NetSuite Best Practices Series: Overcoming Multi-Channel Distribution Challenges

In the past, most companies have operated in only one sales channel, which meant their distribution operations only had to deal with one set of distribution processes. Today, many companies operate in two, three or even four channels, which can be very challenging when you try to combine all the required distribution processes together into one efficient operation. 

To help, we’ve compiled our top tips to overcoming multi-channel challenges.

Warehouse Processes Infocus

To start, let’s quickly clarify what we mean by channel. These include the manufacturer (who may also distribute their own product), wholesale distribution, and eCommerce or brick-and-mortar retail. 

Understanding your channels

If your company is operating in multi-channels, you should first evaluate these channels to verify that they are still profitable (or are not a drain on other channels that are more profitable). One of the main areas to review is your distribution operations and how much it costs to process goods. Many companies start in one channel and expand to others but are hesitant to drop an old channel, even if it’s no longer profitable.

In addition to profit, you’ll want to review the efficiency of your operations. Let’s say you start in a manufacturing or wholesale business and then move into e-commerce. Often times, you’ll find that your product mix and order profile has changed, but the distribution processes have not. This generally creates an environment that causes inefficiencies in all channels, especially when they are still designed for a manufacturing or wholesale channel.

Adopting changes in your channels

One of the differences for companies going into an eCommerce model that will need to be addressed is moving from fewer known customers with larger orders to many unknown customers with small orders - and usually an increase in the number of items that are stocked in the warehouse. In addition, other areas that need to be reviewed are storage techniques, physical layout, picking methods and shipping methods.

One of the primary methods to handle these changes is software automation. The challenge with most systems is that they are designed for one distribution channel and do not do well in a multi-channel environment. Most warehouse management systems (WMS), are designed for an environment that has predictable repetitive requirements. These systems use logic that rely on hard rules that are used to generate various tasks, not on the flow of product through the warehouse at a particular time. 

The challenge in a multi-channel operation is that each channel requires different logic (and many times conflicting logic) to be used. When using software automation in a multi-channel, you will want to use a system that provides best practice logic that guides the user to perform their tasks.

Implementing best practice logic

One example is putting away an item. Instead of the system telling the user to only put the item in one location (which also requires a significant amount of setup), the mobile device shows where the item is normally picked from and other locations where the item is stored, including quantities. This allows the user to use the system-suggested logic AND the user’s logic on what is needed (is the item being returned or are you determining the best location for a new shipment, etc.). 

A bonus: After the item has been put away, replenishment logic can be used to control FIFO/FEFO and replenishment quantities (including not breaking cases for replenishment).

Another example is picking, packing, & shipping items. With multi-channel distribution operations, you will need multiple methods of picking that can all be used at the same time.

Since picking product consumes the largest amount of manpower resources in the warehouse, this is the function that requires the greatest flexibility. In one warehouse, you may require standard order picking for larger orders and a number of different functions to handle eCommerce orders like multiple and bulk order picking.

Making your multi-channel distribution operation more efficient requires thinking through both the processes and software that can provide not only logic assistance, but can record all transactions as they are happening. In addition, your system needs to be flexible to configure and use so it can keep up as your business (and the channels you service) continues to change.

For additional warehouse management tips, check out our best practices for handling inventory – specifically inventory shrinkage