Efficient inventory management and order fulfillment are not an easy proposition; with multi-channel sales and rising customer expectations further adding to the complexity. However, with behemoths like Amazon and eBay raising the bar, it is a matter of survival for retailers – catch up or phase out.
During 80’s and 90’s, when the internet was still in its nascent stage, the business (read commerce) was carried very differently. There was an etched product supply chain in place and there was no way to bypass this framework. The product would make its way from the manufacturer to the distributor, from the distributor to wholesaler, from the wholesaler to the retailer, and finally from the retailer into the hands of the consumer.
Things are very different now. We live in the world of anytime anywhere and anyhow commerce. The customers want their orders delivered to them as soon as possible (with customers willing to pay a premium for that). The rules of traditional supply chain framework are no longer viable and leading to issues like
- Lack of inventory visibility in real time,
- Difficulty in predicting the movement and exact placement of the product in the chain,
- Increased logistics and shipping costs,
- Increased operational costs because of manual errors and inefficient management of multiple distribution centers and warehouses,
- Improper demand forecasting leading to stock-outs or overstocking, and more.
What options do retailers have to tackle these challenges?
The new age retailers have been smart and innovative in adopting the following approaches to better combat the inventory and fulfillment challenges.
- Forward Inventory Placement: Refers to the practice of placing the inventory as close to the consumers’ location as possible by having multiple fulfillment facilities, each strategically placed according to the demand in and around that area.
- Cross Docking: In this method, the inventory is directly picked up from the semitrailer or the railroad trucks and then broken into smaller quantities, loaded onto the delivery vehicles and shipped to the home of the consumer. This effectively reduces the warehousing overheads and even increases the inventory turnaround time.
- Drop Shipping: Drop Shipping is a method where the retailer fulfills an order without actually stocking the product. A third party (could be a supplier or another vendor) near to the consumer’s location fulfills the order on behalf of the retailer.
- Buy Online Pick-up in Store (BOPS): This is another method which is changing the face of e-commerce. In this, the customer places and order on the e-commerce store and chooses to pick up the order from a physical location (say the brand’s nearest retail store) of his choosing.
Not all retailers choose to adopt all the strategies. The strategy you choose depends on the size of product portfolio, type of the product, relationship with suppliers, demand, and the retailers themselves. However, what remains same across is the motive – to streamline inventory management and order fulfillment while meeting the customers’ expectations.
Virtual Warehousing – How can retailers achieve the inventory management and order fulfillment precision?
If you are wondering, what it would take you to adopt the same, Virtual Warehousing possibly is the answer.
What is Virtual Warehousing?
Virtual Warehousing is a concept where all your distribution centers/ fulfillment centers are considered as a network and this network is then considered for fulfillment. When an order arrives, the network is consulted, irrespective of where the product is stored, to identify the best possible way to fulfill the order as quickly as possible.
This virtual warehouse (the network) is the key to having a 360-degree view of the inventory, which is key for inventory optimization. In addition, this helps you to fulfill orders faster meeting customer expectations set by players like Amazon.
Let us consider a European-centric example. A retailer with two fulfillment centers, in Finland and Netherlands, has to transport a truck full of stock from Finland to Portugal. However, the Finland distribution center does not have the sufficient inventory. Traditionally, the retailer will wait for sufficient inventory to arrive to fulfill the order or make multiple half-truck trips to Portugal. With virtual warehousing, the retailer will instead send half-truck load from Finland and cross-dock remaining stock from its fulfillment center in Netherlands. This not only decreases the inventory management and shipping costs but also helps in fulfilling the order faster.
Virtual Warehousing helps the retailers to strategically place the distribution centers close to the manufacturing units reducing the inbound transportation costs while keeping the inventory costs and delivery time in check. Other benefits include
- Helps in improving service levels,
- Helps in avoiding maintaining unnecessary safety stock,
- Helps in effective forecasting of inventory to counter erratic and seasonal demands,
- Helps in minimizing backorders, and more.
How can i95Dev help you realize your dream of virtual warehousing?
One of the most critical things you need for virtual warehousing is centralized inventory information and most ERP systems offer this functionality. However, with e-commerce taking the center stage for the bulk of your sales and decision making it would be great to have this functionality available in your e-commerce store.
We at i95Dev have experience working with clients across multiple industries. We have helped our clients improve their inventory management, streamline their business processes, drive operational efficiency, and increase customer satisfaction.