Next-Generation Fulfillment Strategies and Operating Models: A Strategic Playbook

NEXT-GENERATION FULFILLMENT STRATEGIES AND OPERATING MODELS:A STRATEGIC PLAYBOOK TABLE OF CONTENTS FULFILLMENTPAIN POINTS EVOLVING SUPPLY CHAIN OPERATING MODELS AND TECHNOLOGY CRITICAL FULFILLMENT COMPONENTSGEP: YOUR PARTNER1234 3Copyright © 2022 GEP. All rights reserved.FULFILLMENTPAIN POINTSCompanies are facing demanding fulfillment constraints:•Labor, physical facility and freight cost pressures•High fill rate/service levels•Broad assortments•Faster order cycle times•Capacity constraints in shipping (both ocean and over the road)•Omnichannel requirements from customers (shop, buy, sell, service & return through a variety of channels)•The advent of the “24/7 customer” who is always in the channel, always online and demanding ever-increasing service levelsTakeaway: Yesterday’s fulfillment models cannot serve the customers of today.1 4Copyright © 2022 GEP. All rights reserved.EVOLVING SUPPLY CHAIN OPERATING MODELS AND TECHNOLOGY2Older monolithic fulfillment networks will not meet the emerging financial and customer requirements.To meet all these increasing pressures and competitive dynamics, new operating model components are being developed by operators:•Omnichannel capabilities•Highly responsive delivery times (down to hours)•Highly automated warehouses•Market-level replenishment models for very fast, targeted delivery•Mixed-model warehouses that are much more than traditional pick/pack/shipTakeaway: Supply chain leaders must move beyond legacy fulfillment systems to meet modern demands. 5Copyright © 2022 GEP. All rights reserved.EVOLVING SUPPLY CHAIN OPERATING MODELS AND TECHNOLOGY2Supply chain technology is evolving to support these new models:•Decision-support tools such as inventory planning tools that support segmented, differentiated fill rate targets•Robotics and mobile autonomous equipment•Facility infrastructure such as massive, multi-story warehouses3PLsand 4PLs are also evolving to fill the gaps.A segmented, strategic approach is required for fulfillment –not all orders or items are created the same, therefore requiring differentiation in stocking and replenishment.Takeaway: Innovative tools and approaches are key to designing and implementing new fulfillment models. 6Copyright © 2022 GEP. All rights reserved.CRITICAL FULFILLMENT CAPABILITIES3Omnichannel fulfillmentConquering the last mile dilemmaThe new roles of 3PL/4PL playersThe warehouse revolution continuesSupply chain fulfillment technology evolving to fill the gap Fulfillment Strategy ComponentsThere are five components that can enable new fulfillment strategies 7Copyright © 2022 GEP. All rights reserved.CRITICAL FULFILLMENT CAPABILITIES3Omnichannel fulfillment is a strategy of having a unified approach to manage inventory and order processing from a variety of sales channels, including both forward and reverse flows and both physical and digital channels.Customers are “always in the channel / 24-7 customers” who want to be able to shop, buy, service and return products through a large variety of physical and digital channels. Takeaway: Omnichannel fulfillment isanapproach where the fulfillment operator implements multiple physical and digital channels.WHAT IS OMNICHANNEL FULFILLMENT? 8Copyright © 2022 GEP. All rights reserved.CRITICAL FULFILLMENT CAPABILITIES3The challenge for operators is two-fold:•To develop and consistently execute in these new channels•Manage costs as channels growIt is common for operators to enlist the help of logistics partners —carriers, facility operators, and field personnel —to augment their capabilities.However, tight integration and visibility between the prime operator and their logistics partners exist, thusresulting in omnichannel networks that are consolidated and carefully plannedTakeaway: Omnichannel networks require new capabilities —dynamic planning and visibility —to deliver their promise while not expanding costs.OMNICHANNEL FULFILLMENT CHALLENGE(S) 9Copyright © 2022 GEP. All rights reserved.CRITICAL FULFILLMENT CAPABILITIES3Rapid replenishment models are shaking up the competition by offering “instant” delivery within as little as 20 minutes.The emerging model is collaborating with local delivery service partners to have highly automated mega-warehouses and distribution centers that straddle 1-2 major market regions and can rapidly replenish the dark/satellite depots to meet unique, changing demand.In addition, companies like Amazon are developing “owner-operator fleets” where individual owners are acting as the last-mile drivers of their delivery van, or vans, all with Amazon logos to be indistinguishable from a corporate private fleet.Takeaway: Fulfillment capabilities are being pushed to entirely new levels of extreme service while managing cost and asset commitments.THE LAST MILE 10Copyright © 2022 GEP. All rights reserved.CRITICAL FULFILLMENT CAPABILITIES3Market Level Logistics (MLL) is a newer fulfillment model focusing heavily on a major market and uses a strategic approach to both demand