer satisfaction time and time again.
Manage and Reduce Inventory Costs
Omnichannel fulfillment allows 3PLs to effectively manage and reduce the cost of their inventory. An astonishing 82 percent of ecommerce businesses have increased sales, showing that the potential for growth is better than ever!
Increased Profit Margins
23 percent of customers are willing to spend more money on products to meet free shipping. With minimums in place, retailers and 3PLs don’t have to absorb the cost of shipping, but neither do customers through higher prices in products. An omnichannel fulfillment process allows for more efficient shipping and handling, which allows 3PLs to be able to offer more benefits to customers while increasing their own profit margins.
As the numbers of orders increase as businesses grow and scale, businesses will have to put more goods in the warehouse. This means they'll also need more employees to manage the items, as well as ensure every step of the product fulfillment goes smoothly.
While this expansive growth is great for business, it can add up quickly and, if not managed properly, eat up profits. Omnichannel order fulfillment allows 3PLs to be able synchronize data and handle orders quickly, saving over half the cost of warehousing, staffing, and other expenses.
Implementing an omnichannel fulfillment model means you have to monitor fulfillment center and warehouse productivity in depth. It’s likely you’ll end up taking a harder look at every aspect of your operations, as it is necessary for implementation of a successful omnichannel fulfillment strategy. One benefit of such monitoring, especially with a cloud-based warehouse management system (WMS), is real time reporting, you can improve warehouse processes.
Higher Warehouse Productivity Levels
Implementing new technology to streamline fulfillment processes through omnichannel fulfillment means that warehouse personnel get more detailed information. This allows for increased productivity as staff are doing things that are higher level instead of repetitive tasks. This helps to increase warehouse productivity levels, as well as overall operational efficiency.
Stronger Brand Perceptions
Brands that take advantage of omnichannel fulfillment are viewed as more attentive to customer preferences and needs. This differentiates you from other 3PLs who aren’t yet offering omnichannel fulfillment.
Reduce Last-Mile Costs and Delivery Times
Last-mile logistics is incredibly expensive and can eat up profits quickly. In fact, this accounts for an astonishing 41 percent of costs in the supply chain fulfillment process. However, you can optimize your 3PL for more competitive delivery by offering diverse channels of fulfillment. Omnichannel fulfillment options require that goods be closer to end consumers. The result of this is a reduction in delivery times and last mile costs, which can increase revenue and result in happier customers.
Mitigate Disruptions in the Supply Chain
This one is especially important. The supply chain has faced disruptions in years past, and has only continued to be disrupted by COVID-19. However, 3PLs can mitigate disruptions through omnichannel fulfillment. Traditional third-party logistics networks have fewer locations and are more centralized, which really can enhance the impact the disruption has on a business. Offering multiple channels is less likely to face disruption, which can lead to more satisfied consumers, quicker shipping, and better overall efficiency.
It’s clear that there are many benefits to 3PLs who offer omnichannel fulfillment. It’s a great way to drive success, increase customer satisfaction and loyalty, and encourage expansive growth. However, your business cannot have operational silos when implementing omnichannel fulfillment. It’s imperative to have a cloud WMS that handles all aspects of business operations, blending them together seamlessly.
What is WMS?
Warehouse management system software is an integral part of adding omnichannel fulfillment to drive success for 3PLs. A cloud WMS puts all operational aspects of your 3PL at your fingertips for faster and more efficient fulfillment across the board.
With omnichannel fulfillment, there are a lot of moving parts, even more so than traditional ecommerce fulfillment. A lot goes into being successful in omnichannel fulfillment.
Finding the right third-party logistics software is integral to running and growing a successful 3PL business. A comprehensive cloud WMS takes over one of the most critical parts of your business, which are the processes behind order fulfillment. When you make the wrong choice, you end up costing your organization time and money. You can even lose customers due to inefficient processes and practices, which can cause your business to suffer greatly.
Fortunately, the right cloud WMS can help you grow your business, while avoiding growing pains along the way.
A good WMS can help with many facets of running a successful 3PL omnichannel fulfillment strategy:
- Inventory accuracy. Stores have lower inventory accuracy rates than distribution centers. Partnering with a 3PL removes the inaccuracy. This means that 3PLs will be handling multiple streams of fulfillment, making inventory accuracy more important than ever with features like mobile barcode scanning technology.
- SKU complexity. Minimizing margin-eroding split shipments across the network becomes challenging, but WMS software can help 3PLs manage SKU complexity, resulting in reduced errors and higher levels of efficacy.
- Demand forecasting. In order to speed up shipments to the consumer, it is essential to have accurate demand forecasting. A good cloud WMS is essential for positioning inventory across warehouses, store types, and fulfillment centers.
- Efficient shipping. With Extensiv 3PL Warehouse Manager, you can print labels, get the best rates, and more all within the warehouse management software.
- Real-time data. Using Extensiv 3PL Warehouse Manager's integrated SmartPack that verifies orders in real time means that data will occur in real time with fewer human errors, increased efficiency, and more informed decision making.
- Direct integrations. A warehouse management software such as Extensiv 3PL Warehouse Manager allows you to integrate with leading marketplaces and online shopping carts, allowing for efficient omnichannel fulfillment through different channels.
- Faster and easier payments. 3PL billing software allows you to handle all the aspects of your business. Omnichannel fulfillment means that there are multiple streams of orders, which can get chaotic quickly. You should be able to seamlessly integrate with other billing systems, capture billing workflows on an individual customer basis, and reduce the time it takes to get paid, resulting in more cash on hand for your business.
Omnichannel Fulfillment Best Practices
3PLs who are serious about getting into omnichannel fulfillment and expanding their business need to be aware of and implement best practices to be successful.
In order to realize all of the benefits of omnichannel fulfillment, the following best practices, at a minimum, should be observed:
Choose the right omnichannel fulfillment strategy.
With so many options from which to choose—ship-from-store, ship-from-warehouse, pick up from store, etc.—it’s important to select the ones that meet their business needs. Don’t just wing it—take into consideration various factors, make data informed decisions, and come up with a solid strategy to be implemented.
Avoid operational silos.
Operational silos are the enemy of 3PLs serious about omnichannel fulfillment. Operational silos can cause a host of problems, including:
- Staff responsibility for repetitive tasks
- Increased human error, which can be costly and eat up profits
- Inventory mistakes and orders being filled incorrectly
- Lost inventory due to not having a fully connected inventory system
- Reduced business
- Unsatisfied customers
- Lack of opportunity to grow and scale since time is spent trying to run the organization
Fortunately, operational silos can be avoided. It’s absolutely essential to choose the best WMS for 3PLs so you can integrate all parts of the 3PL process, from the moment you get the order until after the customer receives it (or returns it). This will keep staff on the same page, allow for increased innovation and efficiency, and improve the overall bottom line of your third-party logistics company.
Practice strong inventory management.
For omnichannel fulfillment to be successful, it’s key to maintain detailed inventory records. This includes organizing products so that they’re easily accessible, having workflows that are automated, and systems that are utilized to increase inventory visibility. A good software management system is essential when it comes to having strong inventory management.
Invest in the right technology.
Warehouse management systems transform omnichannel fulfillment from an overwhelming and complex endeavor to one that is much more simple and efficient. Everything from inventory management, shipping management, replenishing products, and analyzing data is right here at your fingertips to maximize efficiency, leading to successful omnichannel fulfillment.
The Takeaway: The Essentials for Omnichannel Fulfillment for 3PLs
The most important takeaway about omnichannel fulfillment is that it requires your business to utilize all resources to ensure that customers receive orders as quickly as possible–which leaves little room for operational error.
Break Down Operation Silos
If you are planning to implement omnichannel fulfillment in your 3PL, it’s essential to remove any barriers to your channels seamlessly joining. Not only will this slow down fulfillment time, but this will frustrate customers who may want to interact with selling channels as they like.
When shifting to an omnichannel fulfillment strategy, it’s essential to maximize integrations and communications between different aspects of your 3PL operation. This ensures that everyone is on the same page, the operational requirements are fulfilled, and business can be conducted timely and efficiently.
Choose the best WMS for 3PLs
If you want to implement omnichannel fulfillment to drive success, you’ll absolutely need to have a WMS that can manage multiple high volume capabilities. You need a WMS that can report order statuses and SKU counts at all times. With this ability, you can determine which warehouse, store, or other method is best suited to fulfilling a customer’s order in the fastest time possible. Without real-time tracking and data, it will be next to impossible to efficiently implement omnichannel fulfillment in your 3PL.
It’s important to choose a warehouse management system that allows for increased efficacy with automation. By automating all the different aspects of your omnichannel fulfillment, you can save time and money. Reports and invoices can be generated from one system instead of multiple. Furthermore, you can automate your integrations with third-party platforms, such as Shopify and other shopping carts. Using the right cloud WMS means that 3PLs can succeed by managing all aspects of omnichannel fulfillment from A-Z, making it one of the single most important investments for 3PLs.
Increase Efficacy with Automation
By automating different aspects of fulfillment and the supply chain process, 3PL software can save both providers and their clients a ton of time! Payments and orders are able to be tracked automatically. Reports and invoices can be generated from one single database instead of confusing and time-consuming separate spreadsheets.
Integrating with ecommerce platforms such as Amazon, Shopify, and more can leverage automation. Using the right warehouse management software means that 3PLs can offer support for ecommerce fulfillment and retail businesses.
Integrate Inventory Management
To really engage in omnichannel fulfillment, you must have integration in your selling channels. That includes the total number of SKUs at warehouse locations and stores. This means that there is greater inventory supply access. However, this requires full visibility of products including reverse logistics and workflows. A great warehouse management system for 3PLs will ensure you’re able to do this with top notch integrations.
Prepare Your Warehouse Now
In the 2020 State of the Third-Party Logistics Report, we noted that nearly 40% of all consumers would be born after 1995, known as Gen Z. Of this group, only 9.6% of buyers shop in a physical store. In addition, the Washington Post reported that consumers over the age of 65 spent, on average, $1615 online from January to October, a 49% increase from a year earlier. Without strategies in place for your 3PL warehouse, you may miss prime opportunities for growth as ecommerce and omnichannel buying become the new norm. But don’t take our word for it.
“Now I love it so much that I won’t ever go back,” said Murrell, who lives in Prince George’s County, Md., and uses a combination of delivery and curbside pickup services.
To learn more on how Extensiv can help your warehouse diversify for omnichannel fulfillment, click 2022 State of the Third-Party Logistics Industry Report to check out our 2022 State of the Third-Party Logistics Industry Report.
Looking for the Best WMS for 3PL?
Having the right warehouse management system is a game changer for third-party logistics companies who are serious about omnichannel fulfillment, increased revenue, and expansive growth.
Sign up for your WMS software demo today and see how Extensiv can help you manage your omnichannel fulfillment!