Top Omnichannel Logistics and Supply Chain Challenges in Ecommerce

High-volume growth can be a logistical nightmare—but it doesn't have to be.

This post was originally published in July 2017 and has since been updated for currency and readability.

What may have started as a straightforward ecommerce site or maybe just an experiment in taking your retail store online has grown—a lot.

It’s every founder’s dream.

But high-volume growth can be a logistical nightmare. You now face the challenges of managing products across channels, aligning inventory and delivery, coordinating with suppliers, manufacturers, and third-party logistics (3PL), as well as connecting in-store purchases and pickups with online orders and even international demands.

Every success presents unique obstacles, and all of them cry out to be solved.

It’s time to figure out those solutions.

What is omnichannel logistics?

Accenture’s COVID-19 Consumer Pulse Research recently discovered not only how interconnected and seamless consumers now want their shopping experience to be:

• 78% of shoppers plan on using curbside pickup/click and collect

• 76% of shoppers plan on using a virtual consultation for personal styling

• And 80% of shoppers have done their shopping on social media platforms

In addition, customers expect a product to arrive as soon as possible and also want the freedom to try it either in-store or at home.

Serving this always-connected consumer may look like the following:

Image from Miura Systems

1. A potential customer sees an advertisement for jeans on their smartphone traveling home from work.

2. At home, they use their desktop to Google your brand.

3. Once on site, they decide to buy a pair but schedules a virtual consultation with a stylilst first.

4. During the consultation, the consultant also recommends a few shirts to match.

5. The customer asks a few questions about fit and likes the jeans and two of the shirts.

6. Unfortunately, their shirt sizes are out of stock.

7. But instead of losing the additional sale, the clerk places an order online for the right sized shirts to be delivered to the customer's home.

8. The shirts arrive within a day, and the buyer is delighted.

That process is now becoming standard and allows you to tailor how a product is experienced, purchased, and delivered. By optimizing the locations, sourcing, and fulfillment of your products,

Omnichannel logistics ensure reduced costs, faster delivery, and a better customer experience.

When we discuss omnichannel logistics at Sourcify, we ensure we have the following bases covered:

• An online purchase sent directly to a consumer (inventory visibility)

• An online order sent for in-store pick up (channel specific process)

• Cross channel fulfillment options (speed of delivery)

• Reverse each scenario whenever a product is returned (ease of return)

When your customer moves across channels, a traditional multichannel approach to logistics can come up short in regards to the information availability, delivery speed, and personalized experience that modern shoppers expect.

Moreover, optimizing each channel individually breeds competition between them.

For example, products fulfilled by FBA often move faster than your own warehouse or 3PL. This can create variations in your customer experience, product information, pricing, and service levels.

For an ecommerce brand, omnichannel logistics will help you improve efficiency, cut shipping times and costs, and enable you to manage your inventory across channels and fulfillment centers. This all adds up to a seamless experience across consumer touchpoints to simultaneously create both a diverse product flow as well as a consistently positive purchase.

To do this, four challenges present themselves:

Challenge 1: Inventory visibility

Knowing the status of your inventory is at the core of a strong omnichannel approach.

In a traditional model, you will dedicate inventory by channel and have little to no cross-channel inventory visibility.

The last thing you want is to promise next-day delivery to your customers and not be able to follow through. This is a challenge for a retailer that sells across channels, especially during peak holiday seasons.

To address this challenge, develop an efficient order fulfillment process that works via an optimized warehouse management system. By using inventory visibility as a forecaster of future demand, you can plan your supply chain activities accordingly.

Once you scale out your inventory visibility, you may get to the point where you can sell orders online without ever taking physical possession of your product.

Your ecommerce and order management systems will be synced up in a way where an order through your Shopify store will trigger your closest omni-channel distribution center, and fulfillment will be carried out by your outsourced or in-house party responsible for that channel.

By setting up a measure for inventory visibility, your store will be more capable of having a smooth customer experience while staying on top of its supply chain.

Learn more: Get omnichannel marketing ideas to connect with customers—without being creepy.

Challenge 2: Channel-Specific processes

The next flaw businesses fall victim to is focusing on channels independently. Your supply chain needs to be integrated across your own Shopify store, retailers, and other online sales channels like Amazon.

Though in some cases you will have to adhere to distribution guidelines set by FBA, you can still implement a system that integrates these channels.

This will ensure you make the most of your channel-specific warehouses and have a dynamic outlook towards space allocation.

Implementing an omnichannel process will also enable you to use spaces variably. Warehouses can act as showrooms. Ikea, for example, uses this model for a highly cost-efficient supply chain.

Challenge 3: Speed of delivery

One of the hardest parts of selling across channels is ensuring speedy delivery. When a customer buys online, they expect that order to come within a few days—at most.

In addition to creating clear expectations for each channel, using physical stores as fulfillment centers is a must. In fact, given the rising desire among customers, stores should serve as both pickup locations for online orders—buy online, pick up in-store—and fulfillment locations for deliveries (ship-from-store).

Image from Digital Commerce 360

Allowing customers to buy online and pick up in-store saves both the customer and the company money. Also, when a customer is picking up an order, they often make additional purchases.

As an example, Walmart announced plans to let its employees fulfill local orders by paying employees extra to deliver online orders headed to destinations along their normal route home.

That said, most retail stores are not set up to fulfill orders and most lack good inventory visibility. Their backroom space is limited, and store employees are trained to sell, not fulfill orders.

Challenge 4: Ease of return

Handling the return of orders should be a crucial consideration when setting up your omnichannel logistics system. If you truly want to be integrated across platforms, you should aim to enable returns from different platforms as well.

If a customer purchases one of your products online, can they return it to a retail location? Customers need to feel like they have the ease of returning their purchases or your conversion rates will suffer.

The implementation of a sound reverse logistics system will be imperative to good customer service within your omnichannel strategy.

Though these challenges are big, your return on investment will greatly outweigh these initial problems.

Omnichannel logistics in action

When Ryan and Andrew Beltran launched Original Grain on Kickstarter, they had their goals set high. In their first crowdfunding campaign, they raised nearly $400,000 and realized firsthand that their logistics and supply chain would be the backbone of their company.

Fast forward four years, Original Grain has hit the eight-figure sales mark while selling across various channels like brick-and-mortar retail, Amazon, and their own Shopify store.

They took an omnichannel logistics and supply chain approach early on and, as a result, have earned five-star reviews across channels.

Their Amazon store provides free same-day shipping through FBA. On Shopify, they detail their shipping process on a designated shipping page. These two channels are intertwined on their backend to easily keep track of inventory levels.

When shipping from their Shopify store, they work with a third-party logistics partner who batches shipments within a one or two day period. This enables them to optimize the actual fulfillment process by shipping similar products at the same time.

Learn more: What Is Logistics Management?

A bird’s eye view of omnichannel logistics

The key to implementing an omnichannel logistics strategy in your company is to focus on the customer journey.

Amazing interactions at every touchpoint will ensure a smooth process and—in today’s review-based ecommerce space—maintaining a stellar reputation can’t be underestimated.

Your approach should align with your shoppers.

Implementing an omnichannel logistics and supply chain system may seem complex, yet by mapping it out around your customer journeys, you’ll be able to create a seamless process.

Omni Channel Supply Chain FAQ

What does “omnichannel in supply chain” mean ?

Omnichannel in supply chain is a term used to describe a strategy in which companies use a combination of channels and technologies to provide customers with a unified shopping experience. This includes the use of both physical and digital channels with a focus on delivering a seamless customer journey across all channels and devices. Omnichannel supply chain strategies aim to create a unified experience for customers, allowing them to shop online, in-store, or via mobile with ease.

What is an example of omnichannel retailing?

An example of an omnichannel approach is a retailer offering customers the ability to shop both in-store and online, with a seamless experience across both channels. For example, a customer might look at products online, then go to the store to try them on and make a purchase, or buy online and pick up in-store. The same loyalty program and payment methods would be available across both channels, making it easier for customers to switch between the two.

What are the benefits of omnichannel logistics?

• Improved Customer Experience: Omnichannel logistics allows customers to shop from any channel, be it in store, online or through a mobile app, and receive a consistent brand experience. This makes it easier for customers to switch between channels and find the product they’re looking for.

• Increased Reach: Omnichannel logistics allows retailers to reach more customers by making it easier for them to shop from multiple channels. This opens up more opportunities to increase sales and expand markets.

• Enhanced Fulfillment Options: Omnichannel logistics offers a variety of fulfillment options, such as same-day delivery and in-store pickup. Customers can choose the option that best suits them and receive their orders quickly.

• Higher Inventory Visibility: Omnichannel logistics helps retailers to have a better understanding of their inventory and stock levels. This helps them to better manage their inventory and ensure they have the right amount of stock in the right place at the right time.

• Improved Supply Chain Efficiency: Omnichannel logistics helps retailers to streamline their supply chain and reduce costs by eliminating the need for multiple warehouses, increasing the speed of delivery, and reducing the cost of returns.

What is the difference between omni channel and multi channel logistics?

Omni-channel logistics is a unified approach to supply chain management that creates a seamless end-to-end experience for customers across all channels. It seeks to integrate all customer touchpoints into a single, unified system, enabling customers to have a consistent experience whether they are shopping online, in-store, or through a mobile device.

Multi-channel logistics is a more traditional form of supply chain management that focuses on optimizing the flow of goods through multiple channels. It seeks to improve efficiency and reduce costs through better coordination of inventory and distribution across a variety of channels. It is often used in retail, where different channels such as brick-and-mortar stores, online stores, and mobile platforms each require their own unique logistical strategies.