As retailers adopt Omni-channel models and offer their customers different ways to obtain product, their supply chain network becomes more complex. This complexity usually results in unwanted costs seen as the price of servicing a customer in today’s landscape. However, there is a way to minimize these costs and still serve your customer at the required levels to compete in the industry. Allocation strategies can not only eliminate costs, but also create a competitive advantage for your supply chain.
Allocation traditionally led to orders and order lines being sent to the distribution center for fulfillment. With Omni-channel capabilities such as Buy-Online-Pickup-In-Store (BOPIS) and Ship-from-Store being implemented, allocation becomes more complex. The distribution center is no longer the only means for fulfillment. It may be more efficient and cost-effective to ship customer orders from stores, or consolidate shipments for increased customer satisfaction.
A robust Order Management System (OMS) will allow you to configure allocation rules based on your business objectives. For example, if your organization has a smaller store footprint with less room for inventory, it may make more sense to ship most of your product from the distribution center. In contrast, if you operate a larger store footprint with the bandwidth to ship from stores, it may be more cost-effective and quicker to ship directly from stores to customers. This could create a competitive advantage for your fulfillment network and reduce overall transportation costs.
These allocation strategies can apply to a Buy-Online-Pickup-In-Store model as well. A BOPIS order can be allocated to another store to fulfill if the item isn’t available in the pickup store. The item may not be available immediately, but this provides you additional flexibility to fulfill the order and eliminate a lost sale.
Another example of when an allocation strategy is needed is when you don’t have inventory available or the original allocation is cancelled. Your system should be flexible enough to reallocate these orders or order lines to make sure you can still fulfill the customer order. For example, if the original order was allocated to a store and that store’s inventory is damaged or missing, the system would be able to determine the next best fulfillment option based on a set of rules.
Many companies today are embarking on fulfillment network analysis initiatives to try and understand customer demand and optimize where they are holding inventory. This analysis will help alleviate the pressures of allocation, ensuring that inventory is available in the right locations the majority of the time. That being said, allocation strategy is still vital to understand where to fulfill orders from and what to do when your first option is unavailable. Used correctly, your strategy can fulfill customer orders effectively and efficiently
Contact Bricz today to learn more about different allocation strategies and how they can align with your business objectives to give you an advantage when fulfilling orders.
Contributor: Kevin Quigley