Omni-channel warehousing model gaining traction

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As retailers venture to explore the most expedient and integrated solution for warehousing and distribution in order to meet customer expectations, omni-channel warehousing model can be a go-to alternative for automated order fulfilment in e-commerce and retail sector alike.

Saurabh Sharma

Going by the convention, there is one single region-specific warehouse attributed to a group of retail stores that exist in the vicinity and another which is used by their E-commerce portal. Nowadays, companies have come to an understanding that in order to keep up with the ultra swift delivery options, offered by major E-commerce players, they are going to need a solution that can serve their purpose in the most suitable manner. Instead of running one warehouse per channel, companies are gauging the perks of operating omni-channel warehouses that interact with each other seamlessly. They are basically designed more on the lines of fulfillment centers.

Omni-channel retailing involves seamlessly integrating the customer experience across all interaction channels– in-store, on the web, and on mobile devices. As customers are likely to use almost every viable and economic buying channel at their disposal, companies need to be omnipresent. The buying process is no longer predictable. It is dynamic and sporadic, driven by increasing internet and mobile use, and it has more ‘touch points’ than ever.

The Omni-channel business model

Many retailers have already started to show their predilection towards the strategy by integrating their online and stores channel to leverage their vast customer reach and the convenience of internet shopping to boost revenues. The retailers’ omni-channel retail capabilities were scored on a four-point scale spanning four key categories of online experience, channel consistency, in-store pickup, and in-store experience.

According to a report by Market and Markets entitled India Omni-channel and Warehouse Management Systems Market Type (Omni-Channel Solutions and Warehouse Management Systems), Component (Hardware, Software, and Service), Deployment Type (On-Premise and On-Cloud), and Vertical – Forecast to 2024, India’s omni-channel and warehouse management systems market size is expected to grow from USD 231 million in 2019 to USD 488 million by 2024, at a compound annual growth rate (CAGR) of 16.2 per cent during the forecast period.

Worldwide, leading retailers have deployed several omni-channel initiatives. For example, Walmart offers pay-with-cash option which lets customers order merchandise online and pay with cash at its stores. This permits customers who do not own a credit or debit card to buy online, which boosts online traffic.

Sporting goods giant Decathlon is yet another example who has managed to set up the best omni-channel retail and digital store capabilities in Singapore and planning to expand it in the retail stores across India. French retailer has equipped its stores with automated inventory management tools like RFID tags and a dedicated service counter to deliver efficient in-store pickup. It also provides cross-store inventory visibility for associates and customers and its option for customers to self-checkout with in-aisle kiosks.

With 70 large, warehouse-like omni-channel stores, Decathlon’s product pricing is about 30-40 per cent  lower than competing products since it sells everything from running shoes to mountaineering equipment under its own brands. This also helps the retailer earn higher operating margins.

Similarly, office supplies giant- Staples has launched a ‘buy online, pick up in-store’ program to fight declining in-store sales and profits.

Demand driving advancement in Technology

Customer expectations are touching new heights; they expect to receive their goods on-time and in perfect condition. This expectation is met inside the distribution center where the appropriate systems and solutions have been deployed. Customers expect to be able to check the status of their orders from the time of ordering, throughout picking and packing, to the point of delivery. Every step of the fulfilment process must be handled efficiently, accurately, consistently and cost-effectively.

According to Ushasri Tirumala, Senior VP & General Manager at Manhattan Associates “Talking about Omni-channel retail, customers expect new alternatives in fulfilment such as buy online, pickup in-store or ship from store. Effectively this transforms a traditional retail store into a fulfilment centre. This requires optimization of store inventory and fulfillment to deliver on customer expectations. Retailers also need to confidently offer these flexible fulfilment options that meet profitability targets too.”

Tiruamal says, “Recent advancements in robotics and automation have transformed warehouses. Every resource – man and machine – needs to be orchestrated through efficient workflows to maximise performance. Modern warehouse execution systems need to be embedded within a Warehouse Management System (WMS) to efficiently and seamlessly orchestrate workflow across the full spectrum of resources.”

In a traditional supply chain, to move goods from the factory to the end customer, one needs to go through a multi-level supply chain built up of a factory warehouse, an international warehouse, distribution centers throughout the world, and stores. The international warehouse handles mostly full pallets. So the distribution center receives huge pallets of single products that then have to be unpacked and shipped to their respective destinations. Finally, the store sells the products by the piece. Therefore, if a retailer wants to ship goods straight to a customer (e.g., because of an online order), the only place where all the products are in stock is the store level. All this makes the adoption of technology, robotics and artificial intelligence almost indispensable.

Go Sport is another French global brand in sportswear, equipment and fitness lifestyle, in association with Tablez, a retail group in India that has recently set foot in India and driving demand through digital and experiential marketing initiatives.

According to Adeeb Ahamed, MD, Tablez Retail, “Go Sport brings to the table a variety of international and home-grown brands for its consumers, which no other multi-sport brand store has. The brand’s store format differs in comparison to other multi-brand stores”.

The brand plans to open 20 such stores by the year 2024. It will double the stores if the responses for the first couple of stores is good in India.

Speaking on the revenue expectations, Ahamed says, “The total sport branded segment is around $3.3 billion globally and is supposed to grow around five billion next year and further 9 per cent year on year. But we are looking to get minute numbers compared to the international field because the consumer’s mindset in India differs from abroad. The Indian consumer looks for a value in the product.

Vivekanand, Country Manager, India & APAC, GreyOrange is of the opinion that with rising expectations over the years, E-commerce has been compelled to upgrade to a great degree of automation to stay competitive and provide faster turnaround.

Vivekanand says, “For instance, in a warehouse, technologies such as AI and robotics are being deployed to handle millions of parcels to be shipped every day. These technologies offer a clear cost-benefit in terms of faster order fulfilment and delivery to consumers, higher accuracy in order consolidation, reducing returns and holding leaner inventory.” Also, with the implementation of Goods and Services Tax (GST), players are looking at larger state-of-the-art warehouses which would be about five to ten times of their current facilities, making automation a critical part of the supply chain process, believes Vivekanand.

Automation is bound to have a physical impact on the warehouse; new areas will need to be set up for packing stations and consolidation. Revamping traditional warehouse processes to handle web-based orders is just one of the many impacts. In some cases, distribution centers will need to be relocated to cover a wider portfolio of goods. Apart from the physical aspect, there will be a significant impact on warehouse IT processes.

Impediments to restructuring

Any type of fundamental reform will require transformation in the entire supply chain infrastructure, therefore restructuring a traditional warehouse is undoubtedly a rigorous and capital intensive process that demands a thorough knowledge of omni-channel system of delivery. According to McKinsey & Company, the average supply chain is 43 per cent digitised, and those that have achieved digitalisation can increase annual growth of earnings by 3.2 per cent.

Unfortunately, supply chain leaders still experience a disparity between the actual gains and potential gains. Technology gaps have become commonplace as supply chain technologies were put on the proverbial back burner after an initial burst of innovation and implementation. There are many other challenges associated with enabling omni-channel warehouses, a few of which are enlisted below:

High Upfront Cost:  Initial cost of robotics and automation uptake peters out stakeholders from making any further investments.

Lack of Inventory Visibility and Metrics: To address this challenge, businesses must develop an efficient order fulfilment process through the use of a fine-tuned WMS.

Fragmented Supply Chain Processes: Larger companies generally have many private warehouses and distribution centres, managed by different in-house and outsourced operators that run on different systems and tactics.

Unreliable Order Fulfilment Processes: An unreliable order fulfilment process can lead to shipping delays, which can deter customers from doing business with that company in the future.

Ignorance of Technology: In order to match the global standard, traditional warehouses still need to grasp the latest trend in technology.

Discussing the viability of autonomous robots and AI in omni-channel environment, Vivekanand elucidates, “Autonomous Mobile Robotics (AMR) systems ensure the consolidation of multiple orders efficiently and help them reach the consumers within the expected timeframe. Capable of operating 24×7, this adds to improved productivity, less returns and minimal loss of sales. By reducing multiple touch-points in a warehouse, helping in inventory management and storage, replenishment and order picking in fulfilment and distribution centres, automation is helping enhance productivity, reduce costs and help companies achieve greater Return on Investment (ROI) by optimising these various processes.”

Order fulfilment is yet another aspect to be taken into account while contemplating on the refurbishment of traditional warehouses.

Tirumala says, “The traditional order fulfilment approach in the DC, known as ‘wave processing’ which is used by many to process large batch distribution orders, orders are picked in batches, based on assumed processing capacity. This worked satisfactorily for traditional wholesale channel order fulfilment. However, for an omni-channel operation, each order may be unique with multiple small shipments involved. This new paradigm shift requires a different strategy known as waveless order fulfilment.”

“Waveless picking reimagines traditional order fulfilment logic and offers a more flexible, E-commerce-centric fulfilment method. It continuously evaluates the order pool and automatically releases work based on variables such as order priorities and facility processing capacities. As soon as there is capacity in the fulfilment operation, new orders are processed. It is extremely valuable to today’s distribution centres, as the core science-driven methods support continuous analysis and real-time execution strategies,” Tirumala informs.

The transition towards Omni-channel

As days of dedicated warehouses for E-commerce are in passing, warehouse managers must understand the necessity of new systems and processes to create omni-channel warehouses or remodeling the conventional ones in order to stay competitive in the E-commerce driven supply chain market. Supply chain players that understand the challenges of warehouse transformation and follow the right best practices will succeed.

Warehouse robotics may form a major component of the automation sector globally. The Indian warehouse robotics market is projected to grow at a double-digit CAGR till 2024. Increasing technological advancements, rapid penetration of automation in warehouses, the fast-growing E-commerce; a whopping $2.3 trillion market today, and the need for enhanced quality and reliability in a warehouse are aiding to the growth of Artificial Intelligence (AI) and robotics.

Going forward, the advent of positive omni-channel experience will continue to evolve under the influence of intermittent consumer demands. The profitability of an enterprise will always depend on key success factors such as well-orchestrated execution, availability of real-time information/analytics, optimised inventory, leveraging technology and the ability to fulfil the orders promised.

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