Print

A Technology Perspective on Omnichannel Retailing

By Tom Singer,
Principal
Tompkins International
www.tompkinsinc.com

August 2013

Introduction

Final delivery is the recasting of the traditional online delivery model to support the new omnichannel world.

Final delivery is hardly a new concept for online and multichannel retailers. But the retail landscape has changed dramatically since the early days of on-line shopping. The lines between store and online shoppers have become blurred.

Customers still buy online and in stores. But they now also buy using mobile devices and kiosks. They order in-store with fulfillment being done by another facility or store. Delivery options have expanded too. Store pickup, third party services, pick up and drop off (PUDO) services, and delivery lockers have joined homes as final mile destinations. Retailers also have more delivery carrier options. In addition to the traditional national parcel carrier services, there is a robust ecosystem of regional and local carriers, courier services, and white glove delivery services providing more options and rate competition.

Final delivery is the recasting of the traditional online delivery model to support the new omnichannel world. This omnichannel delivery model starts with network design and positioning of fulfillment centers. Then it includes network-wide inventory visibility, distributed order management, vendor drop shipping, store fulfillment, and shipping. The model ends with the final mile delivery.

This provides the omnichannel retailer with the ability to increase product selection, save sales, and avoid markdowns through endless aisle functionality. Retailers can offer more expedited delivery services while reducing delivery costs. All in all, this model makes the omnichannel retailer more competitive.

The Role of Final Delivery and its Drivers

Final delivery is the fulfillment of customer-direct orders within an ecommerce and omnichannel framework. It covers processes and related systems, from order capture to final mile delivery. The role of final delivery is an integral part of the omnichannel landscape, where it provides the basis for fulfilling and shipping customer-direct orders. It also directly interjects the customer into the fulfillment process, by providing detailed visibility to inventory positions by facility, and supporting customer in- store pickup.

Final delivery impacts systems and processes across the entire retail landscape. A retailer’s network of fulfillment facilities is governed by the final delivery operation, affecting how these networks should look and how they operate. Other industries that use final delivery processes are branded manufacturers and consumer products companies with direct customer sales.

The key drivers of final delivery are:

  • Competition. Amazon continues to expand its dominant position in the ecommerce world by focusing on delivery as well as selection and value. It is building out a network of fulfillment centers that will allow it to support same-day and next-day delivery for its Amazon Prime members. Walmart and other big-box retailers are responding by leveraging their stores as forward fulfillment centers for customer-direct orders. This competition is impacting the business models of retailers of all sizes, which must change to effectively compete against Amazon and other big-box operations.

  • Endless Aisle. Selection is a competitive advantage for any retailer. But stocking too much physical inventory has an adverse impact on profitability. Endless aisle allows a retailer to leverage vendor and supplier inventory through drop shipping. It also makes store inventory available for customer-direct order fulfillment. It provides opportunities for margin improvement by selling ‘stranded’ store inventory without the need for markdowns. It provides the customer with what she wants; a one-stop shopping experience.

  • Quicker Fulfillment Expectations. In the omnichannel world, customer expectations only continue to grow. This applies to order fulfillment and delivery. Expedited service has become the norm, with same-day and next-day delivery representing the high ground. Convenience has become an integral part of customer delivery expectations. The customer wants her order delivered now according to her terms.

  • Profitable Growth. As retailers seek to meet changing customer expectations, they must also pursue new opportunities to increase margins. These opportunities include cost reductions on inventory, transportation, and fulfillment operations, as well as revenue growth, due to increased inventory availability and reduced mark downs.

Technology Challenges

Final delivery presents significant technology challenges for many omnichannel retailers. While many omnichannel retailers have made significant investments in their technology landscapes, their solutions are incapable of effectively supporting final delivery. These landscapes have been typically built on the premise that each channel operates independently. Final delivery requires systems that provide seamless execution across channels with a single customer experience, from order initiation through delivery. A single view to customers, orders, and inventory across channels is a necessary part of this equation.

Additional functionality beyond traditional order management and fulfillment is needed to support endless aisle and same-day and next-day delivery. Scalability across an extended fulfillment network, including retail stores, is a necessity.

Final delivery is an essential cornerstone of a demand-driven value network (DDVN). It requires that retailers focus on customer demand beyond the four walls of the store and fulfillment center. It supports a truly demand-driven operation where customers generate demand signals and pull inventory through the supply chain.

Responsiveness to customer demand is the key to making the sale. Since a retailer’s supply chain typically crosses multiple echelons and parties, integration plays a critical role in supporting DDVN. Latency in processing demand due to ineffective integration between internal and external systems is unacceptable. Final delivery requires a multi-enterprise integration approach and platform fully capable of supporting a DDVN.

Technology Boundaries

There is no one-size-fits-all final delivery systems solution.

From a technology perspective, final delivery encompasses the systems that support the fulfillment and delivery of customer-direct orders. Final delivery is an integral part of an omnichannel retail model that supports:

  • Buy anywhere – ecommerce web site, call center, mobile device, or in-store.

  • Fulfill anywhere – fulfillment center, vendor drop ship, or in-store.

  • Ship anywhere – residential address, store for customer pickup, third-party pick up and drop off (PUDO) service, or delivery locker.

Final delivery is inexorably linked to the fulfillment of customer-direct orders. As such, it can involve a variety of systems, from order capture through proof of delivery. It impacts retail merchandise management, inventory management, web commerce management, order management, customer service, supplier relationship management, store operations, warehouse management, and shipping. There is no one-size-fits-all final delivery systems solution. Requirements can vary significantly by retailer type and size. A mall-based fashion retailer has different needs than a grocery chain or department store.

A retailer’s existing technology landscape also shapes its final delivery approach. Strategic enterprise platforms and directions place both constraints and opportunities on how a retailer pursues final delivery. However, the key drivers remain constant, regardless of retailer type and existing technology landscapes. Competition, endless aisle, and the need to support more expedited delivery services have a direct impact on final delivery systems.

The remainder of this paper will examine the technology required to make final delivery meet its full potential for a retailer. This paper will describe:

  • Core requirements for an effective final delivery solution.

  • Key factors that shape final delivery functionality and its deployment approach.

  • Functional components which are inherent in a final delivery solution.

  • Final delivery’s position within the enterprise technology landscape.

  • Deployment approaches.

  • Technology challenges and enablers.

  • Path forward in pursuing final delivery technology.

Core Requirements and Foundation

While final delivery solutions can vary in functionality and scalability, an effective systems platform must be based on these foundational concepts and core requirements.

  • Seamless Customer Experience. Channel is an irrelevant concept to the customer who expects a seamless experience regardless of how her order was initiated, where it was fulfilled from, and how it was shipped to her for final delivery. This extends to the underlying systems and devices (desktop/notebook browser, mobile app, kiosk, etc.) that support final delivery. The customer expects a choice in how to interact with the retailer through the order fulfillment process. But she will not accept being forced to use separate systems at each step in the process.

  • Single View of Inventory, Customer and Order Data. A seamless customer experience is impossible without a single view of inventory, customers and orders. These views cannot be siloed by channel, device, or underlying system. A consistent view to available inventory, customer information, and order status must be presented to participants in the process at all times. These participants include the customer, merchandise planners and managers, customer service representatives, store associates, fulfillment center staff, and delivery personnel.

  • End-to-end Visibility. Visibility is essential to both fulfillment execution and customer satisfaction. A single view of data must be available, from initial customer interaction through post delivery. Available-to-promise must account for every network node, whether it is a regional fulfillment center, retail store, or vendor. The retailer must provide the customer with a complete view of order status from entry through final delivery, regardless of where the order is fulfilled and who delivers it.

  • Integrated Order Management Backbone. Final delivery cannot meet customer expectations without an integrated order management solution which provides flexible, rules-based order brokering functionality. Sourcing orders across the network cannot occur on a rigid, batch transmission basis with a one-way information flow. It must occur near real-time with exceptions and status updates flowing back from fulfillment execution systems to order management systems.

  • Effective Orchestration. Fulfillment of any customer order can involve multiple internal and external entities, including customer service representatives, fulfillment center personnel, store associates, vendors, and delivery services. The steps and processes involved in final delivery must be effectively orchestrated across all these entities so that a seamless experience can be provided to the customer. This includes vendors providing endless aisle drop ship services, as well as supporting endless aisle across internal fulfillment centers and stores.

  • Efficient Execution and Delivery Processes. As customer expectations continue to increase, systems related to final delivery must support rapid fulfillment and expedited delivery processes. Fulfillment centers must contend with tighter cut-off windows and more carrier/courier services when same-day and next-day services are offered. Order cycle time will only increase in importance. The execution systems that support fulfillment centers from dedicated national/regional facilities to individual stores must provide functionality that allows these operations to meet increasingly aggressive timelines. This need for efficient execution extends to final mile delivery, which can be performed by internal fleet, national/regional parcel carrier, local courier service, or white glove service. Efficient delivery execution can go beyond meeting service commitments, to include addressing specific customer delivery requests, notifications, and installation services.

Key Factors that Shape Solutions

The systems and modules that make up a final delivery solution can vary by retailer. The specific functionality required is dependent on the retailer’s business and operational requirements. Consequently, there is no single final delivery package that can meet the needs of all omnichannel retailers. Given final delivery’s business and operational footprint, it is highly likely that an individual retailer will employ multiple applications in a final delivery solution.

The specific applications and related functionality that make up a final delivery solution are shaped by:

  • Network Configuration. This consists of the type and nature of distribution / fulfillment centers that make up a retailer’s distribution network. Fulfillment and shipping functionality required for a specific fulfillment facility is directly dependent on its size and relationship to the overall network. For example, a national fulfillment center may need a top-tier WMS, while a lower- end, cloud-based package might be a better fit for a regional or local fulfillment center. A retail store fulfilling customer-direct orders would likely need an entirely different execution system.

  • Retailer Type. From a final delivery perspective, this refers to the nature of a store network (big box, department store, discount, grocery, fashion, and specialty) and locations (anchor, mall- based, strip mall, free standing, and urban store front). A retailer’s type determines its operating models as well as network configuration. This in turn drives functional requirements. Retailer type influences delivery service requirements (e.g., is white glove needed?), distribution center and fulfillment center operational characteristics, and store layout (e.g. is there a large backroom operation?). Consequently the requirements for a store fulfillment application may vary significantly between a home appliance retailer and a mall-based fashion chain store.

  • >Product and Margin. Product characteristics (type, size, value) and gross margin also shape the delivery services employed by the retailer. This in turn can influence the execution functionality required for any given fulfillment center or store.

  • Distribution Model. Does the retailer provide endless aisle selection through vendor drop shipping? If so, this capability needs to be tightly integrated with order management functions. For some retailers, it may require an extra level of orchestration to ensure orders are delivered according to customer expectations and desires.

  • Size. Overall size impacts approach and functionality. A small specialty retailer with regionally- based stores with a growing ecommerce business will likely need a different application platform than an established national omnichannel retailer with thousands of stores.

  • Existing Enterprise Landscape. Existing retail and supply chain execution systems can constrain an individual retailer’s pursuit of the ideal final delivery solution. But the existing enterprise systems landscape can also provide opportunities to leverage existing investments for deploying final delivery functionality.

  • Integration Requirements. A final delivery solution can impact a significant number of enterprise applications necessitating integration between internal systems. It must also interface with external carrier and courier systems. Direct external integration may also be required for logistics service providers and vendors (e.g. drop ship).

  • Adoption Curve. Where a retailer is located on the final delivery adoption curve can significantly impact the solution that is deployed. Pilot deployments typically differ significantly from interim and full production solutions.

Functional Components

The key factors that shape final delivery solutions also help drive functionality. They also mean that there is no universal set of final delivery functional requirements applicable to all omnichannel retailers. Since specific functional requirements are numerous and can vary by retailer, the higher-level functional components that can make up a final delivery solution are a logical starting place in any quest to understand inherent functionality.

Figure 1 below shows the core components that may make up a final delivery solution, and potential internal and external integration touch points.

Figure 1 – Final Delivery Functional Components

Figure 1 should be viewed more as a color palette for final delivery than a definitive portrait. Different retailers may have differing names for components. Furthermore, they may choose or need to mix colors when painting their final delivery pictures. The final delivery core functional components are:

  • Inventory Visibility. This means real-time visibility to available-to-promise inventory across all channels and facilities from full DCs and FCs to stores. Inventory visibility includes providing a single view or source for inventory positions by item and facility, including on-hand, available, reserved, on-hold and in-transit quantities. Inventory visibility must be tightly integrated with functional components, such as retail merchandise management, web commerce, mobile commerce, order management, order brokering, POS, store inventory management, store fulfillment, warehouse management and returns. It can include vendor stock positions, drop shipping to customers which integrate vendor drop shipping, supplier collaboration, and

purchasing functions. Potential external integration points can include vendor and logistics service providers’ systems.

Robust inventory visibility is a key cornerstone in an effective final delivery solution. It is an essential element in supporting endless aisle and distributed order management across an extended network of fulfillment centers, stores and external partners. Failure to fulfill an order due to inaccurate or latent information is unacceptable to customers. Maintaining real-time inventory visibility can present significant challenges to many retailers, given the number of internal and external systems that manage and view inventory positions. The robustness of inventory visibility functionality is directly dependent on the effectiveness of the underlying integration to other components and touch points.

  • Order Management. This function entails the capture, entry and maintenance of customer orders, including order header and line details, shipping preferences & methods, promotions, payment, tax calculation, and personalization & instructions. It is typically a standalone application that can be used by a call center, direct sales, and store personnel for order captures. Order management can also be fed by other order capture systems and devices, including web store fronts, mobile commerce apps, and store kiosks. It integrates with inventory visibility and order brokering functions and may be integrated to internal systems and external services for address verifications, parcel ratings, cost calculations, and payment authorizations. Order management may also be integrated with customer relationship management and clienteling functions.

    Traditionally the order management function has been viewed from the perspective of the web store front and call center operations. Omnichannel retailing interjects the need to support store order entry and management, as well as the need to accommodate new capture devices, such as customer smartphones, tablets and store kiosks. Increasing demand for expedited delivery drives the need for more real-time views of service commitments and scheduling. Depending on a retailer’s business model, order management may have to accommodate additional functionality, such as online reservations with store payment and pickup, and installation and personalization services.

  • Order Brokering. This is also known as Distributed Order Management (DOM), and involves the sourcing of customer orders to fulfillment facilities, based on rules that account for availability, allocation policies, distance, transportation costs, and capacity constraints. These rules govern the allocation of inventory by facility and splitting of orders across facilities. DOM may trigger the creation of purchase orders or distribution orders for vendor drop shipments. It integrates with inventory visibility, order management, warehouse management, and store fulfillment, and may be integrated with vendor drop ship, supplier collaboration and shipping functions. It may also integrate directly to vendors, logistics service providers and carrier external systems.

    Order brokering functions are directly responsible for ensuring that the optimal facilities fulfill customer orders from a delivery commitment and cost perspective. As such, it directly impacts customer satisfaction. Traditionally it has centered on routing orders based on inventory availability, delivery distance and transportation costs. Omnichannel retailing is driving the need for new functionality.

    Stores that provide same-day and next-day delivery services may need more robust integration with shipping function.

    Order brokering is essential for endless aisle support. This interjects the need for greater orchestration in the brokering function and now must account for stores and vendors as potential fulfillment sources. Combined with store fulfillment, order brokering provides the ability to save the sale and avoid markdowns. It is a lynchpin for same-day and next-day delivery service, where it must account for fulfillment center capacity and store capacity as well as an extended set of carriers and local couriers.

  • Store Inventory Management. Inventory management functions within retail stores include receipts, cycle counts, inventory moves and holds, returns and adjustments. This can include a store stock locator function that maintains inventory quantities by location. It may also include QA and ticketing functionality. Store inventory management is integrated with POS, inventory visibility, and store fulfillment functions and may also be integrated with store work force management. It provides functionality via desktops, wireless devices and mobile apps. Store inventory management directly supports the store fulfillment function.

  • Store Fulfillment. This function encompasses store-side processing of customer orders, including order release, inventory allocation, picking, packing and shipping. It supports ship-to- customer, store pickup, and shipping to other stores for in-store pickup. Orders are generally picked via paper pick lists or mobile devices, with packing lists and shipping labels typically printed during packing. Store fulfillment can also support on-line reservations with in-store payment and pickup. It is integrated with order brokering, inventory visibility, store inventory management, and shipping functions. It may be integrated with store work force management functions.

    Many retailers feel the need to ensure that a customer receiving a package shipped directly to her home cannot tell that it was shipped from a store instead of a fulfillment center. This requires store fulfillment capabilities that mirror warehouse management systems in packing instructions, and pack list and shipping label printing. As volumes increase, the need for efficient processes increases too, especially surrounding pick processes where alternate pick methods beyond paper-based discrete order picking may be required. Labor capacity will also become an issue as volumes increase, necessitating a tight coupling of store work force management, store fulfillment, and order brokering functionality.

    Store inventory accuracy can present significant fulfillment challenges, especially when locating floor stock and shrinkage. This necessitates a tight integration between store fulfillment and order brokering functions, so the inability of a store to fulfill an order is quickly resolved by another node in the network. Strong customer notification capabilities are needed to address exceptions and delays surrounding both home delivery and store pickup. Appeasement policies and store safety stock levels can also be leveraged. Stores that provide same-day and next-day delivery services may need more robust integration with shipping functions to accommodate more regional and local carriers and couriers, as well as more complex tendering windows.

  • Warehouse Management. This function supports distribution and fulfillment center operations, including receiving, inbound quality assurance, putaway and storage, pick location replenishment, order management and release, inventory allocation, picking, packing, value-added services and kitting, shipping, task management, inventory control, physical and cycle counting, and returns processing. It tracks inventory quantity and status by location within the facility’s four walls. It is typically provided by a warehouse management system (WMS). Warehouse management is integrated with inventory order brokering, order management, inventory visibility, shipping, labor management, and transportation management functions. This function may be integrated with supplier collaboration function for ASN.

    Given the differences in order profiles, customer-direct order fulfillment can require different functionality and processing flow from store order processing. Increases in customer-direct order volumes may be addressed by automation and/or additional warehouse management system functionalities. Functionality required to support customer-direct orders can vary by fulfillment center types. A national or regional fulfillment center generally requires extended functionality, while a local facility or hub can be supported by more basic functionalities. Same- day and next-day delivery requirements can interject more carriers/couriers and associated tendering cutoff windows, requiring tighter management and more efficient order processing.

  • Shipping. This function encompasses parcel shipping, including rating, carrier tracking number generation, carrier labels and shipping documents, and carrier data transmission. It may include extended functionality such as international documentation and custom clearance, LTL rating, rate shopping, and freight payment auditing. It is integrated with warehouse management, store fulfillment functions, and external carrier systems. It may be integrated with order management functions for rating and service level selections. It may also be integrated with external services, modules and systems for address verification and denied trade screening.

    Carrier service options provided for customer-direct orders shape the functionality required for shipping. Each carrier or courier service can involve different integration, rating, and labeling requirements. For some retailers, the shipping function may involve private fleets or contract services with associated routing, dispatch, and scheduling functionalities. White glove services can involve additional customer service support and installation, which require associated instructions to be provided along with shipping documentation.

  • Proof of Delivery. This function allows visibility to order delivery status from the dispatched fulfillment facility through to the final delivery. It provides the ability to report a carrier’s tracking status at all relevant points within a delivery network, with notifications of delivery exceptions being sent to the customer. It may include capture of electronic signatures at the final delivery point. Visibility is provided through integration with web commerce, call centers, customer relationship management, and mobile commerce functions. Delivery tracking requests are typically handled within retail systems by linking to carrier web sites or direct call- to-carrier-provided web services. The latter approach allows the customer-facing systems to keep customers on a retailer’s website. National carriers typically provide more events and direct web service tracking status calls to their internal systems. Local courier services vary widely on their abilities to support proof of delivery. Technology platforms and applications used by carriers and couriers have a direct impact on a retailer’s ability to execute final delivery and provide high customer satisfaction levels.

  • Vendor Drop Ship. This function provides the automated transmission of sales orders to suppliers participating in drop shipment programs, including updates, cancellations and exceptions. It supports near real-time order status updates, ship confirmations and inventory position update transmissions from supplier back to the retailer. It provides the ability to print retailer-formatted packing lists and shipping labels by the supplier. This is integrated with inventory visibility, order management, and order brokering functions. Supplier data exchanges necessary for vendor drop ship are supported through direct integration with supplier systems or web portal applications that provides suppliers with all required functionalities.

    Vendor drop shipping is an essential element of many retailers’ endless aisle strategies. A seamless customer experience requires that vendor drop ship deliveries arrive with the same look and feel as deliveries from the retailer’s facilities. This means more than the physical appearance of packing lists and shipping labels. Vendor processes and systems should mirror the retailer’s functionality surrounding special packing instructions, warranty initiation, event notification, tracking visibility, and returns & claims processing. Orchestration with internally- fulfilled lines can require merge-in-transit capabilities, where the drop shipment is consolidated with internally-fulfilled items at a retailer, carrier or logistics service provider’s facility.

  • Returns & Claims. This function addresses customer returns and claims, including creating returns merchandise authorizations (RMAs), determining shipping methods, and supporting call tag or returns package label delivery to customers when a retailer is responsible for initiating shipping. It provides for the collection of required fees and payments. It supports returns receiving, disposition, exchanges, claims and refunds processing. Traditionally, returns and claims have been a channel-centric function, with stores handling in-store purchases and designated fulfillment centers, special facilities or logistics service providers processing ecommerce purchases.

    This division is not compatible with omnichannel customer expectations. Return-to-anywhere is an implicit companion to buy-anywhere. Furthermore, as customer-direct order volumes increase, so will returns. Funneling returns through central processing facilities can add time to repositioning any returned saleable inventory at the optimal fulfillment facilities or stores. Routing services coupled with returns functionality can help position this inventory to the need- point faster.

Enterprise Technology Landscape

The functional components for final delivery can be supported by a variety of applications and modules within any individual retailer’s enterprise technology landscape. The components can be embedded within larger enterprise applications, bundled together in a targeted solution, or individually packaged as a standalone application. They can be provided through commercial enterprise suites and best-of-breed commercial packages. They can also be supported by customizing existing applications and developing new custom applications.

The number of required applications and modules, as well as the functionality supported by an individual application and module, can vary significantly across retailers. The final delivery landscape can also vary significantly over time for an individual retailer, with a pilot or interim solution looking completely different from a full production solution.

The best path for any retailer to assemble the pieces needed for a final delivery solution is dependent on:

  • Business and operational requirements which drive the functionality required to support each component and influence the options for packaging this functionality within the overall landscape.

  • The existing retail application landscape which represents a starting point and shapes integration requirements.

  • External integration requirements with carriers and vendors. How many external touch points must be supported, and what is the nature of each?

  • Adoption objectives which determine levels of investment and timelines for deploying a particular solution. Is the solution intended to get the retailer through the next peak season or serve as an on-going foundation for final delivery?

A demand-driven value network (DDVN) has a direct impact on final delivery.

Since it focuses on sensing and orchestrating customer demand across internal entities and external trading partners, a demand-driven value network (DDVN) has a direct impact on final delivery. Retailers pursuing a truly demand-driven operation must be able to support near real-time demand signals across an extended network that spans internal, supplier and carrier systems. This can significantly shape final delivery’s position within the enterprise technology landscape.

Order management systems (OMS) are a good starting point for understanding how these factors can influence a final delivery solution. An OMS is an integral part of any omnichannel retailer’s existing enterprise technology landscape. Consider the situation where a retailer has a legacy OMS that is integrated with several web commerce management systems, and supports call center and customer relationship operations.

The OMS is also a module within an overall enterprise suite, which is the retailer’s strategic technology platform. Furthermore, the OMS does not provide inventory visibility and order brokering functionality required to support store fulfillment.

Should the retailer look for a distributed order management package to integrate within this existing landscape, or seek to build out the required functionality? The best course of action is directly dependent on the above factors.

Store fulfillment provides another contrast on how the assembly process can vary by retailer. Fulfillment solutions span a wide range of business requirements and operational functionalities, primarily dependent upon anticipated order volume and store layout. Assume that a retailer is looking to deploy store fulfillment. The required functionality could be provided by building out legacy systems or custom development. However, there are packaged solutions that support store inventory and fulfillment. These solutions are generally companion packages or modules to the full-order management suite or the distributed order management package. They typically provide ‘light weight’ parcel shipping functionality through direct web service calls with FedEx and UPS.

Should the retailer pursue a packaged solution or a custom build approach? What if the retailer needs to ship via regional carriers or local courier services? If it is pursuing a packaged fulfillment solution, should it have the software vendor customize its core package to support these additional services, or seek to integrate the fulfillment solution with a stand-alone parcel shipping system? Once again, there is no clear cut answer to these questions without diving into specific requirements and objectives.

Deployment Approaches

Given its footprint, there are many paths a retailer can follow in pursuit of a final delivery solution. It is convenient to classify these approaches as:

  • Pilot Solutions. The usual starting point for final delivery is a pilot, or proof of concept, that concentrates on leveraging experience gained to shape actual production rollout. A pilot can provide valuable insight on the organizational impact of any solution, identify or refute key assumptions and requirements, and help build enterprise consensus to pursue production.

    Pilot solutions vary in size and complexity. They can be categorized as:

    • Barebones, which rely on manual processes and existing systems to support operations in a limited number of facilities.

    • Limited, which incorporates some new (but restricted) levels of technology to support operations in a limited or broader set of facilities.

    • Full, which uses a full production solution to support operations in a limited number of facilities.

  • Interim Solutions. Competitive pressures and business objectives can combine to compel a retailer to get a solution in place to support the next peak season. The resulting timeline may mean that compromises on functional and integration requirements must be made. The interim solution may meet the demands of the next peak season but may not be scalable to meet future demand as the business grows. Also, the compromises inherent in an interim solution may result in operating costs and service levels that are less than optimal.

  • Full Production Solutions. Full production is a solution that fully meets functional and integration requirements, is scalable across the extended network, and fits the long-term planning horizon within an acceptable long term operating cost.

Technology Challenges and Enablers

Any retailer that is deploying a final delivery solution may face significant technology obstacles that must be overcome. These challenges include:

  • Integration. Given the number of components, and potential internal and external system touch points that must be supported, integration efforts surrounding final delivery can be daunting. This effort is further complicated by the need for near real-time integration, and the number of devices and platforms that must be supported.

  • Scalability and Agility. Any full deployment solution must be able to handle increasing customer-direct order volumes over the long term. Also, a retailer’s customer-direct business model will likely change as volumes and competitive pressures continue to grow. This can result in the need to quickly deploy new functionality and services.

  • Change Management. Final delivery solutions cross traditional retail channel boundaries and significantly impact certain operational areas. As such, they can generate uncertainty and resistance across enterprises. This is especially true in areas that are on the front line of final delivery, such as store, call center, and transportation operations.

  • Capacity and Accuracy. Customer-direct order fulfillment represents a new job function for many store operations. The additional work load must be balanced with available resources, other retail duties, and limited processing areas. Store fulfillment can be further complicated by inventory accuracy issues, especially on floor merchandise, which can be purchased or moved by customers.

  • Resources. A final delivery solution can involve many applications. It is typically deployed on top of a complex, mission-critical retail technology landscape. It can require deployment resources that can stretch the capacity of most IT departments. Its complexities and the existing systems and operations that it touches require a strong program management function for successful deployment.

  • Sales Credit. Traditionally an ecommerce sale is credited to the online channel, and a store sale is credited to the store associate and store where the sale occurs. But final delivery can cross channels and physical locations. Where the transaction is initiated can be decoupled from where it is fulfilled. A sale can be initiated on the web but fulfilled from a store. It can be captured by an associate in one store but fulfilled by another store. The cross-boundaries aspect of final delivery presents new challenges for performance visibility and ensuring the work force is properly incentivized.

The impact presented by these challenges can be mitigated by:

  • Cloud. Given the large number of sites involved, final delivery components like store inventory, store fulfillment and shipping are perfect candidates for hosted or software-as-a-service deployment models. The cloud can also lessen the IT resource impacts and ownership costs for deploying extended functions like order brokering, inventory visibility, and vendor drop ship.

  • Platform Solutions. Integration requirements between final delivery components can be significantly reduced or eliminated by employing a platform solution that provides multiple components on common application frameworks and database models. There are several vendors who offer platform solutions capable of supporting multiple final delivery components.

  • Integration Toolsets. Application integration middleware can significantly reduce the effort needed for overall integration. These solutions provide the framework and tools to integrate different applications on disparate system platforms.

  • RFID. While it still can present significant deployment challenges, item-level RFID tracking does offer the promise of dramatically improving store inventory accuracy without overburdening store labor. It provides the ability to rapidly count and locate merchandise both in the backroom and on the store floor.

  • Training. Change management challenges can be addressed by comprehensive training programs. These programs ensure that the staff members understand the tools to be employed and the processes involved for final delivery. Given the potential number of sites involved in store fulfillment, cloud-based training programs are useful tools.

  • Work Force Management and Labor Planning. As customer-direct order volumes increase in stores, so will the need for effective store labor planning and management. A store work force management solution helps ensure that in-store labor tasks are completed properly and within acceptable timeframes. It can also directly support capacity planning, helping to ensure that individual stores are not overwhelmed with customer orders.

  • Store Inventory Management. Store fulfillment accuracy challenges can be mitigated through a store inventory management solution that provides positive verification of merchandise receipts, moves, and adjustments. Basis stock locater and cycle counting functionalities delivered by mobile devices can dramatically improve store inventory accuracy.

Path Forward

Final delivery interjects another level of complexity within a retailer’s enterprise technology landscape. Just as there is no one-size-fits-all final delivery solution, there are multiple paths for pursuing final delivery functionality.

The optimal path for any retailer is dependent on the existing technology landscapes, business and operational requirements, and competitive drivers. Functionality may be piloted, deployed in phases, built upon existing applications, and/or supplied by next-generation applications.

However, there is a common approach for deploying final delivery technology across retailer types. It incorporates five core elements:

  • Strategic Assessment. Any pursuit must first be preceded by an assessment that establishes the strategic goals, objects, benefits and constraints involved in a final delivery deployment. This includes identifying the deployment solution approach that should be pursued. Choices exist between a build, buying, or hybrid of both, where internal development and packaged solutions are used. It also details the strategic business case and high-level resource requirements for deployment.

  • Roadmap. After the strategy has been defined, the tactical plans, functional requirements, and technical requirements need to be fully detailed. The roadmap also includes refining the business case, solution approaches, and resource requirements.

  • Select. A competitive software selection process should be conducted for any purchased application based on the identified requirements. This process may include internally developed applications or custom enhancements to existing applications.

  • Implement. A structured implementation methodology should be employed for each application that is deployed. Implementation can be broken down to four core phases: Detailed design, build, prepare & validate, and deploy & stabilize.

  • Support and Evaluate. Once the solution has been stabilized, the implementation process transitions to on-going support. Best practices dictate that post-implementation audits be performed to assess the effectiveness of any deployment. Business, operational, and technology requirements change over time. Evaluation of installed solution can lead to repetition of the deployment cycle.

These elements must be done in concert with operational and business changes required for final delivery. Prospective order sourcing policies must be synched with merchandise planning and allocation functions. Work force capabilities need to be adjusted and tuned to support final delivery. Extended carrier services requirements must be detailed. The effort to address these and the many other operational and business requirements that accompany final delivery must start with the strategic assessment and continue throughout the deployment cycle.

Conclusion

Given the key drivers, a final delivery solution should be approached as a truly mission critical application. As retail channel boundaries blur, how a retailer executes final delivery will determine its future. Treating final delivery as an auxiliary function or a topic that is not currently relevant is not an option that will lead to success. As customer expectations continue to evolve and competition intensifies, final delivery’s importance within a retailer’s technology landscape will only increase. While significant challenges and constraints will confront any deployment, they cannot be used as an excuse for non-action. Any retailer pursuing a final delivery solution must take a strategic view.‌

Final delivery is an inherently complex technology proposition, given its footprint and internal and external integration points. It touches many core business processes. It impacts every facility and store within a retailer’s extended fulfillment network. This requires a new level of inventory visibility across the extended network. The focus on rapid fulfillment and delivery interjects new demands on operations and systems. The relationship is tightening between the customer and the fulfillment process. These factors present significant challenges to any retailer that is pursuing a solution. But sitting on the sidelines is not a viable alternative. The time for action is now.

About Tompkins International

Tompkins International transforms supply chains to help create value for all organizations. For more than 35 years, Tompkins has provided end-to-end solutions on a global scale, helping clients align business and supply chain strategies through operations planning, design and implementation. The company delivers leading-edge business and supply chain solutions by optimizing the Mega Processes of PLAN-BUY-MAKE-MOVE-STORE-SELL. Tompkins supports clients in achieving profitable growth in all areas of global supply chain and market growth strategy, organization, operations, process improvement, technology implementation, material handling integration, and benchmarking and best practices. Headquartered in Raleigh, NC, USA, Tompkins has offices throughout North America and in Europe and Asia. For more information, visit www.tompkinsinc.com.