By Fabrizio Brasca
Australians spent $4.5 billion on domestic online retailers in 2011-2012 alone and this number has been growing steadily. Consumers have grown to expect a consistent and seamless shopping experience, regardless of whether they are connecting with a retailer via store, website, catalogue, mobile phone or social media.
Fulfilling online purchases by parcel freight is putting pressure on margins as consumers’ reliance on e-commerce grows. Additionally, as online retailing becomes more of a commodity, retailers will be under greater pressure to offer free shipping — especially during holidays — to incentivise consumers to shop with them.
Many retailers are realising their transportation and fulfilment processes are simply not agile enough to profitably serve the demands of today’s all-channel consumer. As companies look for ways to reduce costs, retain service levels and create agility, transportation can no longer be viewed as an ancillary function.
Adopting a holistic approach
E-commerce and stores can no longer be serviced by different fulfilment channels. Instead, retailers need to look at the network in its entirety to identify multiple, cost effective ways to fulfil a customer order.
For instance, this may mean looking for opportunities to fulfil an online purchase via store pick-up instead of home delivery. In that case, the package could be added to a truck that’s scheduled to deliver inventory to the store on a weekly basis — a more cost-effective fulfilment option than incurring a parcel freight charge.
The value of incremental planning
The ability to plan incrementally and react as store and online orders change is critical to profitably meeting the needs of the all-channel consumer.
For example, say you have numerous orders that you need to fulfil to a specific city or region. If you have the ability to aggregate your freight, you may decide to deploy a zone skipping strategy. Instead of shipping these orders direct to consumer, the aggregated orders can be put on a truck to a local depot, and then delivered via parcel to the consumers.
Another key facet of incremental planning is the ability to re-plan and re-route as store and online orders get cancelled or added. In order to maximise the value from this dynamic planning process, it’s important for retailers to view the entire network — all the way downstream to the warehouse operations.
Mastering all-channel execution
The complexities of global logistics, the volume of data involved and the frequency of change make it difficult to gain sufficient agility and maximise potential value using spread sheets and manual processes. The good news is that retailers can gain substantial advantages by replacing less efficient, multi-site transportation functions with sophisticated technology that enables them to manage their supply and distribution networks in a more agile and cost-effective manner.
The ability to incrementally plan and re-plan as exceptions occur is the key to mastering all-channel execution, and enables retailers to identify what mix of risk, cost and service for each shipment will drive the greatest value across the organisation.
Fabrizio Brasca is the vice president of global logistics at JDA Software, a company describes itself as "a leader in global supply chain management, offering a broad portfolio of integrated planning and execution solutions".