Multi-Channel Distribution: A 3PL Challenge or Opportunity?

Multi-Channel Distribution: A 3PL Challenge or Opportunity?

The constantly evolving landscape surrounding the distribution industry is providing more and more variables and challenges for your supply chain.  With online and mobile orders on a steady rise, distributors need fresh ways to meet these multiple channels of distribution while keeping costs under control.   The essence of this change stems from the modern ways for a customer to submit an order.  It can be via smart phone, laptop or even the good old call center.  These orders are also expected to be able to be delivered to a variety of places; homes, offices, etc.  All of these new obligations are creating challenges that 3PLs are learning to overcome.

With so many orders coming in over a shorter amount of time, the balancing act of completing more orders at lower costs is the focus for distribution companies today.  A study by Modern Materials Handling shows that 49% of distribution companies consider fulfilling more orders, faster and at a lesser cost their top issue.  However, with multi-channel distribution being such a young concept, no real procedure has had time to emerge as a solution.  While some are investing in brand new software and technology, others have combined other traditional methods to meet these emerging needs.

One thing is certain, multi-channel fulfillment has become the way of the present.  In a survey by PRG, 75% of respondents claimed to be currently supporting more than one selling channel.  47% of the respondents expect mobile e-commerce to become the most vital sales channel within the next 24 months.  These trends predict that these new avenues of distribution are not only here to stay, but will continue to grow.

In the retail sector, the evolution of the seamless multi-channel approach across all sectors is a huge priority for most organizations.  Consumers want and expect both online and bricks & mortar shopping options. Additionally, the consumer wants to use the various shopping channels (mobile, computer, tablets, bricks & mortar, TV, radio, direct mail, catalog, etc.), and they expect the product information to be streamlined and uniform; regardless of the channel being used.  This creates a more knowledgeable buyer, and it places enormous pressure on the retailers and distribution companies to reformulate their supply-chain strategies in order to match this monumental shift in consumer demand.

Supply chain executives in the retail industry have been debating strategies for managing and integrating distinct order taking and fulfillment processes.  In the retail industry, a majority of companies offer and support multiple distribution channels. In a recent survey conducted by Peerless Research Group, two out of every three retailers are offering at least two distribution channels.  Additionally, twenty-eight percent of these retailers run three or four channels. So, there is an obvious trend emerging in the multi-distribution area.

With this new shift in the multi-channel process, there really is no “one size fits all” approach to tackling the challenges of implementation.  Many retailers and distribution centers are taking a variety of approaches.  Some are making new investments into software or automated materials-handling systems, while others are combining processes together into one multi-channel distribution center.  Regardless of the approach, all of these strategies are focused on reducing costs, improving throughput, and maintaining customer satisfaction. 

Transitioning to the multi-channel approach presents a multitude of challenges for retailers and distribution centers alike. The main problems largely stem from process flow and inventory management issues.  Defining and establishing a roadmap and examining resources, and adopting proficient technology applications are a few of the areas that need immediate attention. Furthermore, labor, transportation expenses, and expediting orders all contribute to the escalating cost in the order fulfillment process.

The main focus for distribution centers going forward will be to find ways to accurately and effectively handle more orders and, at the same time, lower costs.  Right now according to PRG, 48% of the distribution companies polled have seen their costs rise with this increase in demand.  The key areas of expense are: transportation, labor and materials.

The challenges that come along with today's multi-channel distribution demands are also considerable opportunities for manufacturers, retailers and distribution centers alike.  The ability to make your product available to as many customers as often as possible, coupled in a way to accurately and efficiently deliver it to them is a pronounced opportunity for every link in the supply chain.