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© 2014 MHI®
Copyright claimed as to audiovisual works of seminar sessions and
sound recordings of seminar sessions. All rights reserved.
Sponsored by: Presented by:
Ed Romaine, Integrated Systems Design
Russ Devilbiss, Carter Control Systems
Best
Omnichannel
Practices &
Trends
What Is ISC
• Integrated Systems & Controls
(ISC) members are the Industry’s leading
suppliers of integrated material handling
and controls systems. They supply
systems worldwide and in virtually every
major manufacturing and distribution
sector.
Today
• Defining Omni and Multi Channel and
Ecommerce Practices
• 8 Trends & Their Impact on Us
• 6 Steps in Implementing Omnichannel
• Some Examples to Learn By
What Is Omnichannel Distribution?
• “Omnichannel retailing is concentrated on
a seamless approach to the consumer
experience through all available channels.” » Wikipedia
• Ecommerce sales focus on internet channel fulfillment.
• Multichannel focuses on ecommerce and retail stores.
• Omnichannel sales focus on the entire opportunity &
experience.
Omnichannel Success!
Customer Experience
Executive Management
Science of ROI
IT Engagement
Operational Excellence
Marketing
Customer Care
• All Assets, Channels
& Touch Points Work
Together
• Create a Seamless
Customer Experience
US Census
Bureau
A Look at Our Future…
Omni-Channel Trends… What Customers Want & The Impact On Logistics:
1. Same/Next Day Delivery
2. Lots and Lots of One Line Orders
3. Vast & Seamless Inventory to Choose From
4. Buy & Fulfill As One…
Not Disjointed By
Function, Location or
Business Unit
5. Flash Sales
6. Free Shipping &
Returns
7. Delivery Time is Key
8. Subscriptions
Same/Next Day Delivery
• Proximity to Customer – Moving away from East
& West Coast Only
– Ability to ship from each region
• What Structure? – DC’s
– Stores & DCs
– Partners & DCs
– Pop-Up Stores & DCs
– Depends on Your Business
Source: MCM Outlook 2013
Store Interaction is Important • 62% want to buy items online and make returns in-store
• 44% want to buy online and pick up in a store
Source: 2013 UPS Pulse of the Online Shopper
Same/Next Day Delivery
• Technologies Needed:
– Software
• WMS, TMS, WCS, CRM,
ERP and More!
– Hardware
• Goods to Person
• Manual
• Automated
– Delivery Methods
• FedEx & UPS
• Drones
• Private Fleet
One Line Orders
• Say Goodbye to 3.0 Lines/Order
• Picking Costs Going Up!
– New Picking Methods
• Faster Picking
• Sortation Issues
– New Packing Methods
• More “Standard” Box Sizes
• More Statements, Invoices and
Documents to Insert
• More Orders/Boxes To Fill & Ship
Vast & Seamless Inventory
• You Are Expected to Have
101% of Inventory
Available At All Times
• Inventory Decisions: • Where Do You Locate It?
• How Do You Track It?
• How Do You Fulfill It?
Seamless Purchasing to
Fulfillment & Returns P
U
R
C
H
A
S
I
N
G
F
U
L
F
I
L
L
M
E
N
T
Call Center
Mobile
Websites Stores
Flash
Sales
Mail Order
Kiosks &
Vending
Machines
Pop Ups Stores
Outlets
Factory
Retail &
E-commerce DCs
Consumer
C
H
A
N
N
E
L
S
Flash Sales • Very Low Price on
Specific SKUs for a Specific Short Period of Time – Strategic Against
Competition
– Great Way to Blow Out a SKU
• Important Considerations: – Communications
Between: Sales, Marketing, Operations is Vital!
– Moving Flash Sale Items Forward To Be Picked Quickly
– Understand What Time and Resources Re-Stocking Might Involve (if needed)
Subscriptions • Returning & Repeat
Customers Are Vital
• Predictable & Recurring Sales
& Revenue
• Keeps in Touch With Loyal
Customers
• Earns Word of Mouth
• Recurring Opportunity to Sell
Additional Products
• Streamlines Operations
41% of Revenue = 8% of Visitors
Free Shipping & Returns
• Strategic Business
Strategy
• Made Popular By
Amazon
• A Primary Driver of
Ecommerce
• Actions To Reduce
Warehouse Costs:
– Automated Order
Picking
– Always Having More
Pickers Than Packers
– Reduce Shipping
Costs
– Reduce Labor &
Inventory
Shipping Costs Lose Sales
Source: 2013 UPS Pulse of the Online Shopper
Warehouse & Stores
Are Vital to Sales…
Source: 2013 UPS Pulse of the Online Shopper
Six Steps To Start Success
“Omnichannel is a Path Not A Destination”
-- Macy’s CEO
1. Find Inventory Sharing Opps
• Look Across The Channels For Commonality in
Inventory and Order Profiles
– Retail Stores
– Ecommerce
– Wholesale
– Manufacturing
– Spare Parts
– Kiosks
– Pop Ups Stores
– Outlets
• Example:
– Inventory: Combining Manufacturing With
Spare Parts & Distribution
– Order Picking: Combine Ecommerce, Retail and Wholesale
2. Identify Best Operating Model
• Develop An Operating Model To Exploit
The Similarities In Order Profiles
– Order Routing
– Order Fulfillment Locations
– Other Key Fulfillment Processes
• Velocity of specific SKUs
• Seasonality of specific SKUs
• Quantities of specific SKUs per order
3. Chart Functions vs. Processes
• Forget What You Think You Know!
• Function: List For Each Channel
• Process: List for Each Function
• You Will See Synergies Between Channels
• Receiving • Quality Control • Split Case Picking
• Full Case Picking • Reserve Storage • Replenishment
• Buffer • Staging • Packing
• Shipping • Returns • Many More!
• Batch Pick • Sortation – Shoe • Auto Doc Insertion
• Cluster Pick • Sortation – Tilt Tray • Auto Insert
• Single Wave • Print & Apply • Semi-Auto Taping
• Paper Pick • Box Erector
• Many More!
4. Optimize Flow Paths
• Connect The Flow From The Processes &
Functions To Optimize Synergies
– Use same picking packing and shipping
systems for multiple channels
• Big Data, Social, CRM Meet WMS & ERP!
– Visibility by combining data in multiple
databases into one view! Understand your
customers and their ordering preferences and
requirements
5. Implement Function-Specific
Technologies
• Identify and implement technologies for
the pick, pack and ship process
• The technologies must support your
operating model and flow paths
• Create an analytical criteria matrix to aid in
the decision making process
Decision Criteria Matrix
>
Criteria Function
or Zone Technologies
Factor
Weight Factored
Value
Analytic
Winner
6. Divide, Conquer & Calculate
• Omnichannel Is A Path Not A Destination!
• Use Technology Neutral Partners
• It Can Take Years
• Do An ROI Analysis and Start With The
Low Lying Fruit
• Measure & Evaluate
• Mitigate Risk
Real World Examples &
Lessons
• Orders are filled using stores plus storage warehouses and ecommerce fulfillment centers
• "We started ship-from-store as a test. It has exceeded every expectation.”
• Shipping from stores provides faster delivery of online purchases "at very low cost.”
• Two-thirds of the U.S. population live within 5 miles of a Walmart
• 10%+ of items ordered on Walmart.com are shipped from stores, and most are delivered in less than 2 days.
• Delivery distances from stores are much shorter saving on shipping costs
• “Showrooming” was killing Best Buy
• Turnaround started late 2012 when the new CEO’s goal was to use their 1,400+ locations as weapons not a cost liability
• The justification: – 1 billion online visits a year
– 2% to 4% of orders were out of stock in the e-commerce warehouses
– 80% of out of stock inventory was in its physical stores
• Pundits predicts ominichannel will generate an extra $5.8 billion in sales and $168 million in profit
• Best Buy shares have more than tripled
• "Some people talk about Amazon with their 100 distribution centers, God bless them. We have 2,600 distribution centers," said Gap Chief Executive Glenn Murphy (referring to his stores)
• GAP launched ship-from-store in 2012.
• Stores have a lot of unsold inventory. Online orders are routed to these locations. This helps reduce: inventory costs and costly discounts of otherwise unsold inventory WHILE increasing sales and customer satisfaction
• One of the first implementers of omnichannel in 2012
• 2013 - Same store sales +3.7% Of which 3.1% came from
omnichannel sales!
• Lessons Learned:
– Order picking is done in the front of the store with associates
who are heavily trained
– Investing aggressively in RFID for replenishment and will have
50% by 4Q 2014
– Inventory in the warehouses and on sales floors are put online to
improves sales, reduces waste and shipping costs
– Gearing up for same day store pick ups and deliveries
– Returns are now an opportunity to re-sell items quickly for the
stores
30,000 Pound Gorilla In The Room • Amazon ($67B) & Your Competitors
• They Are Looking For Growth!
– Will They Enter Your Market?
• Medical Supplies
• Small B2B Parts
• Aerospace Parts
– Best Defense Is
A Good Offense
• Plan Your Attack!
• Implement Today!
• Mitigate Risk!
• Have Patience!
I Want YOUR
Business
Members of ISC
• AGiLE Business Media
• Banner Engineering Corp.
• BEUMER Corporation
• Carter Control Systems, Inc.
• Cinetic Sorting Corp.
• CubiScan (by Quantronix, Inc.)
• Dematic Corp.
• Egemin Automation Inc.
• Integrated Systems Design
• Intelligrated, Inc.
• Intralox, L.L.C.
• JBT Corporation (formerly FMC Technologies)
• JDA - The Supply Chain Company
• Knapp Logistics Automation
• Lenze Americas
• Material Handling & Logistics
• MIAS Inc.
• MURATEC - Logistics & Automation Division
• OCS Checkweighers, Inc.
• Retrotech, Inc.
• Rockwell Automation Control Systems
• Schneider Electric
• SICK, Inc.
• SI Systems
• SpanTech, LLC
• St. Onge Company
• SWISSLOG Logistics, Inc.
• System Logistics Corporation
• TGW Systems
• Transbotics Corporation
• viastore systems, Inc.
• Westfalia Technologies, Inc.