With the expansion of e-commerce, proliferation of smart phones, and emergence of the omni-channel buyer, wholesalers can no longer expect to grow profitably without fundamentally adjusting the way they view promisable inventory. Carrying cycle inventory is expensive yet stock-outs can lead to sales losses and threaten customer loyalty.
One can assume that omni-channel demands will drive better order flow and product velocity as well as enhance Return on Fixed Assets (RoFA), but the ability to fulfill orders as promised (and achieve such results) depends heavily on having ONE view of promisable inventory across channels. Wholesalers must have a comprehensive view of their global inventory across all their DCs as well as In-Transit—not just within a network of distribution centers (DCs) or a geographic zone.
The omni-channel wave is also impacting how customers research and purchase from a backorder perspective as they come across stock outs. Unless, there is a significant cost or impact to switching screens to a different vendor’s website or mobile app to place an order, why would they wait for a backorder to fulfill? Most wholesalers do not track this aspect of lost sales percentages from stock outs. This represents a significant threat (or opportunity) that wholesalers can no longer ignore in a hypercompetitive “retail-like” business environment.
Thankfully, emerging cloud technologies and the concept of control towers provide wholesalers with the needed leverage to be able to view, monitor, control and promise inventory outside of the four walls of their DCs. Lead time calculation algorithms can be configured to assist with re-setting customer expectations on the order receipt date depending on where the promised inventory is in the delivery cycle. Pricing incentives can be layered on top of such strategies to increase the switching cost to buyers, based on various factors such as customer loyalty, order history, size of the order, or the timing of the order.
Over the next decade, B2B buying behavior is expected to “consumerize” further as the workforce turns over with a larger number of digital-savvy buyers coming into the mix. Addressing omni-channel challenges for wholesalers on the fulfillment side of the equation will be a critical success factor in the future.
Wholesalers expecting to aggressively re-orient and capitalize on the omni-channel phenomenon should consider the following:
1) View this as an opportunity to increase sales profitably by improving order flow and scaling physical assets
2) Work toward building a robust, “cloud-friendly” technology foundation that enables supply chain collaboration and inventory visibility
3) Assess and update current cloud adoption strategies to factor in expected omni-channel business value and outcomes