A Guide to the Complex Web of Functions in an Omnichannel Suite
Until the advent of e-commerce, retail systems consisted of a merchandise management system, a POS system and financial systems rounded out by payroll and HR. Then, e-commerce became a promising channel, but it occupied its own silo. The evolution of the industry made way for omnichannel retailing and, most recently, a need for unified commerce.
While omnichannel retailing and unified commerce are getting a lot of print, how many retailers realize the complexity of the transactions and interactions that enable them to work in a seamless architecture?
Most enterprise merchandise management systems are not architected in a manner that integrates the new and the old system components in a cohesive,cost-effective, timely way. Below, is a comprehensive list of the capabilites that are an extension to the function of the systems of old, resulting in an overall suite that is powerful, but more complex than its predecessors. A careful evaluation and thoughtful implmentation of solutions is necessary.
Distributed Order Management (DOM) – This is the engine that sits in the middle of the process. After the customer visits the retailer through one of the many channel portals, DOM conducts the search for available inventory among the channels, in a pre-determined sequence, and determines from whichsources an order will be fulfilled, according to business rules pre-defined by the retailer. These rules, which can include whether or not to split shipments. From then on, DOM tracks the status of each order. Finally, DOM provides the analytics with which the retailer determines the efficiency of its onmichannel execution.
Fulfillment Threshold/Safety Stock – A component of DOM required to deliver on the promise that ‘your items are waiting for you’ is the ability for the retailer to define a threshold of inventory that must be on hand in any one location in order for the automated system to ‘reserve’ the product for a customer, especially for in-store pick-up. Once ‘promised’, that unit can no longer be available for sale until the order is canceled.
Order anywhere – Unified commerce says that the purchase, cart and payment customer-facing screens should be the same for all channels (except mail order; some companies are still printing catalogs successfully). This means that a customer should be able to begin an e-commerce transaction on a PC, suspend it, continue the transaction on m-commerce on a smartphone while on a bus on the way to the store, and buy something else in that store and pay for all the products in the cart at the last stop. The same applies to all other channels.
Ship from anywhere – A proficient DOM engine will ensure that as long as product is available in sufficient numbers, and the inventory quantities and location meet the retailer-defined criteria, the product will ship and the customer will be charged. Add to this vendor drop-ship, whereby the retailer directs the supplier to ship one or more items to the customer directly. This type of transaction begets the need for the retailer to issue (or not) a PO, and pay for items delivered by the vendor upon confirmation.
Ship to anywhere – Allow the ship-to address to differ from the billing address and provide shipping-rate options.
Pick-up Anywhere – The system must ensure that the inventory either exists in, or can be shipped to the store of choice for timely customer pick-up, and then reserved for that customer for a pre-defined period of time so that the item doesn’t get sold out.
Ship-to-Store for Pick-up – This is a nuance of omnichannel retailing and beneficial to the retailer in that it can save on shipping costs. It can be equally convenient to the customer in that he/she can opt to stop by and pick-up the product on the way, and shop at other stores in the same mall or center.
Return Anywhere – The customer needs to be able to return an item to the most convenient location, irrespective of the channel through which the product was purchased. The system has to support the retrieval of the original purchase transaction so the customer can get an RA Number on the e-commerce site and return to a returns-processing location, or in a store, and receive appropriate credit.
Inventory Accuracy – Again, in order to fulfill the promise to the customer, the retailer must rely on inventory accuracy at all locations. RFID tagging of all products is a technology that facilitates very high inventory accuracy. Whilemost retailers have not implemented RFID, it is worthwhile revisiting as costs have dropped and the technology is easier to use now. In the case of vendor-drop-ship, a truly integrated system would have visibility into vendors’ inventory by SKU, in real-time.
Real Time vs. Near-Real-Time – In an omnichannel environment real-time information is critical because the customer is online with the retailer in real time and needs accurate answers in real time. If communication between systems (POS, inventory management, e-commerce, m-commerce, WMS and vendor) is near-real-time, then the chances for disappointing the customer increase, or the thresholds mentioned above have to increase at the retailer’s cost.
Normalization of Data/ The Unified Data Model – The concept of normalization of data or ‘one version of the truth’, has been around decades, but is of particular relevance in unified commerce. The unified data model requires keeping a single view of customer information, customer purchase history, sales transaction history, product, and on-hand inventory data across the enterprise, and all of the processes query and update those same databases.
In-Store Process Changes –Fulfillment from stores calls for new in-store processes in which ‘reserved’ inventory is separate from ‘available-for-sale.’ Store associates have to check for fulfillment requests for their store on a periodic basis. Associates have to be able to quickly identify the product on the floor, retrieve it, tag it for the customer, and place it in a separate pick-up location. Last, they have to confirm to the system that they put the item(s) away for in-store pick-up, or not, or shipped it as requested.
Customer Notification – The system must be able to confirm to the online customer as soon as the order (or part thereof) either is ready for pick-up, or has been shipped.
RTS – The system should provide the retailer with the ability to allow an order to expire if it is not picked up within a retailer-defined number of days, but immediately notify the customer when it has, and then, the items returned to stock (RTS).
Order Cancellations – A well-architected, fully-integrated system should enable the retailer’s Customer Service function to cancel an order that hasn’t passed a logical point-of-no-return in the system. To do that, every order has to reflect its current status and must provide a vehicle to notify the process in question of the cancelation.
Uniformity of Packing Slips – The packing slips that customers see when they receive shipments should look the same, irrespective of the channel of origin.
Outsourced Fulfillment – If the retailer outsources fulfillment to a 3PL, the interfaces can be more complex. Systems that support APIs are desirable because ideally, information should be communicated in real time.
Compensation for Sales Performance – This is a much-discussed topic. Who is compensated how much for what, is an area that retailers have to address. A good system may provide the ability for the retailer to specify what percentage of what transactions is credited (for compensation purposes) to each function in the enterprise. This can be done also outside the system, using the transaction data as desired by the retailer’s financial management.
Because there is a huge sense of urgency to take on these activities as competition increases, of all the retailers needing to adopt an omnichannel strategy, not many are positioned to embrace this type of change, either because of thin resources or a general lack of knowledge of how to go about it. Waiting is not an option.
-By Bob Amster, Principal, Retail Technology Group