Thought Leader: How Omni-Channel Commerce is Changing Traditional Supply Chains

Omni-channel commerce from a mobile device or computer.

Image of John Sell, Vice President of Retail and TransportationFrom Inbound Logistics: a Q & A Session with MD Logistics Vice President, John Sell

With the introduction of online (e) and mobile (m) commerce, consumers are now more comfortable than ever making purchases from any place, at any time, on virtually any device. This shift in consumer behavior has changed how goods and products flow through the supply chain to the end user. As a result, supply chain partners are now required to respond to not only the needs of brick-and-mortar stores, but also to e-commerce and m-commerce customer demands. Omni-channel commerce encompasses these various ordering and fulfillment channels of the supply chain.

Q: How has omni-channel commerce changed the traditional supply chain?

A: The traditional supply chain model revolved around transporting bulk product to brick-and-mortar retail stores or distribution centers that would handle small volumes of direct-to-consumer catalog orders. The ease and convenience of online shopping altered this model by significantly increasing the amount of direct-to-consumer orders.

As a result, retailers are mitigating the high carrying and employment costs associated with brick-and-mortar retail stores by emphasizing online, direct-to-consumer shopping.

Additionally, buyers are no longer content to wait for inventory to arrive in a store. Instead, they will search the Internet and find a competitor offering quick delivery. Shipping time is a decisive factor for buyers making an online purchase. This means a proactive and responsive supply chain is the key to maintaining market relevancy.

To counteract the impersonal online shopping experience, companies must now reflect their brand identity in every part of order fulfillment. From customized packing slips to gift-wrapping, the most effective supply chains highlight brand personality. Today, companies face the task of fostering loyalty among customers who have never stepped into a store.

Q: How has omni-channel commerce changed the supply chain from a provider’s perspective?

A: One major adjustment has been responding to workflow changes. Online orders spike at the beginning of the week, reaching a peak on Monday and slowly declining through the middle of the week. Prior to the rise in omni-channel commerce, weekly order volumes were not nearly as front-loaded.

We have also seen an increase in small pick-and-pack orders. Before online shopping boosted direct-to-consumer shipping, manufacturers mostly shipped bulk orders to warehouses or retail distribution centers. Today, e-fulfillment solutions focus on effectively moving small pick-and-pack orders of one or two items.

In response, traditional parcel providers such as UPS and FedEx are developing postal solutions that accommodate lighter parcels with quick shipping options. The traditional supply chain model was built upon moving large shipments exceeding 30 pounds. Today, companies are tasked with fulfilling pick-and-pack orders that average one pound. This means postal services, and not traditional freight carriers, may offer the most economical transportation rates.