“Omni-channel” is a big buzz word in retail right now. Everyone wants to be “Omni-Channel”. The reasoning for an omni-channel approach is sound. For marketing and merchandising, customers see the same messaging, items, and pricing across all platforms. For inventory and order fulfillment, customers have access to all of your inventory, from stores to DCs.
Omni-Channel is No Cure, Is it Even Symptom Relief?
There are so many advantages to Omni-Channel retailing. But while omni-channel order fulfillment can help you take care of your customers and clear some inventory problems, it can also hide flaws in your demand forecasting system and in your supply chain. Much like over-the-counter cold medicine, omni-channel fulfillment can relieve the symptoms of an ailing replenishment system temporarily, but it can’t cure the underlying problem. Like the common cold, there are many with the ‘magical’ cure but the question you should ask is how did they make the cure if they wrote their base code more than 5 years ago…98% of software is in that category…and all most software does is relieve the symptoms, not a real cure.
- Pains of Demand Forecasting – It’s easy to cover up bad forecasts with omni-channel fulfillment. Forecast too high here and too low there? Omni-channel fulfillment will help you take care of the extra inventory. But it doesn’t change the forecast and it costs more for you to ship from a store than from a DC. If your demand forecast is wrong, you’ll keep repeating the same mistakes: sending too much here, too little there, and wasting money shipping items back and forth across the country.
- Headaches from Lead Time –Lead times drive many decisions throughout your merchandising, planning, and supply chain departments. But there are many places your lead times can fail you (read more in our recent blog “7 Reasons Your Lead Time is Wrong (And It’s Costing You Millions)” ) Once you add omni-channel fulfillment into the mix, you are creating lead times you never had to consider before. If your replenishment system isn’t tracking and forecasting lead times, you will eat into your profits from having to transfer inventory around to cover up your lead time issues.
- Fever from Lost Sales – You think you are curing your lost sales problems with omni-channel fulfillment, but are you really? The fact is most demand forecasting systems don’t use lost sales in the demand forecast calculation (read more about that here). So while you are taking care of customers right now with omni-channel fulfillment, your system isn’t correcting the forecast for the location that was out of stock. You are doomed to keep shorting one location and continue to pay more to ship from another location to take care of customers.
Omni-channel is the future of retail; no one can argue with that. Unfortunately, most legacy systems and demand forecasting systems were created before online shopping was even a consideration for most consumers. To make things worse, they can’t even be updated quickly enough to catch up with the demands of omni-channel retailing.
Need a cure and not just symptom relief?
Whether you are already in the throes of omni-channel fulfillment or just starting to consider it, request a demo of our iKIS SaaS demand forecasting solution today to see how we can help you“ Tighten the Links in your Chain™ ”.