Other Voices: Aligning fulfillment operations with a changing channel mix
June 29, 2012
Editor’s Note: The following column by Jason Denmon, apparel/retail industry leader, Fortna, is part of Modern’s new Other Voices column. The series, published on Wednesdays, will feature ideas, opinions and insights from end users, analysts, systems integraters and OEMs. Click on the link to learn about submitting a column for consideration.
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Are you struggling with fulfilling orders across a number of channels? Fulfillment can get complex as customers expect a seamless experience across all channels. One of the key decision points is whether to manage fulfillment of each channel in shared or separate distribution centers. Here are some things to consider to help you get to the best solution.
Shared Fulfillment Operations
Operating out of a shared Distribution Center is most effective when the channels or segments have common order profiles (item type and quantity) that share the same inventory. But other common points may make shared fulfillment the preferred method:
• Similar service requirements (same day shipping, etc.)
• Shared suppliers or supply points
• Shared carriers
• Shared geographic distribution area
• Cross channel shopping within your customer base
• Same SKUs shipped across multiple channels
But there are other factors to consider. A shared operation may make sense if you see large volume shifts between channels (seasonally or over time), where one channel’s busy season is another’s downtime. Also, if you are testing out new channels, or experiencing a lot of changes in business requirements and service demands, it may make sense to house those channels together for the time being.
Separate Fulfillment Operations
Fulfillment with each channel in its own distribution center makes sense when the channels have unique requirements. For example, the following unique channel characteristics lend themselves to separating operations:
• Separate inventories and/or unique SKUs across channels
• Contrasting and/or diverse order profiles
• Distinct system requirements, such as OMS or WMS
• Contrasting equipment and material handling requirements
• Different processes and inability to share labor
• Varying shipment lead times
You might also want to consider separate operations if you have different P&Ls and inventory owners for each channel/brand, or if it is important that you optimize your performance by channel. Lastly, separate fulfillment operations are generally less risky as you are not relying on a single DC for all of your fulfillment.
Finding the Right Solution
Choosing what type of fulfillment operation is best for your company starts with a holistic view across the business, channels and segments. Getting stakeholder alignment across channels is a critical first step. Start by asking these questions:
• Where are the synergies and differences between channels?
• Are you struggling to respond quickly to market demand? Or dealing with excessive mark-downs and out of stocks as a result of allocation problems?
• How is the performance of each channel measured?
• What are the tipping points where you are willing to sacrifice the optimization of one channel for the overall benefit of the organization? How wide is your lens?
• What are the impacts of changing business requirements in your channel mix?
• Do you have true business/stakeholder alignment between channels with an overarching strategy that drives one consensus plan?
With an understanding of the full impact of multiple channels on your fulfillment operation, you can look for synergies and ways to deliver the seamless experience your customers expect.