Under pressure to fill, quickly and cost-effectively, an increasing number of orders coming in from multiple channels, the distribution industry is undergoing profound changes. Multi-channel distribution has gone mainstream. The term that so recently was not widely used is now part of our everyday vocabulary, but figuring out the most cost-effective response to its logistical challenges is ongoing.
In this multi-part series, we will take a look at how the industry is dealing with the rapidly changing environment of multi-channel distribution. Although commonly considered a retail phenomenon, a study by the Peerless Research Group shows distributors and manufacturers across the board are grappling with the increasingly complex nature of filling orders coming in from multiple channels, as well as delivering those same orders in the most efficient manner.
The frustration of one warehouse and distribution manager can be felt in a comment cited by the Peerless study:
We face the issue of duplicate orders. A customer will place an order online and then not be sure if it went through, so they call our call center and make an identical order and we end up shipping and invoicing twice.
More than half of the surveyed companies identified reducing costs associated with order fulfillment as their top concern, closely followed by fulfilling more orders, faster, and at lower cost in addition to improving order fulfillment and distribution efficiencies.
As pointed out by one blogger, a customer may eye a product in a store only to go home and search the Internet for a better deal before making the purchase online. The product which is readily available down the street will according to the online transaction be shipped from a distribution center halfway across the country.
Unless the company and its fulfillment partner have a system of communication in place to redirect the order to the nearby store, the company will have to pay a high price for shipping, not to mention what would happen if the customer tires of waiting and cancels the purchase. What may seem complex today is bound to grow even more complicated as conventional sales methods are quickly losing ground to mobile e-commerce. Not only will distribution centers have to fill more orders, customers expect to receive their purchases at a faster rate, adding to the challenge of keeping costs in check.
The following figures from the study exemplify how the distribution business is expected to change within the next two years:
- While 41% of companies today consider internal/salesperson as the most important sales channel, followed by traditional e-commerce (laptops, PC) and call centers, 47% predict mobile e-commerce on tablets and smartphones will soon claim the top spot.
- Revenues from online/website sales are expected to rise from 20% to 29%, overtaking brick-and-mortar storefronts as the largest revenue maker.
- Some 76% of companies plan on providing overnight delivery, up from the current 69%, while 67% intend to offer same-day delivery of local orders, up from 46% today.
The changes come with rising costs, mainly for transportation, labor, and packaging and material. To meet these challenges, companies are applying a range of solutions to be explored in upcoming posts.
What do you consider the main challenges and, let's not forget, opportunities of multi-channel distribution?