Navigating the Speed of Omnichannel Order Fulfillment: A Guide for 3PLs

The Evolving Retail Landscape

The retail industry has undergone rapid transformation over the last few years, particularly accelerated by the COVID-19 pandemic. This period has seen a dramatic shift in consumption patterns, channel preferences, and heightened customer expectations for speed and convenience. In today's market, the ability to minimize click-to-customer cycle time is paramount, setting a new benchmark for retail and direct-to-consumer brands. For third-party party logistics (3PL) providers and warehouses looking to secure new business, understanding these dynamics is critical. 

Table of Contents

The Evolving Retail Landscape

The Imperative of Speed in Omnichannel Retail

Challenges in Accelerating Delivery

Leveraging Stores for Fulfillment

The Role of Technology in Inventory Management

Strategic Moves for Retailers and Why 3PLs Should Care

Beyond Speed: Enhancing Customer Experience

Conclusion

The Imperative of Speed in Omnichannel Retail

Recent studies highlight the critical role of speed in order fulfillment. Nearly 50% of omnichannel consumers will abandon their purchase if delivery times are too long. Additionally, over 92% of U.S. online shoppers now expect free two- to three-day shipping, but only about 20% are willing to pay extra for faster delivery. This expectation creates a challenging dichotomy for retailers: they must enhance delivery speeds without compromising profitability, which is already strained by the high costs of omnichannel fulfillment, accounting for 12 to 22% of sales.

Challenges in Accelerating Delivery

Amazon has set a high standard for delivery speed, reducing from over eight days in the early 2000s to two-day shipping. Today, some markets achieve same-day delivery, overnight and 2-hour shipping. Other retailers are striving to match this benchmark. Surveys indicate that 80% of apparel, hard goods, and specialty retailers aim to offer two-day or faster delivery within the next two years, and 45% are targeting one-day click-to-customer lead times by 2025.

Achieving these ambitious goals requires navigating the complexities of the supply chain, where even seconds count. Fulfillment operations typically require four to eight hours for picking and packing, and parcel carriers add additional time for final mile delivery. These tight cycle times demand precision and coordination across the entire supply chain. As a 3PL, showcasing your ability to manage these complexities can position you as a valuable partner for retailers.

Leveraging Stores for Fulfillment

Many retailers are turning to their stores for fulfillment and pickup, utilizing existing infrastructure to boost inventory productivity, speed to customers, and reduce markdowns. However, this approach presents its own challenges:

Inventory Accuracy:

• Stores often have lower inventory accuracy rates (72-90%) compared to distribution centers (over 99.5%).

SKU Complexity: 

• Managing a wide assortment, including channel exclusives and third-party products, can result in margin-eroding split shipments.

Demand Forecasting:

• Accurate demand forecasting and distributed inventory placement are crucial yet difficult to achieve.

Picking Costs: 

• In-store picking can be 1.5 to 2 times more expensive than picking at dedicated fulfillment centers.

Execution Quality:

• Stores, not originally designed for fulfillment, often struggle with managing exceptions, ensuring accurate picks, and maintaining cycle times during peak periods.

By addressing these challenges with innovative solutions, 3PLs can attract retailers looking for effective omnichannel strategies.

The Role of Technology in Inventory Management

Effective inventory management is the cornerstone of a successful omnichannel fulfillment strategy. Technology plays a pivotal role in optimizing inventory levels, ensuring accuracy, and meeting customer demands swiftly. Collaborative Visibility Platforms that provide advanced inventory management capabilities can offer several key benefits that 3PLs can leverage to attract retailer business:

Real-Time Visibility

Supply chain technology platforms offer real-time inventory visibility across all sales channels and fulfillment centers. This comprehensive view allows retailers to monitor stock levels accurately, reduce the risk of overselling, and ensure that products are available where and when customers need them.

Advanced Demand Forecasting

Utilizing advanced algorithms and machine learning, these systems enhance demand forecasting accuracy. They analyze historical sales data, seasonal trends, and market conditions to predict future demand, enabling better inventory placement and reducing the likelihood of stockouts or excess inventory.

Automated Replenishment

Automated replenishment processes ensure that inventory levels are consistently optimized. This automation reduces the manual workload on staff, minimizes human error, and helps maintain the right stock levels across all locations.

Streamlined Order Management

Platforms streamline order management processes, integrating seamlessly with various sales channels, consolidating orders, and ensuring that they are fulfilled from the most efficient location. This capability reduces fulfillment time and improves overall efficiency.

Integration Capabilities

Robust integration capabilities are crucial for 3PLs in today's fast-paced retail environment. Supply Chain Platforms that allow for rapid integration with retailers' existing systems provide a seamless connection between inventory management, order fulfillment, and sales channels. This ensures a cohesive and efficient operation.

Customizable Integrations

Flexibility to customize integrations based on customers' specific needs ensures that each retailer can optimize their processes according to their unique requirements. By providing control over integration, these platforms enable 3PLs to tailor solutions that align perfectly with the operational workflows of their clients, fostering better collaboration and performance.

Integration Control for 3PLs

Giving 3PLs control over the integration process allows them to tailor connections to meet specific customer needs, enabling fast integration and ensuring high-speed demands are met. Customizable integrations ensure that solutions align precisely with operational requirements, positioning 3PLs as invaluable partners in omnichannel retail.

Integration with Robotics and Automation

Platforms that integrate with robotics and automation systems within fulfillment centers enhance picking, packing, and shipping processes, increasing speed and accuracy. Automated systems handle repetitive tasks, allowing human workers to focus on more complex and value-added activities.

Data-Driven Insights

These platforms provide data-driven insights that help retailers make informed decisions about their inventory strategies. Insights can highlight trends, identify inefficiencies, and suggest improvements, enabling continuous optimization of inventory management practices.

Strategic Moves for Retailers and Why 3PLs Should Care

How Supporting Retailers Can Help 3PLs Generate More Revenue

Segmented Speed Approaches:

• By helping retailers understand where speed is most critical and tailoring fulfillment strategies accordingly, 3PLs can offer more value. For example, investing in same-day or next-day delivery in major cities meets higher customer expectations, leading to increased customer satisfaction and repeat business.

Network Expansion:

• Assisting retailers in expanding their networks to include more distribution centers and urban fulfillment locations allows for faster delivery times. Although it involves higher upfront costs, the reduction in last-mile delivery expenses and improved delivery speed can lead to higher volumes and revenue.

Analytics and Automation:

• Utilizing advanced inventory analytics and automation, 3PLs can enhance their order fulfillment processes. By optimizing inventory placement and using robotics to improve speed and accuracy, 3PLs can provide scalable and efficient solutions, making their services more attractive to retailers.

Last-Mile Solutions:

• Developing effective last-mile delivery strategies, such as integrating regional carriers and using new delivery models, can significantly reduce costs and improve flexibility. These improvements make 3PL services more valuable to retailers, leading to more business and increased revenue.

By supporting retailers in these ways, 3PLs not only improve their service offerings but also create opportunities for generating more revenue through enhanced efficiency, speed, and customer satisfaction.

Beyond Speed: Enhancing Customer Experience

A successful omnichannel strategy extends beyond mere speed. Retailers should focus on removing friction from the fulfillment process, addressing factors that significantly impact customer satisfaction. These include seamless curbside pickups, easy returns, and efficient buy-online-pickup-in-store (BOPIS) options.

Conclusion

In 2024, navigating the speed of omnichannel order fulfillment will be crucial for 3PLs and retailers alike. By adopting strategic approaches to enhance delivery speeds, leveraging advanced technologies for superior inventory management, and focusing on customer experience, businesses can meet the rising expectations of today's consumers and thrive in the evolving retail landscape. Integrating seamlessly and customizing solutions to meet specific needs will position 3PLs as invaluable partners in the fast-paced world of omnichannel retail.