I am the Vice President of Supply Chain Services at ARC Advisory Group, a leading industry analyst and technology consulting company. I engage in quantitative and qualitative research on supply chain management technologies, best practices, and emerging trends.
As ecommerce grew at double digit rates, while in store sales grew at less than the rate of inflation, retailers were looking for a way to turn their stores into a competitive weapon. Rather than just offering consumers the choice of buying online or buying in the store, a retail omnichannel strategy involves a lot more paths to fulfill an order or to process a return.
But one thing you notice as you go to omnichannel software vendor’s web sites and examine customer case studies, the case studies may talk about retailers growing their revenues by 100% or more, but none talk about how much profitability grew. If growing sales come with much higher fulfillment costs, profitability can take a hit.
Kathleen Fischer, a director at Körber Supply Chain, rank ordered the profitability of different omni flow paths for me. In general, she asserted, the order profitability by flow path would be the following: 1. Ship from warehouse , 2. Having a customer pickup items selected for them in the store , 3. Drop shipping , 4. Shipping from the store, and 5.
In general, retailers can model the transportation costs associated with an omni-order. Some providers of OOM have better solutions for this than others. Kinaxis offers an OOM that is built on a tech stack. The Kinaxis solution can capture the exact transportation costs associated with every order and use the true transportation costs when making the decision of how to fulfill an order.
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