Omnichannel Supply Chain Transformation for Third Party Logistics Providers

Abstract

E-commerce and store fulfilment operations have traditionally been held separate as multichannel supply chains because of their different operational requirements. Omnichannel distribution makes inventory available to several distribution channels that were traditionally kept separate. Separate channels have overlaps, higher transportation costs and do not allow the same customer experience as omnichannel distribution can offer. This work considers a third-party logistics provider’s distribution operations in China to answer the Question: “How will the supply chain transform to support store fulfilment for E-commerce consumers?” A baseline model depicting current operations is first presented, and then develops three omnichannel designs with varying operational constraints. An IT selection framework is finally developed to help recommend the most appropriate Order Management System to enable the omnichannel transformation and answer the question: “What OMS features will be necessary to transform a multichannel supply chain into an omnichannel supply chain?” This work concludes by demonstrating that a successful omnichannel network can reduce current costs by up to 53% and maintain current lead time service levels even if fulfillment demand is doubled during peak periods. The ability of presenting an omnichannel solution to potential customers will present a competitive advantage for a third party logistic provider.