© 2014 MHI®

Copyright claimed as to audiovisual works of seminar sessions and

sound recordings of seminar sessions. All rights reserved.

Sponsored by: Presented by:

Ed Romaine, Integrated Systems Design

Russ Devilbiss, Carter Control Systems

Best

Omnichannel

Practices &

Trends

What Is ISC

• Integrated Systems & Controls

(ISC) members are the Industry’s leading

suppliers of integrated material handling

and controls systems. They supply

systems worldwide and in virtually every

major manufacturing and distribution

sector.

Today

• Defining Omni and Multi Channel and

Ecommerce Practices

• 8 Trends & Their Impact on Us

• 6 Steps in Implementing Omnichannel

• Some Examples to Learn By

What Is Omnichannel Distribution?

• “Omnichannel retailing is concentrated on

a seamless approach to the consumer

experience through all available channels.” » Wikipedia

• Ecommerce sales focus on internet channel fulfillment.

• Multichannel focuses on ecommerce and retail stores.

• Omnichannel sales focus on the entire opportunity &

experience.

Omnichannel Success!

Customer Experience

Executive Management

Science of ROI

IT Engagement

Operational Excellence

Marketing

Customer Care

• All Assets, Channels

& Touch Points Work

Together

• Create a Seamless

Customer Experience

US Census

Bureau

A Look at Our Future…

Omni-Channel Trends… What Customers Want & The Impact On Logistics:

1. Same/Next Day Delivery

2. Lots and Lots of One Line Orders

3. Vast & Seamless Inventory to Choose From

4. Buy & Fulfill As One…

Not Disjointed By

Function, Location or

Business Unit

5. Flash Sales

6. Free Shipping &

Returns

7. Delivery Time is Key

8. Subscriptions

Same/Next Day Delivery

• Proximity to Customer – Moving away from East

& West Coast Only

– Ability to ship from each region

• What Structure? – DC’s

– Stores & DCs

– Partners & DCs

– Pop-Up Stores & DCs

– Depends on Your Business

Source: MCM Outlook 2013

Store Interaction is Important • 62% want to buy items online and make returns in-store

• 44% want to buy online and pick up in a store

Source: 2013 UPS Pulse of the Online Shopper

Same/Next Day Delivery

• Technologies Needed:

– Software

• WMS, TMS, WCS, CRM,

ERP and More!

– Hardware

• Goods to Person

• Manual

• Automated

– Delivery Methods

• FedEx & UPS

• Drones

• Private Fleet

One Line Orders

• Say Goodbye to 3.0 Lines/Order

• Picking Costs Going Up!

– New Picking Methods

• Faster Picking

• Sortation Issues

– New Packing Methods

• More “Standard” Box Sizes

• More Statements, Invoices and

Documents to Insert

• More Orders/Boxes To Fill & Ship

Vast & Seamless Inventory

• You Are Expected to Have

101% of Inventory

Available At All Times

• Inventory Decisions: • Where Do You Locate It?

• How Do You Track It?

• How Do You Fulfill It?

Seamless Purchasing to

Fulfillment & Returns P

U

R

C

H

A

S

I

N

G

F

U

L

F

I

L

L

M

E

N

T

Call Center

Mobile

Websites Stores

Flash

Sales

Mail Order

Kiosks &

Vending

Machines

Pop Ups Stores

Outlets

Factory

Retail &

E-commerce DCs

Consumer

C

H

A

N

N

E

L

S

Flash Sales • Very Low Price on

Specific SKUs for a Specific Short Period of Time – Strategic Against

Competition

– Great Way to Blow Out a SKU

• Important Considerations: – Communications

Between: Sales, Marketing, Operations is Vital!

– Moving Flash Sale Items Forward To Be Picked Quickly

– Understand What Time and Resources Re-Stocking Might Involve (if needed)

Subscriptions • Returning & Repeat

Customers Are Vital

• Predictable & Recurring Sales

& Revenue

• Keeps in Touch With Loyal

Customers

• Earns Word of Mouth

• Recurring Opportunity to Sell

Additional Products

• Streamlines Operations

41% of Revenue = 8% of Visitors

Free Shipping & Returns

• Strategic Business

Strategy

• Made Popular By

Amazon

• A Primary Driver of

Ecommerce

• Actions To Reduce

Warehouse Costs:

– Automated Order

Picking

– Always Having More

Pickers Than Packers

– Reduce Shipping

Costs

– Reduce Labor &

Inventory

Shipping Costs Lose Sales

Source: 2013 UPS Pulse of the Online Shopper

Warehouse & Stores

Are Vital to Sales…

Source: 2013 UPS Pulse of the Online Shopper

Six Steps To Start Success

“Omnichannel is a Path Not A Destination”

-- Macy’s CEO

1. Find Inventory Sharing Opps

• Look Across The Channels For Commonality in

Inventory and Order Profiles

– Retail Stores

– Ecommerce

– Wholesale

– Manufacturing

– Spare Parts

– Kiosks

– Pop Ups Stores

– Outlets

• Example:

– Inventory: Combining Manufacturing With

Spare Parts & Distribution

– Order Picking: Combine Ecommerce, Retail and Wholesale

2. Identify Best Operating Model

• Develop An Operating Model To Exploit

The Similarities In Order Profiles

– Order Routing

– Order Fulfillment Locations

– Other Key Fulfillment Processes

• Velocity of specific SKUs

• Seasonality of specific SKUs

• Quantities of specific SKUs per order

3. Chart Functions vs. Processes

• Forget What You Think You Know!

• Function: List For Each Channel

• Process: List for Each Function

• You Will See Synergies Between Channels

• Receiving • Quality Control • Split Case Picking

• Full Case Picking • Reserve Storage • Replenishment

• Buffer • Staging • Packing

• Shipping • Returns • Many More!

• Batch Pick • Sortation – Shoe • Auto Doc Insertion

• Cluster Pick • Sortation – Tilt Tray • Auto Insert

• Single Wave • Print & Apply • Semi-Auto Taping

• Paper Pick • Box Erector

• Many More!

4. Optimize Flow Paths

• Connect The Flow From The Processes &

Functions To Optimize Synergies

– Use same picking packing and shipping

systems for multiple channels

• Big Data, Social, CRM Meet WMS & ERP!

– Visibility by combining data in multiple

databases into one view! Understand your

customers and their ordering preferences and

requirements

5. Implement Function-Specific

Technologies

• Identify and implement technologies for

the pick, pack and ship process

• The technologies must support your

operating model and flow paths

• Create an analytical criteria matrix to aid in

the decision making process

Decision Criteria Matrix

>

Criteria Function

or Zone Technologies

Factor

Weight Factored

Value

Analytic

Winner

6. Divide, Conquer & Calculate

• Omnichannel Is A Path Not A Destination!

• Use Technology Neutral Partners

• It Can Take Years

• Do An ROI Analysis and Start With The

Low Lying Fruit

• Measure & Evaluate

• Mitigate Risk

Real World Examples &

Lessons

• Orders are filled using stores plus storage warehouses and ecommerce fulfillment centers

• "We started ship-from-store as a test. It has exceeded every expectation.”

• Shipping from stores provides faster delivery of online purchases "at very low cost.”

• Two-thirds of the U.S. population live within 5 miles of a Walmart

• 10%+ of items ordered on Walmart.com are shipped from stores, and most are delivered in less than 2 days.

• Delivery distances from stores are much shorter saving on shipping costs

• “Showrooming” was killing Best Buy

• Turnaround started late 2012 when the new CEO’s goal was to use their 1,400+ locations as weapons not a cost liability

• The justification: – 1 billion online visits a year

– 2% to 4% of orders were out of stock in the e-commerce warehouses

– 80% of out of stock inventory was in its physical stores

• Pundits predicts ominichannel will generate an extra $5.8 billion in sales and $168 million in profit

• Best Buy shares have more than tripled

• "Some people talk about Amazon with their 100 distribution centers, God bless them. We have 2,600 distribution centers," said Gap Chief Executive Glenn Murphy (referring to his stores)

• GAP launched ship-from-store in 2012.

• Stores have a lot of unsold inventory. Online orders are routed to these locations. This helps reduce: inventory costs and costly discounts of otherwise unsold inventory WHILE increasing sales and customer satisfaction

• One of the first implementers of omnichannel in 2012

• 2013 - Same store sales +3.7% Of which 3.1% came from

omnichannel sales!

• Lessons Learned:

– Order picking is done in the front of the store with associates

who are heavily trained

– Investing aggressively in RFID for replenishment and will have

50% by 4Q 2014

– Inventory in the warehouses and on sales floors are put online to

improves sales, reduces waste and shipping costs

– Gearing up for same day store pick ups and deliveries

– Returns are now an opportunity to re-sell items quickly for the

stores

30,000 Pound Gorilla In The Room • Amazon ($67B) & Your Competitors

• They Are Looking For Growth!

– Will They Enter Your Market?

• Medical Supplies

• Small B2B Parts

• Aerospace Parts

– Best Defense Is

A Good Offense

• Plan Your Attack!

• Implement Today!

• Mitigate Risk!

• Have Patience!

I Want YOUR

Business

Members of ISC

• AGiLE Business Media

• Banner Engineering Corp.

• BEUMER Corporation

• Carter Control Systems, Inc.

• Cinetic Sorting Corp.

• CubiScan (by Quantronix, Inc.)

• Dematic Corp.

• Egemin Automation Inc.

• Integrated Systems Design

• Intelligrated, Inc.

• Intralox, L.L.C.

• JBT Corporation (formerly FMC Technologies)

• JDA - The Supply Chain Company

• Knapp Logistics Automation

• Lenze Americas

• Material Handling & Logistics

• MIAS Inc.

• MURATEC - Logistics & Automation Division

• OCS Checkweighers, Inc.

• Retrotech, Inc.

• Rockwell Automation Control Systems

• Schneider Electric

• SICK, Inc.

• SI Systems

• SpanTech, LLC

• St. Onge Company

• SWISSLOG Logistics, Inc.

• System Logistics Corporation

• TGW Systems

• Transbotics Corporation

• viastore systems, Inc.

• Westfalia Technologies, Inc.

For More Information:

Gary Forger

gforger@mhi.org

www.mhi.org