Omnichannel Fulfillment Should Make Your Inventory Smarter But Is It

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Omnichannel Fulfillment Should Make Your Inventory Smarter. But Is It?

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Consumer shopping habits and the pandemic have complicated what used to be a simple-to-draw distinction between online and offline shopping. The ecommerce site was treated like a big virtual store with distribution centers (DCs) acting as the backroom. These orders were handled totally separately to store fulfillment and replenishment. That made inventory management of these channels simpler and separate.

Now though, we have new options for ecommerce customers:

  • Buy online, pickup in store (BOPIS) comes in two flavors:
  1. The order is still fulfilled by a DC but is sent to a store to be collected
  2. The order is fulfilled within the store, from the store’s stock
  • Some online orders may be fulfilled using store stock, because it’s closer to customers and allows retailers to offer a shorter delivery time even if the customer isn’t coming to the store to collect 


With these journeys, the boundary between online and offline is blurred, and inventory management has to be more intelligent to keep track of what’s happening, particularly as customer expectations around delivery times, product selection and availability have continually increased since these offerings first became widespread during the pandemic.  

The issues with order fulfillment 

The sourcing aspect—deciding which inventory to use to fulfill an order—has become more sophisticated as retailers develop their operations and offerings in this space. More and more, retailers are able to match orders against local inventory in stores, or use stores with an excess of inventory for a certain SKU or line to fulfill ecommerce orders.

However, they’re often using localized, custom-built or stopgap solutions for inventory visibility across their stores and distribution centers. Those solutions frequently lack the scale and responsiveness to match the volume and frequency of orders, and to intelligently source inventory to fulfill those orders.

Even where inventory decisioning is in place and retailers are able to execute order fulfillment intelligently, based on business rules, these tools almost never close the loop between execution and planning. That leads to huge problems with managing inventory levels at scale across a network of stores and DCs.

Sourcing inventory intelligently is good, but it’s only step one. 

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Demand-awareness and inventory management 

Planning systems rely on an understanding of demand in given areas to determine where to locate inventory, and how much to put there. Sourcing inventory from stores to fulfill ecommerce orders is great, but it can confuse the picture of demand that planning systems receive. That’s because when they’re given historical inventory data, planning systems don’t see where demand truly originates, only where orders are fulfilled from.

For example, if you had excess inventory in a store, you might have decided to prioritize that location for ecommerce order fulfillment to correct the overstock. That doesn’t mean there’s truly lots of demand for that SKU in that store region.

But to the planning system that is only aware of fulfillment and historical performance, a large amount of inventory in that location sold through, suggesting demand and inventory were actually correctly matched. Instead of solving the overstock issue, your planning system replicates it the next time you replenish.

Closing the loop between planning and execution  

Intelligent inventory decisioning is not just about being able to identify the right source of inventory for a given order – it’s about efficient planning systems where stock is replenished at fulfillment nodes where true demand exists and tailor future inventory placement accordingly.  

So in our example, the order management and inventory decisioning triggers a planning update, where the planning solution is informed about the geographical basis of those ecommerce orders to understand where the demand actually originates.

Intelligent planning can then adjust future inventory levels to place more inventory closer to customer demand, preventing the overstock issues and making it possible to offer faster fulfillment times to customers thanks to having the right products closer to them.

This feedback process doesn’t only work on outbound orders, either. Returned inventory is a huge challenge for retailers and it too requires an end-to-end approach. Bundling returns into DCs for processing and sorting is a straightforward method but results in massive wastage and loss of value.

If retailers understand what the returns are before they physically arrive, they can disposition them intelligently straight away, turning returned inventory into rapid replenishment for local stores where demand is high.

To do so, retailers must start investing resources in ensuring that inventory planning factors in the most efficient fulfillment considerations when making replenishment decisions. – to understand where inventory is most needed, and which inventory is in high demand, and preventing overlaps – i.e. putting a bunch of returns into a store that is about to be replenished, creating overstock.

Making better inventory decisions is hugely valuable – see how Blue Yonder customer Walgreens was able to offer 30-minute order pickups with Blue Yonder’s order management microservices, and ensure that inventory planning improved over time too, regardless of where orders were fulfilled from. 

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