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What is Omnichannel Logistics and why is it important for businesses?
The first mainstream usage of the term is credited to the Harvard Business Review writer Darrell Rigby, who, in the December 2011 article, The Future of Shopping, wrote that the new phenomenon of companies combining online sales with traditional channels should have a new name: Omnichannel Retail.
Omnichannel logistics is the go-to strategy for every seller and retailer today. No product development life-cycle management strategy is complete without it having sufficient room for omnichannel marketing and logistics.
Even online marketplaces like Amazon, Flipkart, and Alibaba whose primary focus areas are online sales and logistics services make Omnichannel strategy an integral part of their marketing playbook. On the other hand, large traditional retailers like Walmart and Target have adopted effective omnichannel strategies to stay ahead in the ever-changing retail industry.
Therefore, traders and manufacturers need to understand the main fundamentals and the purpose of a logistics strategy designed to serve omnichannel sales, or in other words, the basic components of an omnichannel logistics strategy.
The Evolution of Omni-channel Logistics in Retail and E-commerce
The story of omnichannel logistics evolution is the story of the convergence of the e-commerce supply chain with that of traditional retailers. The e-commerce revolution that started in the early-to-mid 2000s with the emergence of Amazon, Airbnb and Uber, and picked up speed in the aftermath of the 2008 financial recession, took the retail world by storm due to an unexpected phenomenon – consumers worldwide and in India were willing to forego the essential element of touch-and-feel if they were promised fast, reliable deliveries at their doorstep.
Even so, it took a while for both ecommerce players and offline retailers to learn from each other. The logistics industry developed omnichannel solutions by aligning the priorities of merchants, third-party logistics providers and sales channels. For businesses managing multiple fulfilment channels, working with a third party logistics (3PL) provider can help coordinate warehousing, transportation and fulfilment requirements across the network.
For example, the main goals of traditional logistics strategy was to optimize cost and maximize fill rates. The right omnichannel strategy had to include a few more objectives such as a fast and reliable delivery mechanisms and improved responsiveness to demand.
The unstoppable rise of online marketplaces over the last decade meant that retailers in all major markets started to pay close attention to omnichannel logistics. That in order to compete and even hold onto their traditional turf they will have to match the speed of delivery and the wide range of product choices that online marketplaces. Innovations such as fulfilment centers designed specifically for online channel logistics, nearshoring or locating sortation hubs closer to the customer and last-mile delivery milk-runs are a few of the many innovations that the growth of omnichannel has produced.
Key Components of an Effective Omnichannel Logistics Strategy
It is imperative for every merchant to have an omnichannel logistic strategy in place, starting from the time of launching a product, if not earlier. Every step of a product’s go-to-market journey, from procurement to aftersales must factor in the company’s omnichannel strategy. The following areas must necessarily include considerations for all channels, online, offline and a mix of the two.
The transportation strategy should consider utilizing online channels for freight sourcing activities like reverse auction and spot bidding. It should also have a smart strategy in place for optimizing its last-mile logistics.
And possibly the most crucial area of logistics that needs to an integrated omnichannel strategy is warehousing. These include functions like warehousing design where one needs to decide whether to follow a hub-and-spoke model or a decentralized model based on one’s omnichannel presence (or lack thereof) in a region. Same is true for the corporate decision to have ecommerce-only distribution centers also known as fulfilment centers as part of the warehouse network.
As order volumes shift between channels, businesses also need to assess whether their existing facilities can accommodate changing inventory and fulfilment requirements. Our guide on managing warehouse overflow and optimising storage explores practical ways to improve space utilisation and plan for additional capacity.
Businesses planning an omnichannel network need to consider how fulfilment centres, regional distribution centres and delivery locations will support different order profiles. Explore Apollo Supply Chain’s retail and e-commerce logistics solutions to understand the warehousing, fulfilment, inventory and transportation capabilities available for these requirements.
Equally important are decisions pertaining to the type of technology to be used across the supply chain. Omnichannel logistics operations need the deployment of advanced e-commerce applications that can be seamlessly integrated with legacy software systems. It is nuanced decisions like these that can translate into huge savings or costs based on one’s knowledge of omnichannel trends.
Connecting sales channels with warehouse and transportation operations also depends on technology that gives teams a consistent view of inventory and order movement. Learn more about technology-enabled supply chain visibility and the systems that support warehouse, transport and operational monitoring.
How to Choose the Right Omnichannel Logistics Partner
Today’s manufacturers and sellers, big and small, have access to both online and physical marketplaces be it for B2B or B2C requirements. That is a good problem to have compared to facing the challenge of a paucity of distribution options, which was the case not very long ago.
For businesses that need support coordinating these activities, understanding what a 3PL company does can help clarify how an external logistics partner may support warehousing, transportation, inventory management and fulfilment across sales channels.
However, the availability of different channels also brings forth problems of its own. The biggest one being the often-witnessed tendency of businesses and professionals to throw money at the problem of picking the right solution. But that is a negative-sum game, where uninformed choices lead to lost sales and customers. The right course is to work with retail and e-commerce sector experts such as Apollo Supply Chain whose mission it is to help you navigate the market for omnichannel success.
Frequently Asked Questions (FAQ's)
What is omnichannel logistics?
Omnichannel logistics connects inventory management, warehousing, order fulfilment, transportation and returns across online and offline sales channels. It helps businesses coordinate inventory and order movement so customers can receive consistent service regardless of where they shop.
What is the difference between multichannel and omnichannel logistics?
Multichannel logistics supports multiple sales channels that may operate independently. Omnichannel logistics connects these channels through coordinated inventory, order management and fulfilment processes, improving visibility and consistency across the customer journey.
Why is omnichannel logistics important for retailers?
Omnichannel logistics helps retailers coordinate inventory across stores, e-commerce platforms and other sales channels. When supported by suitable processes and technology, it can improve order fulfilment, inventory visibility and responsiveness to customer demand.
What are the key components of an omnichannel logistics strategy?
Key components include inventory visibility, warehouse network design, integrated order fulfilment, transportation planning, last-mile delivery, returns management and technology integration. Businesses should align these elements with their product mix, customer locations and service requirements.
How does warehousing support omnichannel logistics?
Warehousing supports omnichannel logistics by positioning inventory, processing orders and replenishing different sales channels. The right network may include fulfilment centres, regional distribution centres, stores or other facilities, depending on demand patterns and delivery requirements.
What role does technology play in omnichannel logistics?
Technology helps connect inventory, warehouse and transportation information across sales channels. Systems such as warehouse management systems (WMS) and transportation management systems (TMS) can improve operational visibility, order coordination and exception management when appropriately integrated.
How can a 3PL provider support omnichannel fulfilment?
A third-party logistics (3PL) provider can support warehousing, inventory management, order fulfilment, transportation, distribution and returns, depending on the agreed service scope. Businesses should assess whether the provider’s network, technology and operating processes fit their specific channel and customer requirements.
