Omnichannel ‘Bogus Solution’: Where’s my ROI?
With the rise of Order Management Systems in the last decade and a half, calculating ROI for the project is sometimes hard to quantify. Unlike other projects for Warehouse and Transportation management, the expected return on investment is sometimes more qualitative than quantitative.
When we think of the cost involved with distribution to customers, we think of three main pillars:
- Transportation Cost
- Labor Cost
- Inventory Carrying Cost
While in the field, I witnessed a few implementations where top-line growth increased by upwards of 10% for the first year of the project but starting to ship from stores. This uplift sounds great in principle, what CFO doesn’t want to hear about that “success”.
These additional costs erode margin and when not fully considered during the design process, and specifically in the testing and “proof” (build/test) phases, this top-line growth is met and exceeded by the additional cost involved with Omnichannel projects.
Yet another example of a “Bogus Solution” is the lack of ROI due to additional Transportation Cost. Retailers lacking the foresight to have sound and proven allocation logic in their OMS do not “cap” the number of times an Order can split across multiple facilities for fulfillment. At around the second split of the Order, the cost outweighs the benefit of having split the Order.
Retailers lacking the foresight to have sound and proven allocation logic in their OMS do not “cap” the number of times an Order can split across multiple facilities for fulfillment. At around the second split of the Order, the cost outweighs the benefit of having split the Order.
SCApath experts suggest investing and researching your OMS’s capabilities around grouping order lines on an Order and allocating all lines together at each facility, instead of allocating each line’s first available inventory (even if it means skipping to a further away carrier zone). Leading OMS systems have the ability now to Geographically source the order to a store, often times within the same city as the customer. If the lines cannot be fulfilled from said locations, then the system will choose the next closest store that has available inventory and enough capacity to fulfill the Order.
Want to learn more about SCApath’s track record in the market for designing OMS allocation strategies, click here: Contact Us