More than a decade ago when omnichannel retailers first began adding ecommerce fulfillment to their distribution operations, they typically set up separate material handling systems to process retail, wholesale, and ecommerce orders. In doing so, they also set up separate inventories dedicated to each channel. But having separate fulfillment operations with dedicated, individualized inventories for each channel was a costly solution that tied-up capital and demanded large infrastructure investments for these early omnichannel retailers.
Today, many retailers are taking a different and better approach — using a single stream inventory strategy to support simultaneous fulfillment for all sales channels. Made possible through the combined use of warehouse automation and warehouse software, this approach enhances operational productivity while reducing the need for hardware investment.
A single stream approach to inventory enables products for all sales channel orders to be filled from one common inventory. Since inventory need not be assigned to specific channels, the need for multiple bulk storage areas in a distribution facility that each house the same stock keeping units (SKUs) is eliminated. The fracturing of inventory that creates open cases with leftover product is reduced generally by a multiple of three — if not eliminated by a more progressive residual storage methodology. And the potential for inventory errors as well as the need for cycle counts are greatly reduced as SKUs are more easily accounted for in a single storage location.
With a single stream of inventory, omnichannel retailers need not operate separate material handling systems for each channel. Instead, material handling systems can be multi-tasked to handle retail, ecommerce, wholesale, and even reverse logistics through the same system. This greatly reduces the required infrastructure for omnichannel fulfillment that previously burdened many retailers. In these cases, Warehouse execution software (WES) can be used to facilitate simultaneous order fulfillment for all sales channels by exploiting SKU commonality in the order pool and fulfilling orders calling for common SKU’s for all three channels at the at the same time. This eliminates the need to continuously pull SKU’s in and out of storage and maximizes opportunities for greater picking efficiency whenever possible. Finding SKU commonality in orders across all three channels saves time and labor by reducing inventory handling.
A single stream inventory strategy also enables the streamlining of product flow paths throughout a facility. In merging three separate channel inventories into one, multiple, often convoluted, paths for goods movement can be consolidated, reducing handling requirements and increasing operational efficiency. Combining multiple, redundant paths into a few creates a stream of inventory that naturally flows throughout a facility to maximize order fulfillment efficiency.
The single stream approach to inventory simplifies operations by minimizing the need for inventory handling and movements. It reduces the required footprint for inventory storage, while opening the door to increased operational efficiencies. And it enables streamlining of product flow throughout a facility, the multi-tasking of material handling equipment, and the simultaneous fulfillment of orders for all sales channels. But that’s only part of the story…
To learn about the big picture financial implications of the single stream approach to inventory in a follow-up blog, click here.
Walter High is VP Marketing at MSI Automate, where he has worked since 2012.