Multi-Channel Logistics

Multi-channel logistics: Mail order and online retail continue to boom – online business is becoming increasingly important for many companies, and for many it is already the main channel. However, they often lack the know-how to organise the necessary logistics efficiently. It has to be built or acquired. The logistics processes behind multi-channel sales are both complex and demanding.

Efficient logistics through multi-channel distribution

Typical changes due to multi-channel:

• Trend towards smaller order and shipment sizes
• Extensive product range
• High return rates and resulting handling costs
• Large fluctuations in demand
• Increasingly shorter delivery times

The changes described above are far-reaching and require new approaches to logistics. Effective methods and proven solutions for an efficient multi-channel business are rare and product-specific. Work with an experienced logistics consultant to develop your strategy.

The market is changing

Online retailing in Germany will continue to grow strongly, with experts predicting that per capita spending on online retailing will increase. At the same time, stationary retail sales are declining.

Retailers aiming for long-term market growth are integrating e-commerce into their portfolios. Especially in the textile and lifestyle sectors, there has been a clear change in customer behaviour. There is no longer a preference to buy through a single channel, but the customer chooses the most appropriate option for the situation, while expecting the product to be permanently available in all channels.

Today’s successful retailers offer access to their entire product range from any store, from their own website, which can be used on mobile devices, or from the established public trading platforms on the Internet.

Customers are free to choose their delivery address and have goods delivered to their office, home or packing station. Alternatively, goods can be collected from a store of their choice. In addition, the delivery date can be set by the customer, and this flexibility in purchasing continues with the returns process.

Multi-channel retailers are increasingly recognising that bricks-and-mortar stores are benefiting from online sales, as many in-store collections lead to further purchases.

In the field of multi-channel logistics, the following trends can be derived:

• The entire range is now available online.
• In addition to the usual sales function, the stores also serve as pick-up points and accept returns.
• High availability and fast order processing are key to customer loyalty.
• Online sales are growing rapidly and often account for a low double-digit percentage of total sales, while sales in bricks-and-mortar stores are stagnating or declining slightly.

Multi-channel warehouse issues and requirements
The logistical challenge in an integrated multi-channel warehouse arises from the different order structures and service commitments of the different sales channels. Depending on the shipping cost structure, online orders may have only a few order lines, increasingly arrive at the end of the day and therefore need to be processed at very short notice. On the other hand, replenishment and delivery quantities to stores are more extensive, but are usually known the evening before. However, many stores now have the option of placing rush orders during the day, which also increases the logistics requirements for this channel. Key issues include:

• How can the process chain be standardised as far as possible in order to react efficiently and flexibly to fluctuations?
• Where do you need to differentiate processes for individual channels?
• How can returns be integrated into the overall process in an intelligent and cost-effective way?

Approaches to multi-channel logistics

For successful multichannel logistics

• Stocks must not be permanently assigned to channels.
• Picking must be standardised so that picking orders are as similar as possible across channels.
• Should be shipped in uniform containers or cartons.
• Small orders should be grouped together in multi-order containers.
• Orders with few items and quantities should also be consolidated.

When standard containers are used for picking, many common picking techniques can be used. The large number of small-volume online orders is consolidated through the use of totes and multi-order logic. Daily fluctuations in throughput can be smoothed out by using the same type of totes for all sales channels. The necessary allocation to individual customer orders only takes place in the packing area.

High return rates have to be accepted in online business. These are highest in the clothing sector. At the same time, returns are the fastest-selling goods, most of which are sold again within a few days. For this reason, returns from temporary returns warehouses in these industries are usually no longer sorted by type, but are stored in returns mix bins or dynamic buffers (e.g. for hanging garments), from which they are picked directly.

In the multichannel warehouse, additional storage locations must be provided for the provision of returns and an above-average number of workstations must be planned for the processing of returns.