WMS (Warehouse Management System) role in retail omni-channel strategy

One of the most discussed terms in retail today is the adoption of an omni-channel strategy, where different company channels (physical stores, websites, applications on mobile phones and tablets, social networks, etc.) are integrated to offer a better purchase experience for consumers.

To meet consumer needs, retailers need to restructure and integrate their processes and systems from supply to the sale of products/services. And one of the important links to ensure customer satisfaction in this new environment are receiving, distribution and inventory management operations, supported by WMS.

Leveraging an Omni-channel strategy

Consumers know the brands, not the different retail channels and their operational aspects, and expect the same level of convenience, agility and personalized service wherever they are, in their favorite channel.

The omni-channel strategy seeks to meet this expectation and five major work and development pillars summarize what is required to leverage this strategy: system integration, information integration, organization, customer focus and logistics.

papel wms

The omni-channel strategy operated by traditional company processes, is a recipe for failure. Paying attention to new requirements and adjusting them in advance to the full adoption of the strategy is essential, where the differentiator is the speed that these companies can adapt to this reality.

Impact of omni-channel strategy in logistics processes

The delivery time of a product today is not measured in days, but in hours. Any delay creates a dissatisfaction that when shared on a social network, significantly affects the company's image. However, reality shows that coordinating a logistics operation that can comply in a timely manner with purchases made by many consumers in different geographical locations through different channels, is not easy.

In the new model, any combination of purchase channel (physical store/e-commerce), delivery location (home, physical store or service units) and inventory (distribution center, store or supplier) must be allowed, in addition to the possibility of reverse logistics being accepted at any company location.

Thus, new processes are needed and more importantly, all these flows should work in parallel and in an integrated manner, with accuracy, speed and operational flexibility.

This complexity is even greater when considering retail aspects such as discounts on different channels, on-demand product sales or new aspects strengthened by e-commerce, like the use of its platform as a marketplace and use of company logistics processes for distribution of third-party products.

In the past, logistics operations were unique for each channel, thus, there were dedicated distribution centers or total process separation inside the same location, while in the new reality, it does not make sense to separate these activities. This leads to a new role for WMS in this omni-channel context, which is providing smart and integrated management for resources in a hybrid operation, to reduce costs, improve service levels and meet different customer demands.

New WMS requirements in an omni-channel operation

Before adopting an omni-channel strategy, a large number of companies have invested for years renewing its technological base to support its new operation. Traditional systems are not sophisticated enough to support this new strategy as they do not allow the required flexibility to integrate different channels.

Regarding WMS, this isn't different, as most systems in the market were developed to meet a specific operation. So, new features are required, including: different formats of wave picking according to shipment type, distribution of resources according to sales volume for every shipment type, prioritizing tasks according to the deadlines in order management systems for different channels, online inventory updates for inventory management integrated with stores and suppliers, etc.

The main process impacted in the operation of distribution centers that serve different channels is order picking, both in grouping tasks and setting the distribution center layout. Inefficient picking logics result in a huge impact on a distribution center's operating costs and customer service level.

Traditional operations to supply physical stores allow picking large quantities and distribution between docks. However, they are not prepared to efficiently accommodate a large variety of orders. E-commerce operations have a different profile, due to the assortment with a greater variety of SKUs and orders with few items, where it is common to organize the picking process by picking areas and direct single orders directly to packaging and billing for faster order processing speed. With omni-channel, WMS must have the flexibility and intelligence to group picking activities and allocate resources among different operations in order to optimize picking productivity and meet deadlines set during the sale. In addition, it must provide tools to optimize the layout and routing of these shared picking areas.

WMS integration with other company systems

Another relevant factor in an omni-channel strategy is the WMS integration with systems such as inventory management and order management. Inventory update inside the organization is a requirement, so WMS must provide integration for online inventory update at receiving and shipping, as well as physical inventory blocking and stock rotation, with a unified inventory management system for distribution centers and stores. Additionally, integration with order management systems from sales channels allow total inventory visibility across the supply chain, assigning different orders/requests to inventories at distribution centers, stores and suppliers, in order to seek reducing costs and improving service levels.

WMS adaptation to the new requirements

After identifying the necessary improvements to WMS to comply with the omni-channel strategy, a question that remains is whether we should adapt the current system to meet new needs or to seek a new solution already developed for this purpose.

Regardless of the path to be followed, an item that can't be overlooked is that technology alone will not solve all issues. There is a need to review internal operational processes of distribution centers and their interfaces with processes in other company areas.

Process alignment will allow detailing functional requirements and a re-examination to adapt the current system or seek a new solution. In both cases a careful analysis is required to avoid high customization costs or mischaracterization of market systems.

This adaptation is not a simple and quick process and therefore should be planned to ensure that the role of WMS within the omni-channel strategy is achieved, providing a better shopping experience for consumers.

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