The Pressures of Omni-Channel Fulfillment and Returns Are Growing

It’s no longer optional — LSPs need to master fulfillment and returns

Increasingly, retailers and D2C manufacturers are choosing to outsource the seemingly insurmountable challenge of omni-channel fulfillment and returns to their expert partners: Logistics service providers (LSPs). Third-party logistics providers (3PLs) and the growing fourth-party logistics provider (4PL) community are expanding their offerings of managed warehousing and distribution services in response to growing demand.

While it’s a lucrative business segment, managing omni-channel fulfillment and returns — across customers, at massive scale — is not easy for LSPs. Imagine the complexities of a single fulfillment-and-returns operation, in one warehouse. Now multiply that by dozens of customers, thousands of SKUs, multiple distribution centers and exponentially higher operations volatility.

As consumers grow in their delivery, service and pricing expectations, those pressures are, in turn, placed on LSPs who often struggle to operate profitably in this demanding landscape.

In achieving omni-channel optimization, at scale, LSPs face big challenges

What can LSPs do? Is it even possible to achieve the required level of speed, precision, customer service and planning accuracy at scale, 24-7, as orders and returns keep coming in? Across multiple customers and supply chains?

In Blue Yonder’s experience working with over 175 LSPs, it’s very achievable. But first LSPs need to overcome these four common challenges we’ve witnessed firsthand:

• Inventory and order handling gaps. For LSPs managing multi-client warehouses, misaligned or unbalanced inventory can lead to higher operations costs, fulfillment delays and missed service targets. It can be especially hard to manage and prioritize orders and inventory during launches or promotional events. Of course, this damages both LSP-retailer relationships and retailer-consumer relationships. The solution lies in using advanced technology to achieve the real-time inventory visibility and synchronization needed to balance orders with availability.
• Dynamic requirements for labor and other resources. Order volatility also makes it tough to forecast labor and other resources across clients in managed warehouses. In today’s tight labor market, LSPs often face both fluctuating employee availability and demand surges. Understaffing during peak periods increases costs and delays, while also reducing fulfilment service levels. By leveraging digital workforce planning and warehousing solutions, enabled by artificial intelligence (AI), LSPs can dynamically allocate resources to meet client requirements both efficiently and profitably.
• Increasing reverse logistics complexity. Growing return volumes, spurred by e-commerce growth, are only exacerbating the pressure on LSPs. Amid the rising costs of handling and processing large return volumes, many LSPs are striving — but failing — to integrate their forward and reverse logistics operations. Advanced technology can help, by consolidating return pickups across multiple customers, introducing a centralized reverse logistics platform, and fueling more sustainable workflows and practices — while also minimizing costs and delays.
• A need for agile, real-time decision-making. As they manage multiple complex customer supply chains, LSPs are overwhelmed with data —about inventory movements, new orders, transportation capacity, labor availability, supply disruptions, and other upstream and downstream events. Disruptions at any node, or in any function, demand swift, smart decisions. But LSPs struggle to manage all this data, achieve real-time visibility, and sense disruptions and exceptions. That means they also lack real-time responsiveness and agility when these events occur. AI is the only practical solution for tracking supply chain events and driving an informed, strategic response. Advanced analytics, real-time data integration, and autonomous, AI-enabled decision engines empower LSPs to pivot quickly and strategically, improving inventory allocation, order prioritization, cost control and overall customer service.

The convergence of these forces signals a pressing need: LSPs need to transform their operations by embracing digital solutions, powered by AI and other innovations, to manage multiple omni-channel supply chains effectively.