Omni-Channel not just for retail anymore, by Oracle
Written by By Derek Gittoes (pictured, right), Vice President, Value Chain Execution Product Strategy and Mark Lewis (pictured, below), Director, Value Chain Execution, Oracle
If you have been paying any attention at all to the industry periodicals over the last couple of years, you are well aware that “Omni-Channel” is all the rage as a topic. While these articles always seem to link Omni-Channel inexorably to Retail, the ramifications of this new fulfillment paradigm also affect distribution centre design and warehouse management system (WMS) functionality requirements across virtually all supply chain verticals.
The Consumer Package Goods (CPG) industry in particular - where distribution (and WMS) is often highly integrated with manufacturing – is increasingly being asked to provide direct-to-consumer shipments on behalf of the major retailers. This can lead to a very complex fulfillment process where the WMS is not simply optimised for finished-goods big-box fulfillment, but must also manage and optimise raw and in-process product as well as have separate fulfillment for both direct-to-consumer and traditional big-box processes.
Before they were called Distribution Centres (DC), warehouses traditionally were thought of as being at the end of the supply chain, a place to accumulate goods after manufacturing and hold them until final order fulfillment. A “WMS” isn’t a “Distribution Centre Management System” (DCMS) because the WMS software industry originated during this earlier warehouse era and evolved under the paradigm of automating and improving operations for a facility that was still, even as recently as a few years ago, thought of as being stand-alone at the “end” of the fulfillment process.
WMS “In the middle”
The few Omni-Channel articles that go so far as to even discuss WMS functionality rightly bring up the fundamental differences in fulfillment between retail distribution and manufacturing/wholesale distribution. Shipping case and pallet quantities with relatively few order lines to a limited customer set is very different from supporting a vastly greater number of much smaller split-case and each-pick orders to a delivery set that is limited only by the location of the homes of the end users. Add to that the increased need for advance slotting functionality and labor scheduling to improve this new process, and the need for a robust WMS becomes even more critical.
While these fundamental operational process differences alone are often enough to require a full review of distribution operations, and even – if the current WMS package has been in place for a few years – consideration of a new solution, many companies still operate under the old “WMS at the end” paradigm. This thinking can result in criteria too heavily weighted on inside-the-box feature-function considerations and not on overall broader fulfillment objectives. Just as the Warehouse has become the Distribution Centre, it should also no longer be thought of as at the end of the fulfillment process, but rather as a “WMS in the middle”.
In reality, this move to the middle started at least twenty years ago with the rise of just-in-time order fulfillment. As finished goods inventory stock fell, it became more imperative that order management (OM) systems have closer ties to the distribution centre, and the WMS running it, in order to more accurately promise and deliver product in real-time.
This closer linkage of OM and WMS began to move the distribution centre from its long-held position at the end of the process and bring it more closely into the real-time business world of OM, purchasing and manufacturing. Today, 20 years or so beyond just-in-time, the Omni-Channel movement is forcing even further immersion of distribution operations with the real-time order capture/manage/fulfill process.
As the omni-channel paradigm continues to establish itself in Retail, it is increasingly forcing those non-retail suppliers to support this new fulfillment model as well. Wholesale distributors require instant real-time validation of stock availability across all their DCs, the ability to ship goods easily from DC to DC, split orders across DCs, and fulfill individual orders directly to the end-user from multiple DCs. Manufacturers require that not only finished goods be available for sale and shipment, but raw and in-process goods as well.
With Omni Channel, it is ever-more important that the WMS be thought of not simply as a tool for optimising the final goods handling at the end of the supply chain, but rather as a central and integral part of a blended fulfillment solution including Manufacturing, Distributed Order Orchestration, Transportation Management, and Supply Chain Planning. A WMS “in the middle”.
Driver shortages: Why the industry needs to be worried
While driver shortages are a global problem, with a recent survey from the International Road Transport Union suggesting that driver shortages are expected to increase by 25% year-on-year across its 23 member countries, the issue has very much made itself felt for UK businesses in recent weeks.
A perfect storm of factors, which many within the industry have been wary of, and warning about, for months, have led to a situation wherein businesses are suddenly facing significant difficulties around transporting goods to shelves on time, as well as inflated operating costs for doing so.
What’s more, the public may also see price rises as a result due to demand outmatching supply for certain product lines, which in turn brings with it the risk of customer dissatisfaction and a hit to brand and stakeholder reputation. Given that this price inflation has been speculated to hit in October, when the extended grace period on Brexit customs checks comes to an end, the worst may be yet to come.
"Steps must be taken to make a career in the industry a more attractive proposition for younger drivers, which will require a joint effort from government, industry bodies, and the sector as a whole"
That said, we have already been hearing reports of service interruption due to lack of driver availability, meaning that volumes aren’t being transported, or delivered, to required schedules and lead times. A real-world example of this occurred on the weekend of 4-6 June with convenience retailer Nisa, with deliveries to Nisa outlets across the UK affected by driver shortages to its logistics provider DHL.
But where has this skills shortage stemmed from?
Supply is the primary issue. Specifically, the number of available EU drivers has decreased by up to 15,000 drivers due to Brexit alone, and this has been further exacerbated by drivers returning to their home country during the COVID-19 pandemic, as well as changes to foreign exchange rates making UK a less desirable place to live and work. This, alongside the recent need to manage IR35 tax changes, has also led to significant inflation in driver and transport costs.
COVID-19 complications have also meant that there have been no HGV driver tests over the past year, meaning the expected 6,000-7,000 new drivers over the past year have not appeared. With the return of the hospitality sector we understand that this is a significant challenge with, for instance, order delivery lead times being extended.
It is little surprise, therefore, that the Road Haulage Association (RHA) earlier this month became the latest in a long line of industry spokespeople to write to the government about the driver shortage for trucks. The letter echoed the view held by much of the industry, that the cause of this issue is both multi-faceted and, at least in some aspects, long-standing.
So, many in the industry are in agreement as to the driving factors behind this crisis. But what can be done?
Simply enough, outside of businesses completely reorganising their supply chain network, external support is needed. In the short-term, the government should consider providing the industry with financial aid, and this can also be supported more widely with legislative change.
Specifically, immigration policy could be updated to place drivers on the shortage occupations list, which would go some way towards easing the burden created by foreign drivers returning to their home countries. Looking elsewhere, government should also look for ways to increase the availability of HGV driver tests after the blockage created by the coronavirus lockdowns.
Looking more long-term, steps must be taken to make a career in the industry a more attractive proposition for younger drivers, which will require a joint effort from government, industry bodies, and the sector as a whole. As it stands, multiple sources suggest that the average age of truck drivers in the UK is 48, with only one in every hundred drivers under the age of 25. We must therefore do more to increase the talent pipeline coming into the industry if we are to offset more significant skills shortages further down the line.
On the back of a turbulent year for the supply chain industry, it has become increasingly clear that the long-foretold shortage of drivers is now having a tangible and, in places, crippling effect on supply chains.
Drivers, and the wider supply chain industry, have rightly been recognised for the seismic role they played in keeping the nation moving and fed over the past year under unprecedented strain. If this level of service is to continue, we must now see Government answer calls to provide the support the sector needs, and work hand-in-hand with the industry to find a solution. If we do not see concrete action to this effect soon, we are likely to be in for a turbulent few months.
Rob Wright is executive director at SCALA, a leading provider of management services for the supply chain and logistics sector