Most retailers’ critical back office systems date from a time when brick and mortar stores dominated and when digital channels were treated as self-contained stores. But now that digital commerce continues to blend with traditional brick and mortar retailing, it’s time to rethink how “Unified Commerce” data is processed in the back-office.
In this blog series, we’ve been examining each of the cornerstone back office systems to reveal the issues in integrating them to a world of unified commerce. This blog focuses on the new challenges Unified Commerce places on Logistics software.
What’s different about Unified Commerce Logistics?
Before ecommerce hit the industry, retailers focused on gaining the greatest possible efficiencies in flowing merchandise to their store locations. Execs used to say “you can’t sell it if it sitting in your warehouse”. To that goal, retail execs invested heavily in new distribution centers, transport solutions, sortation systems, physical handling equipment, high speed conveyors, scanners and so on. At the same time, retailers brought new process changes such as cross dock and floor-ready shipments, source marking, Advanced Shipping Notices, Appointment-based receiving, and Prepacks.
However, just as retailers were perfecting their express train from suppliers to stores things started to get more complicated. They started taking orders direct from customers over the phone, by fax, and ultimately from their digital commerce sites. Suddenly the Express Train to the stores needed to accommodate a whole bunch of unscheduled local stops along the way, not only to hundreds of stores but to tens of thousands of individual customers. This massive shift in requirements calls into question virtually every engineering feature of their warehouse management systems that were fundamentally designed for a different era.
How did we get here?
In the early years of digital commerce, most retailers chose not to make fundamental changes to their flow-through logistics strategies. They either outsourced fulfillment to a third party or carved out some warehouse space for poorly automated, labor-intensive customer order picking and shipping. Data integration was simply not a priority.
However, with the steady growth of digital commerce and the advent of Unified Commerce, retailers are finding that they must abandon their initial strategies for fulfilling customer orders and that they now need to re-engineer their Logistics systems to integrate customer order activities with highly efficient flow-through.
This brings the focus squarely back on data integration and that remains true whether you are putting in a new warehouse management system or whether you are reconfiguring the old system.
Four new requirements
We’ve found that in our integration work there are four overriding requirements where intensive data integration is required.
1. Dynamically updated, accurate pooled warehouse inventory.
Unified Commerce retailers must determine which of their locations is the best for fulfillment for each customer order. This means that the logistics system must be fed by data from Order Management. It also means that the logistics system must have access to information about product and perpetual inventory (this information usually comes from Merchandising and Product Life Cycle systems.) These pooled inventories must be maintained at the highest accuracy levels, which usually requires cycle counts.
2. Optimized order picking
To gain some measure of efficiency in order picking, retailers are now anticipating the patterns of customer orders so they can optimally layout their bins and order picking process. This requires a constant information feed from purchase order management (merchandising), assortment planning and analytics.
3. Small shipments direct to consumers
In contrast to the bulk store shipment from the flow-through approach, individual customer shipments are small and very time sensitive. The outbound side of the Warehouse Management System (WMS) must combine Unified Commerce orders fulfilled by the warehouse with the bulk shipments to stores. Therefore, a tight integration is required between WMS shipping features, Order Management (OMS) and Customer Relationship Management.
4. Labor costs and productivity
In the flow-through world Warehouse Management Systems typically tracked specific labor tasks by counting cartons as they whizzed by machines that scanned, sorted, and staged for shipment. Now with Unified Commerce, retailers must measure productivity by item and individual workers. Integration processes must pass this information to the Workforce systems, Stock Ledger, and Analytics so Logistics managers can make plans for the intense seasonal peaks with digital commerce.
The Three Biggest Challenges of Unified Commerce Coordination:
1) Never fail interfaces
Unified Commerce Logistics systems are even more mission critical than traditional flow-through models. Successful operations require many more flows of information which must run with great reliability. This puts the integrators focus on system management including a sold approach for alerts, fail over, and error resolution.
2) Leveraging information to drive productivity
The fundamental challenge Unified Commerce retailers must face is deciding how much of their digital business should be fulfilled from either their warehouse, their vendors, or their stores. This decision can be made easier by some hard, cold facts measured within the Logistics systems and filtered by customer service and merchandising points of view.
3) Product attribution
Often the physical characteristics of the individual product has a significant impact on the cost of fulfillment and delivery. These include weight, packaging, size, durability as well as tendency to damage. It is vital that the data integration specialist ensures that product attribution schemes are well supported throughout the information flows discussed.
Our Recommendations
1. PRIORITIZE YOUR LOGISTICS INTEGRATION with your most talented resources who will consider all of the subtle process changes that Unified Commerce brings.
2. Design your Logistics integration to MAXIMIZE UPTIME AND RESPOND QUICKLY to every abnormal condition. It is as mission critical as any component of Unified Commerce landscape.
3. Capture every element of LABOR COST because only then will you learn the actual expense of Unified Commerce.
