3 Ways to Reduce Omnichannel Order Fulfillment Costs


omnichannel order fulfillmentOmnichannel order fulfillment is a double-edged sword. On one hand, you have multiple methods for fulfilling customer orders, and customers can choose whether they want orders shipped to them or picked up in store. This flexibility helps to make customers happy.

On the other hand, retailers have seen upwards of a 300 percent increase in what it costs to serve omnichannel customers. 

According to the Retail Industry Leader Association’s annual survey, as reported in Supply Chain Quarterly, executives identified controlling supply chain costs as a top priority, with order fulfillment and omnichannel costs being a part of the reason.

The good news is that tools exist to help reduce omnichannel order fulfillment costs and complexity. These tools leverage advanced capabilities like artificial intelligence, cognitive computing, and predictive analytics to optimize order fulfillment processes.

The transparency provided by these tools can help companies drastically reduce the cost to serve their omnichannel customers while still meeting consumer expectations of speedy delivery.

While there is no magic bullet to cost reduction, let’s take a look at three ways companies can use these advanced capabilities to improve the way they fulfill orders.

1. Leverage data to understand your costs and invest where it matters most

It's unlikely that you don’t have the data you need to reduce order fulfillment costs, streamline fulfillment, and invest in the methods that are the most profitable. In fact, you may be drowning in too much data, and struggle to make it meaningful.

Fortunately there are powerful solutions available, such as IBM Watson Order Optimizer, that leverage AI and analytics to help you understand what’s influencing costs in order fulfillment using real-time data. The solution analyzes customer and order data, inventory data, shipping time and costseven external data like events and weather data—and helps you see where it may be costing you too much to fulfill certain orders. Also, it helps you determine and execute the optimal ways to reduce fulfillment time and costs while balancing with the need to deliver a positive customer experience.  

Solutions like this can also help you gain a holistic view across fulfillment processes, and analyze how fulfillment costs are impacting the rest of your supply chain. You can identify where partners may be in danger of not meeting service level agreements—which results in delays, backorders, lost sales, and unhappy customers. Of course, no one wants that.

2. Identify and utilize inventory at its most profitable price point

When your inventory in one location isn’t moving but is in demand in another, it makes sense to fulfill from the locations that are overstocked. Leveraging artificial intelligence and analytics tools, you can understand patterns in demand, inventory levels, returns, and overstocked inventory across locations. This can help you maximize the use of your inventory while reducing markdowns.

3. Simulate sourcing and fulfillment scenarios using historical data

If you’ve been conducting omnichannel commerce for a while, your systems will have data on how each order was fulfilled, from where it was sourced to where it was picked up or delivered.

Advanced capabilities like artificial intelligence and predictive analytics can help you run models on where you will source a product, where you will ship it to, and what the results will likely be. This data can help you identify the most cost-effective way to fulfill an order, as determine how to optimize various types of orders in the future.

One example of this is identifying what the demand will be for a particular item, such as a small kitchen appliance. Using historical data from similar SKUs, customer segments, and purchase patterns—along with other fulfillment data—companies can predict roughly where the appliance will be in demand the most.

Using simulation models, you can test out different scenarios and make adjustments before the changes go live and before inventory is shipped to various locations. You can view likely outcomes to balance the need to reduce fulfillment costs with the need to fulfill consumer expectations.

These three approaches can dramatically reduce the cost to fulfill omnichannel orders. Customers will receive their products in the expected time frame, and companies will be able to cut out unnecessary costs by having a transparent view of their fulfillment processes. In fact, IBM reports that a leading retailer saved 7% or $20 million on annual shipping costs through real-time order sourcing and optimization.  Not to shabby, huh?

To learn more about the tools that can make this possible, download the Aberdeen Group report:  Last Mile Intelligent FulfillmentHow Best in Class Are Solving the Omnichannel Fulfillment ChallengeAnd if you need help with your omnichannel order fulfillment initiative, reach out to us. We'll be happy to help. 

 Best-in-Class are Solving the Omni-Channel Filfillement Challenge

About the Author

Lori Angalich

Lori Angalich is the VP of Marketing at Lightwell. She loves exploring new technologies and business models, learning how things work, solving problems, and working with others to develop new ideas. She has a Bachelor of Science in Biology and an MBA in Marketing, and she enjoys applying her knowledge from both each and every day.  Lori has a passion for travel, art, wine, music, wildlife (including her two dogs, who are a bit on the "wild side"), and most of all, creating great memories with her family. 

Connect with Lori on LinkedIn