DHL Trendreport Omnichannel

OMNI-CHANNEL LOGISTICS
A DHL perspective on implications

and use cases for the logistics industry
2015
Powered by DHL Trend Research

PUBLISHER
DHL Customer Solutions & Innovation
Represented by Matthias Heutger
Senior Vice President
DHL Customer Solutions & Innovation
53844 Troisdorf, Germany
PROJECT DIRECTOR
Pang Mei Yee
DHL Asia Pacific Innovation Center
PROJECT MANAGEMENT AND EDITORIAL OFFICE

Tamanna Dahiya
DHL Asia Pacific Innovation Center
IN COOPERATION WITH:
RESEARCHER
Daniel Kraemer
PREFACE
Consumer buying behavior is changing drastically Jointly developed with IDC Manufacturing Insights,
with growing adoption of the Internet, smartphones, a global provider of market intelligence and advisory
and handheld devices worldwide, especially in Asia. services, this report goes beyond the media hype. We
The surge in Internet sales and in consumers using offer real-world examples of how companies are
different channels to evaluate products, order, pay, embracing omni-channel strategies to transform their
collect, and return their purchases has driven companies business, and we take a close look at the enablers of
to investigate the omni-channel approach. omni-channel supply chain management.
Retailers and manufacturers in all industries will need To better understand the impact of omni-channel on
to adapt to this new reality to thrive. From being an companies in Asia the fastest-growing region and yet
emerging trend, omni-channel will be a key requirement one where omni-channel research is sparse IDC and
in the future, presenting challenges and significant DHL conducted a survey with 56 fast-growing companies.
opportunities to all businesses. We invite you to join As well as a changing sales channel mix, this survey
us on a journey to discover its potential! highlights consumer preferences and shows how logistics
can address these issues over the next few years.
Logistics is a key enabler for omni-channel, and the
success of the omni-channel approach hinges on We hope that this report sparks your interest and
how businesses adapt to evolving consumer journeys. enthusiasm for this exciting topic and provides you
They must move away from channel-based structures with actionable insights for success. Thank you for
and networks, and seek to personalize their engagement choosing to join us on this journey.
with consumers.
Sincerely,
This DHL Trend Report discusses the impact of omni-
channel on logistics, and underscores DHLs interest
and commitment to helping our customers stay ahead
in a fast-changing marketplace. It answers several key
questions:
What is omni-channel?
What are the best practices in omni-channel?
What are the implications of omni-channel on
the logistics industry?
What are the omni-channel trends in Asia? Pang Mei Yee Matthias Heutger
2 Table of Contents
Preface .......................................................................................................................................... 1
1 Understanding Omni-channel ............................................................................................. 3

1.1 Why Invest in Omni-channel ................................................................................ 5
1.2 Finding the Return on Omni-channel Investment .............................................. 5
2 Omni-channel Best Practices ............................................................................................... 7

2.1 Personalized In-store Shopping Experience ......................................................... 7
2.2 Personalized Customer Engagement Beyond the Store ..................................... 11
2.3 Case Study: Macys Omni-channel Journey .......................................................... 13
3 Omni-channel Logistics: Fulfilling the Customer Promise ................................................ 15

3.1 Enable High-performing, Cost-effective Omni-channel Fulfillment .................. 18
3.2 Enhance Speed, Flexibility, and Convenience in Last-mile Delivery ................... 24
3.3 Starting the Omni-channel Journey: Key Success Factors ................................... 28
Conclusion and Outlook .............................................................................................................. 30
Special Insight: Omni-channel in Asia ........................................................................................ 31
Appendix: Survey Respondents Profile .................................................................................... 36

Understanding Omni-channel 3
1. UNDERSTANDING
OMNI-CHANNEL
The face of retail has changed completely. Todays and social media, bringing into focus several new
digitally connected consumers are more empowered factors that influence sales and consumer decisions
and well-informed than ever before, giving rise to the (Figure 1). It is shifting from a sequence of actions in a
descriptor omni-channel shopper. The word omni single channel to a continuum of action across multiple
means all: in all ways, places, etc. and without channels. A 2013 study by Accenture found that 88%
limits. The modern omni-channel shopper is always
1
of US consumers admit to web-rooming browsing
connected via mobile or the Internet. This person is online and then buying in-store.2 On the other hand,
well informed about their choices, finds the best Best Buy, a US-based electronics multi-channel retailer,
deals, and expects to receive each purchase at their found that almost 70% of its consumer electronic
preferred time and place. products in the United States are purchased via
showrooming consumers visit a physical store
The modern shoppers journey cuts across different to touch and feel the product before purchasing
channels including the physical store, online, mobile, it online.3
You see an advertisement for jeans

on the way from work.
Awesome! At home, you browse for a pair of

You cant wait to tell all your friends. jeans you like and buy them online.
Social media is a
key communication channel
Happy customers make for great publicity Enhanced search functionalities

are important to consumers
Later in the day, you receive an e-mail stating You look up the nearest store and confirm
that the delivery has been made. thats where youll pick up the jeans.
RESERVED!
The Modern
Fast delivery is a key expectation Shopper's Inventory visibility across
Omni-channel channels is a key enabler
Journey
The store doesnt have your size, so the retailer
offers to deliver it to your parcel locker. As soon as you arrive, the retailer
recognizes you and brings the jeans.
SIZE M
You see a shirt you like, scan

its QR code, and request its
delivery to the fitting room.
Flexible delivery options are Personalized in-store service
important FITTING is a key expectation
ROOM
Customers who pick up in-store

often make additional purchases
Figure 1: The modern shoppers omni-channel journey
1
Definition by Merriam-Webster
2
https://newsroom.accenture.com/industries/retail/accenture-study-shows-us-consumers-want-a-seamless-shopping-experience-across-store-online-and-mobile-that-
many-retailers-are-struggling-to-deliver.htm
3
http://business.illinoisstate.edu/bestbuy/situation.shtml
4 Understanding Omni-channel
Todays consumer journey typically moves across fulfillment, and returns. It is a new and different way
channels, starting and ending at different points based of managing and incentivizing business.
on individual preferences. A traditional multi-channel
approach just cannot achieve the information availability, The omni-channel approach is more complex than
delivery speed, and personalized experiences that modern the traditional multi-channel approach because the
shoppers expect. customer experience in every channel must be identical,
and switching from one channel to another must be
Currently most businesses employ a traditional multi- seamless. If the retailer knows the preferences of an
channel approach, seeking to optimize the consumer in-store customer, this information must be shared with
experience in each channel. The channels operate the online channel (and vice versa). This must be done in
independently and often in competition with each a timely manner, ideally in real time, as this information
other. And there can be considerable variation across could impact buying decisions. Similarly, the retailer
the different channels in customer experience, product must capture each customer interaction in each channel
information, pricing, and service levels. and leverage these purchasing behavior insights to build
the optimal omni-channel strategy.
The omni-channel approach is the next logical evolution-
ary step after a multi-channel approach (Figure 2). Logistics and supply chains are the backbone of every
It requires the previously separate sales channels to omni-channel strategy. They are the key enablers to
converge into a single seamless channel of orchestrated consistently and cost-effectively deliver personalized
product flow this flow must be designed to deliver not service and flexible fulfillment. And they enable
just products but also the highly personalized shopping retailers to achieve cross-channel inventory visibility
experience customers have come to expect. Omni-channel and optimization (crucial to the success of omni-channel
is therefore driving a rethink and a makeover of everything implementation) and meet customer expectations,
from marketing and merchandising to ordering systems, generating higher satisfaction and loyalty.
Single channel Multi-channel Omni-channel
Figure 2: Omni-channel delivers a seamless customer experience across all channels

Understanding Omni-channel 5
1.1 Why Invest in Omni-channel?
Meeting the omni-channel shoppers expectation is

complex and expensive. So its essential to build the
business case. In this section, we review the factors that
are driving omni-channel growth before discussing the
return on investment.
The number of smartphone subscriptions is expected to

increase from 1.6 billion in 2013 to 5.6 billion in 2019.4
By 2019, 90% of the worlds population will be able to
access fast mobile Internet connection. The popularity of
smartphones and growing Internet penetration will only
magnify omni-channel customer behavior. These trends data and they can easily use this to personalize offers
greatly increase one-click shopping expectations and and target customers more effectively, driving more
make omni-channel the only sustainable way of doing social commerce the convergence of social media
business in future. and e-commerce. And this new phenomenon of social
commerce is set to accelerate. Facebook recently announced
Innovations in technology are also driving the uptake the use of payment platforms and functionality to talk to
of omni-channel retailing, supporting new capabilities customers via its Messenger platform.5 Google is working
in personalized consumer engagement. These game- towards establishing a payment channel which will save
changers include smart sensor-based systems that enable customers having to go to a different site to purchase
customer recognition, advances in store digitization products located with the Google search engine.
technologies, predictive logistics, and virtual assistance.
These new technologies have the potential to disrupt
existing business models in the same way as Amazon 1.2 Finding the Return on Omni-channel
disrupted traditional brick-and-mortar sales many years Investment
ago. And bear in mind that after this kind of shift,
customer behavior doesnt revert back. The change to omni-channel is justified by the benefits.
Retailers that have already invested in omni-channel
In future, competition models will be very different, strategies report an increase in customer base and loyalty,
driven by the modern consumer preference to engage and improved profitability. Cross-channel fulfillment
across several channels. Already e-commerce giants are strategies help to move store inventory faster and save
trying to get closer to customers; they are starting to add the sale that may have been lost (if, for example, the
physical presence by collaborating with local retailers. traditional multi-channel approach meant that a product
was unavailable).
Meanwhile, brick-and-mortar retailers are seeking to
strengthen their competitive advantage by adding online The CEO of US clothing retailer Ann Taylor says that using
stores while also reinventing the customer experience and omni-channel strategies such as ship-from-store improves
the role of their stores (for example, by using stores as margins. We are able to liquidate product on markdowns
fulfillment centers for online orders). at a much higher gross margin rate. Similarly, Macys
CEO Terry Lundgren believes that avoiding markdowns
As consumers spend more and more time on social media, is well worth the cost of shipping products from store
this in itself is becoming an increasingly powerful sales and to home.6 Cross-channel inventory visibility also reduces
marketing channel. Online companies own rich consumer costs through inventory optimization.
4
http://www.ericsson.com/res/docs/2013/ericsson-mobility-report-november-2013.pdf
5
http://newsroom.fb.com/news/2015/03/send-money-to-friends-in-messenger/
6
DHL White Paper, Fashion in Flux: Mastering the Omni-Channel Supply Chain, p.7
6 Understanding Omni-channel
Omni-channel shoppers spend 15-30% more than The reason for the immaturity of omni-channel supply
traditional shoppers. So its no surprise that businesses chains is significant investments are required to create
are investing in omni-channel. According to IDC Retail cross-channel visibility and business rules must be adapted.
Insights 2014 Top 10 Predictions, 20% of the top 250 This represents a substantial undertaking and a daunting
retailers will embark on transforming store, mobile, and challenge, requiring a transformation of organizational
e-commerce channels, supply chains, merchandising, and structure and metrics to optimize and incentivize
marketing for the omni-channel customer experience. 7
marketing, merchandising, and fulfillment across
channels as opposed to individual channels.
Manufacturers also benefit from leveraging digital
channels and an omni-channel approach these invest- There are some further reasons for the immaturity of the
ments allow for direct product feedback, testing, and omni-channel supply chain. It can be difficult to quantify
fostering of direct customer relationships. Manufacturers the benefits of omni-channel transformation. Legacy
can then leverage these new insights in marketing application integration may cause a roadblock, and unless
and merchandising decisions across all sales channels. everyone appreciates the potential gains of omni-channel
As manufacturers build direct relationships and develop it is unlikely to earn a place on the corporate IT roadmap.
more direct selling avenues, they get closer to being For all of these reasons, an omni-channel transformation
retailers themselves. needs to be led by the CEO and CFO, not just by IT or
Digital Marketing.
Despite the potential and promise of an omni-channel
approach, omni-channel supply chains remain relatively In this report, several case studies acknowledge companies
immature. As Figure 3 shows, most respondents in the that have already invested in omni-channel strategies.
2015 Annual Third-Party Logistics Study believe they But it is important to recognize that no company has yet
do not have the capability to handle omni-channel mastered the omni-channel approach. The omni-channel
retailing. space continues to evolve and we anticipate substantial
innovation in this area in the coming years.
How prepared do you think your organization is to handle omni-channel retailing?
33% 29% 26% 10%
2%
No capability Inconsistent Competent Efficient High performing
Figure 3: Omni-channel supply chains remain immature; Source: 2015 19th Annual Third-Party Logistics Study
7
http://www.idc.com/getdoc.jsp?containerId=RI245468
Omni-channel Best Practices 7
2. OMNI-CHANNEL
BEST PRACTICES
The omni-channel approach aims to enable a seamless
personalized customer experience anytime, anywhere,
on any device, as shown in Figure 4. Takes too much time,
23%
money and/or effort
Todays leading omni-channel adopters typically focus Long queues

first on personalizing the in-store shopping experience and slow 20%
(stores are and will continue to be the dominant sales checkout process
channel globally). Leveraging new technologies, these
Prices are not
adopters aim to simplify the consumers in-store journey 16%
competitive
by removing any friction factors. The second area of
The merchandise
focus for todays omni-channel adopters is to personalize available does not
13%
customer engagement beyond the store via online, include what I am
looking for
mobile, and social media interactions.
The opening hours
10%
are not convenient
2.1 Personalized In-store Shopping

Products are
Experience out of stock
9%
A study conducted by IDC Retail Insights in June 2015

among more than 2,600 consumers in Asia found the top
two reasons that prevent shoppers from buying products Figure 5: Top shopping inhibitors; Source: IDC Retail Insights
in shops: the time it takes and the inconvenience of Survey, June 2015
the shopping experience (Figure 5). The omni-channel
approach has the potential to overcome both these
objections.
Personalized in-store shopping Personalized customer engagement

experience beyond the store
4G 3: 06 PM 70% 4G 3: 06 PM 70%
Results Flight Info

CWT To Go USD Wed 30 Apr - Wed 6 May $1605
SIN > PAR SIN > PAR

Wed 1 April Wed 1 April
My Trips Singapore to Doha

No upcoming trips
01:10 S ingapore Changi Terminal 1
07:10 Doha Airport 6h
Services A F222 Business Class
Boeing 777
A ir France
2 hour(s) layover in Doha
Doha to Paris
07:10 Doha International Airport
14:10 Paris Inter Terminal 2 7h
A F245 Business Class
Boeing 777
A ir France
Virtual expert advice

Personalized service Social media
Ease of nagivation and access to product information Customer loyalty
Removing friction factors from stores Simplified replenishments & automated services
On-the-go promotions Product customization
Figure 4: A seamless personalized customer experience inside and beyond the store
8 Omni-channel Best Practices
2.1.1 Merging Online and Offline Experience in in point-of-sale systems. Retailers also gain vital in-store
the Store customer information, particularly on how shoppers
maneuver through the store.
The auto industry has pioneered the in-store integration
of digital technologies. In 2012, Audi City opened its first An innovator in the airline industry, Virgin Atlantic,
digital car showroom, providing an interactive brand began an iBeacon trial at Londons Heathrow Airport
experience for customers. The customer can view every
8
in May 2014.10 During this trial, the airlines premium
possible combination across the entire model range in a passengers received personalized notifications and
way never seen before in a traditional showroom. They offers via their iPhones. Virgin used beacons to:
can use multi-touch tablets in order to select designs
and the color of a full-size car presented to them on a Remind customers to have their electronic boarding
video wall. passes ready on arrival at a security check
Send tailored offers to customers as they moved

through the airport (for example, commission-free
currency exchange deals as passengers arrived in the
departures section)
Let customers know about in-flight entertainment

specials before boarding the plane
Inform ground staff when the temperature dropped

outside their airport lounges (so staff could offer blan-
kets to customers who were sitting on outdoor decks)
Another example of combining a physical store and state-

Figure 6: Audis digital car showroom merges the customers of-the-art digital technology to enhance the shopping
online and offline experience; Source: Audi experience is Burberrys store in Londons Regent Street,
which opened in 2013.11 Radio identification technology
(RFID) tags are embedded into fashion items and accesso-
Today, customers are expecting to receive contextual ries, enabling customers to view multimedia content via
information while shopping in-store. Many retailers the 100 digital mirrors and 500 loudspeakers in the store.
are therefore looking at leveraging mobile phones for When customers hold an item near one of the mirrors,
real-time in-store communication with customers. Recent it turns into a huge screen displaying information about
consumer research by IDC has shown that across the Asia the product.
Pacific region, 71% of shoppers (who own a mobile device)
currently use their mobile device in the store to look for Denim apparel shop Hointer in the United States uses
information about the products they intend to buy.9 a holistic omni-channel approach in stores using mobile
technologies, e-Tags, and in-store sensors.12 In its smart
Increasingly, retailers are using beacons to recognize showroom, items of apparel are marked with e-Tags and
customers as they enter the store; these detect nearby shoppers scan these codes using Hointers omni-cart
smartphones and give the sales staff relevant information mobile app to get product information. Hointer has also
(e.g., data on the customers purchasing behavior). ensured that in-store shoppers get the same range of
Advertisements, coupons, and other supplementary information as online shoppers. Store associates use the
product information can be transmitted to in-store omni-cart app to get information on the shoppers, such
screens located near the customer, and may also be used as their purchase history and style preferences.
8
https://www.audi.co.uk/audi-innovation/audi-city.html
9
IDC Retail Insights Global Shopper Survey, 2015
10
https://www.umbel.com/blog/mobile/15-companies-using-beacon-technology
11
http://retail-innovation.com/burberry-regent-street
12
http://retail-innovation.com/us-retailer-hointer-uses-robots-to-deliver-your-selections-to-the-fitting-room/
Customers do not have to be in the store to buy from installed robots to greet consumers at the door, field
Hointer; they can as easily use the omni-cart application product inquiries, and escort shoppers to the exact
on the go. The store is used only as a showroom displaying in-store location of the merchandise.
only one kind of every product. The inventory is stored
in an adjacent automated microwarehouse that links to They provide product and real-time inventory information
the fitting room system. With one click of the app, the and instruct video screen interfaces. The robots speak mul-
shopper can have the item sent directly to the Whoosh tiple languages, and supplement the role of store employees.
fitting room within 30 seconds or call for assistance The technology helps to improve customer experience
without leaving the fitting room. The approach increases while ensuring the cost-effective and consistent delivery
utilization of the space, removing the clutter of shapes of personalized assistance services in large stores. Figure 7
and sizes in addition to providing a highly personalized provides a high-level illustration of the robotic system.
and seamless customer experience.
The AndyVision robot, a pilot by researchers at the
Carnegie Mellon University in the United States, aims to
2.1.2 Easing Navigation with In-store Robots improve the shopping experience in a similar way.14 The
robot patrols and scans the retail aisles and shelves for
An example of how artificial intelligence helps to inventory, and generates a detailed map that is projected
personalize customer experience and improve in-store on a digital sign inside the store. It accomplishes this
navigation is a pilot project by one of the largest hardware through the real-time fusion of image-processing and
store chains in the United States. Lowes stores are typically machine-learning algorithms, a database of images of
quite large. Hence, finding the product you want and the stores products, a basic map of the stores layout,
getting help to understand which one to buy can be quite and sensors to help the robot navigate autonomously and
challenging.13 To address these friction factors, Lowes has to prevent it from running into things.
3D & Product Scanner

Human body frame detection
Autonomous Navigation
Smart laser sensor
Customer Engagement
Speech recognition,
product information &
location inventory
integration beacons
Obstacle Avoidance
Smart laser sensor
Figure 7: Components of the Lowes robot; Source: Lowes
13
http://www.lowesinnovationlabs.com/innovation-robots/
14
http://www.cmu.edu/homepage/computing/2012/summer/robots-in-retail.shtml
2.1.3 Driving Traffic to Stores with On-the-Go customer enters specific geo-fencing codes (pre-defined
Promotions locations) that increase the chance of getting the
customer to visit the store.
Omni-channel retailers are also leveraging mobile phones
to drive traffic to the physical store network. Imagine you
are at McDonalds in a neighborhood. A nearby retailer 2.1.4 Providing Store Shopping Assistance from
realizes you are close by based on your GPS location and Home
decides to offer you special offers to entice you to drop
in to the store and purchase something. Tesco has developed a mobile application called MyStore,
which lets shoppers prepare a shopping list at home and
To maximize effectiveness, the personalized promotional directs them to the items in the store.15 Another example
offers sent by the retailer are based on your profile and of Tescos vision for the future is its prototype of a virtual
purchase history gathered from a combination of sources. reality supermarket in which customers can browse using
This is what is referred to as on-the-go promotions: Oculus Rift virtual reality eye gear.16Although customers
incentivized coupons that can be redeemed in store via cannot pick anything off the shelves, they are able to travel
a phone or tablet and are targeted to the location when through the store and look at the brands and products
people come in close proximity to the store. The customer offered. Tesco sees this kind of augmented reality and
insights database triggers targeted offers when the virtualization as an aid to online purchasing (Figure 8).
Figure 8: Supermarket of the future leverages augmented reality
15
http://www.mediapost.com/publications/article/222767/tesco-trials-ibeacons-with-a-mystore-app.html
16
http://www.independent.co.uk/life-style/gadgets-and-tech/tesco-dreams-big-with-fully-immersive-virtual-reality-tesco-store-for-the-oculus-rift-9211854.html
3:06 PM 4G 3:06 PM
2.2 Personalized Customer Engagement

4G 70% 70%
Results Flight Info
Beyond the Store CWT To Go USD Wed 30 Apr - Wed 6 May $1605
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Omni-channel customer engagement continues beyond My Trips Singapore to Doha

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the store via online channels. These are designed to build 01:10 Singapore Changi Terminal 1
07:10 Doha Airport 6h
relationships with customers and influence their opinions Services AF222 Business Class
Boeing 777
and purchase decisions, especially for those customers Air France
who prefer to do their shopping outside brick-and-mortar

2 hour(s) layover in Doha
stores.
Doha to Paris
07:10 Doha International Airport
14:10 Paris Inter Terminal 2 7h
AF245 Business Class
2.2.1 Offering Virtual Expert Advice Boeing 777
Air France
To support the shopping experience, it is essential to

provide expert advice. This is particularly true when Figure 9: Carlson Wagonlit Travel uses virtual avatars to enhance
customers are not in the store. One solution is to offer a the shopping experience; Source: CWT
videoconferencing application mobile device, connecting
each customer to a real person who is able to deliver
expert advice. This becomes ever-more feasible with In the US, UK, and Australia, users are spending 13-16
cheaper video networking and improved camera quality. minutes per online hour on social media.19 With smart
Since early 2015, Google customers have been able to handheld devices becoming ubiquitous, consumers
use a video chat function in the Google Play Store to are increasingly likely to use these platforms as part of
be connected to a customer service representative and their shopping journey. So it is imperative for companies
receive expert advice on selected gadgets. 17
to understand how to actively leverage social media to
advance their omni-channel strategy.
Personalized expert advice is taking on a new dimension
with virtual avatars that provide real-time expert advice Many companies now use social media to monitor
using advanced cognitive capabilities. A current example customer sentiment and, where possible, take corrective
of this is the Personal Virtual Travel Assistants pilot by action to recover any negative customer experience.
Carlson Wagonlit Travel (Figure 9).18 The virtual avatar Tesco has formed a separate social media business
CWT Carla listens to customer requests and recommends unit and hired experienced customer service agents
transportation and hotel accommodation in real time with social media skills.20 The key objectives are to
with conversation and comprehension skills similar to deliver great customer service, drive action through
human interaction. customer insight, build customer advocacy, and build
a contemporary image for the brand.
2.2.2 Utilizing Social Media Customer service is at the core of every interaction,
with social media helping to ensure that issues and
Social media has shown to be an effective platform for complaints are attended to and resolved quickly.
consumers to discuss and voice opinions about products Tesco uses a sentiment tracker to monitor positive
and brands, as well as for businesses to communicate and negative comments, and leverages social media
with consumers. From a mere 8% in 2005, the percentage to proactively respond to customers and foster better
of Internet users who are active on social media grew customer relationships.
to 72% by 2013.
17
http://www.csmonitor.com/Technology/2015/0209/Google-introduces-expert-gadget-advice-through-live-video-chat
18
www.cwtcarla.com
19
http://www.jeffbullas.com/2014/01/17/20-social-media-facts-and-statistics-you-should-know-in-2014/
20
http://www1.planetretail.net/news-and-events/rob-gregory/blogs/tesco-looking-grow-engagement-through-orchard
2.2.3 Leveraging Customer Loyalty the customer. Amazon is enhancing the home shopping
experience with its Dash Button, a physical hardware
In todays environment where choices abound, customer device that simplifies product replenishment.22 As an
loyalty is a key focus area for businesses. Many e-commerce example, a button for Tide washing powder could be
platforms offer customer loyalty points for sharing product attached to a customers washing machine. When it is
reviews or rewarding customer loyalty on social media pressed, an online order would be generated and sent
platforms, thus building positive customer currency. With to the customer for completion through Amazons
big data analytics and an omni-channel approach, several smartphone application (Figure 10).
companies are developing membership cards to improve
the customer experience across all channels. A good
example is the Tesco Clubcard which has been issued to As more products become connected, more opportunities
more than 16.5 million customers.21 Tesco wants to make are emerging to provide customers with seamless and
this card a common currency that can be used across its personalized services. Many manufacturers now see
chain, along with a digital card to be used on mobile their role extending beyond production to also include
phones. In addition, Tesco has launched its own social longevity, assured through effective service. For example,
network, Orchard, to connect customers. The company automotive companies and dealerships with connected
uses the wealth of customer data gathered via its loyalty car programs offer additional services such as vehicle
card and social network to analyze shopping behavior health analysis; customers can use onboard diagnostics,
and execute more targeted promotions. vehicle dashboards, and smartphones to proactively
communicate with their vehicle regarding its health.
Vehicle services can be scheduled including ordering
2.2.4 Simplifying Replenishment and Automated of parts and accessories, using any channel or device.
Services Another example is the Maintenance on Demand project
that aims to develop a commercially viable truck capable
One of the ways in which retailers seek to simplify the of deciding autonomously when and how it requires
consumer experience and reduce expended time and effort maintenance. This would reduce downtime and improve
is to install automated replenishment systems. With an fleet management and the environmental footprint.23 With
automated ordering process, an automatic order is gene- this initiative, the manufacturer and the product interact
rated when a product runs out, and either a replacement autonomously to ensure product upkeep and maximum
item is sent directly to the retailer or a reminder is sent to utilization, saving time and money for the customer.
Figure 10: Amazons Dash Button works with a smartphone application
21
http://www.telegraph.co.uk/finance/personalfinance/household-bills/10273842/Tesco-Clubcard-vs-Nectar-Best-loyalty-schemes.html
22
http://www.businesswire.com/news/home/20150423006485/en/Amazon.com-Announces-Quarter-Sales-15-22.72-Billion \l .VbWuWvmqqko
23
DHL Internet of Things in Logistics Trend Report, 2015
2.2.5 Customizing Products 2.3 Case Study: Macys Omni-channel Journey
Digital showrooms such as Audi City enable customers to This case study reveals a retail giants comprehensive
tailor a product to their specific requirements. The same approach to omni-channel. With a revenue of US$ 28
can be achieved via online channels. billion in 2014, 885 stores across the US, and an established
online presence, Macys began its omni-channel journey
As a core business strategy in 2015, Haier, a global home in 2008, aiming to better serve the needs of customers.
appliances and consumer electronics brand based in China,
announced it would develop online factories.24 These Macys research showed that about two-thirds of all
enable mass customization of production by allowing shopping trips start online with customers researching
Internet-connected consumers to cost-effectively custom- options on their desktops or handheld devices. Customers
ize their products online and place orders directly with the then visit the store to touch, feel, and try on the merchan-
factory. Haiers refrigerator factory in Shenyang, China, dise before buying the item in-store or online at home.
now supports more than 500 different types of product This research exposed the limitations of Macys channel-
from a set of different subsystems and options. specific approach and convinced management of the
need for an omni-channel strategy.26
German company Outfittery has installed photo booths
equipped with 3D body scanners near train stations and Today, Macys operates as an omni-channel retailer with
airports. Customers can walk in and have the scanner a single view of customers, inventory, and business. Its
capture thousands of detailed body measurements. 25
strategy is based on the following key initiatives: the
While standing in front of a digital mirror, the customer My Macys localization program, omni-channel integra-
can see clothes superimposed on their body, saving the tion, and Buy Online, Pickup in Store.
time it usually takes to try on outfits. A style expert then
sends tailor-made clothes to the customer in the size, The My Macys localization program was launched
color, and materials of their choice. in 2009 to deliver a merchandise assortment and
personalized shopping experience that is unique to
The trend toward greater personalization of products will the individual customer. It offers customers the ability
increase, especially as new production technologies such as to predetermine what is available in shops.
3D printing improve. Future possibilities include factories
of 3D printers located in towns and cities close to end con- With an ongoing commitment to leverage technology
sumers; these factories would print and deliver customized to enhance the customer shopping experience, Macys
products cost effectively and with very short lead times. joined a list of retailers in support of Google Maps 6.0
to display detailed indoor floor plans. These plans have
been included in Macys smartphone app with other
associated mapping systems. According to Mashable.
com, shoppers now have a utility to get around stores,
find products, and sign up to receive offers based on
their location in the store.
24
http://www.haier.com/my/newspress/pressreleases/201502/t20150217_262012.shtml
25
http://www.dailymail.co.uk/news/article-2947866/Is-future-clothes-shopping-men-Train-station-3D-body-scanner-spells-end-ill-fitting-attire.htm
26
http://macysinc.com/macys/m.o.m.-strategies/default.aspx
Macys initiative for omni-channel integration brings originated from Macys stores. As the name suggests,
the online and brick-and-mortar channels togetherin this new process combines online and in-store channels,
a single integrated approach. It enables visibility and establishing a new dimension in customer access and
management of inventory across channels. In addition, convenience, according to Terry J. Lundgren, Macys
it allows store associates to rapidly check system-wide Chairman and CEO. As well as improving the customer
availability, locate an item, and facilitate delivery or experience, all of the above initiatives have achieved
next-day pick-up by the shopper. And when fulfillment cost savings from inventory optimization.
center inventories are depleted, it can even make store
inventory items available to fulfill online orders on Having reviewed retailer approaches to a personalized
the retailers website. and seamless customer experience across channels, the
next chapter considers implications for the physical
Instead of separate teams for each channel, Macys supply chain and its information systems.
now has a single integrated merchandising and
marketing team. This implementation started with
aggregating consumer data (such as preferences and
ongoing purchasing patterns) to achieve a 360-degree We are working to provide our customers with
view of each customer, and then the retailer analyzed seamless experiences, no matter how they choose
the data, gathered meaningful insights, and combined to shop with us, and to utilize the strengths of each
this information into new processes to deliver a seam- channel to satisfy demand and service customers
less customer experience. needs better than we could if we did not operate
multiple channels.
In 2014, Macys rolled out its Buy Online, Pick Up in
Store initiative nationwide. In the same year, some Karen Hoguet, CFO, Macys
US$ 1 billion of Macys direct-to-customer shipments
Omni-channel Logistics 15
3. OMNI-CHANNEL LOGISTICS
FULLFILLING THE CUSTOMER PROMISE
Traditional supply chains are coming under considerable Emerging strategies that blend in-store operations with
pressure as demand for anytime, anywhere, from any traditional and e-commerce supply chains expect to
device service and the use of new technologies extend deliver profit and performance gains. To design and
the range and breadth of consumer choice. Currently an develop a cost-effective omni-channel supply chain,
evolving approach, seamless omni-channel logistics will companies must focus on two key areas (Figure 11).
become a key requirement in the future.
DHLs vision for the omni-channel supply chain is illustra-
Technology trends already on the supply chain agenda ted in Figure 12. This supply chain is demand-oriented,
include data analytics, Internet of Things (IoT), and flexible, highly responsive, and channel-agnostic. It focuses
automation. As organizations transform to omni-channel, on optimizing the consumer experience while ensuring
they can leverage these new capabilities. Companies anytime, anywhere, from any device service.
must rethink existing logistics structures and network
strategies, and adopt a far more active role in managing This chapter explores the key areas of focus for the
and delivering the consumer promise. omni-channel supply chain and showcases some exciting
future possibilities for omni-channel logistics.
n Seamless inventory visibility and optimization across channels

High-performing, n Flexible dynamic omni-channel warehouses often handling smaller
cost-effective quantities in an ever-decreasing timeframe
omni-channel n Leveraging warehouses as showrooms and enabling customer fulfillment
fulfillment network activities such as pick-ups
n Logistics marketplaces and real-time consumer engagement
Enhance speed,
n Leveraging stores for fulfillment, thereby increasing microwarehouses
flexibility and n Anytime, anywhere delivery models
convenience in n Expanding the range of omni-channel value-added services
last-mile delivery
Figure 11: Key areas of seamless omni-channel logistics

16 Omni-channel Logistics Omni-channel Logistics 17
Real-time Proactive Network Same-day/ Flexible Delivery

Quotes Cost-saving/Capacity Alerts 1-hour Delivery Options
Digitized Stores
Demand
Real-time Shaping/ Seamless
Configuration of Optimized Delivery
Logistics Services Logistics In-Store Delivery
Returns
Customer Customer
Marketplace Recognition
Navigation
Robots Service
Targeted Change Delivery

Promotions Options
1 nyw
here, and
An
2
A
e, y Expanded Home
Delivery Services
Seamless Customer
im
Seamless Inventory
De
Dynamic Fulfillment
Last-mile Delivery
yt
vic
An
e
Visibility
Service
Microwarehouse
Next to Store
Pick Up In-store/
Health Ship from Store
Check
Se
e
m
nc
Parcel
ie Return
a
Product le r Social
Drive-through Information ss pe Media Box
C ust
Warehouse o m er Ex Installation
1000304552223442134
Upselling
Maintenance
On-the-go On Demand
Promotion
Delivery
by Drone
Virtual Advice Dash

Expert Buttons
TAXI
Warehouse as a
Showroom Crowd-sourced Deliver
Delivery to on Demand
Car Trunk
Anticipa
tory Logistics
B2B B2C
Parcel
Locker
Goods Customization
in Transit During Transit
Omni-channel Fulfillment
Warehouse
Cloud
Optimal Fulfillment Location & Options

Figure 12: DHLs vision for the omni-channel supply chain
18 Omni-channel Logistics
3.1 Enable High-performing, Cost-effective Leading retailers are now using converged inventories to
Omni-channel Fulfillment optimize enterprise-wide stock levels while maximizing
availability across channels. Fewer than 10% of respon-
Orchestrating flexible fulfillment options across channels dents in a 2014 survey by the software firm JDA expect to
requires much greater flexibility in supply chain networks. still have dedicated inventories three to five years from
An omni-channel fulfillment network differs from tradi- now (Figure 14). Instead, it will become the norm to share
tional ones in a few ways (Figure 13). Let us go deeper inventory at the store and distribution center for online
into these elements, reviewing examples of company order fulfillment.
practice today, and sharing the anticipated direction
and vision for the future.
Inventory sharing strategies in 35 years
3.1.1 Seamless Inventory Visibility and

Dedicated
Optimization DC
inventory
9%
According to an RSR (Retail Systems Research) study of

Vendor
retail winners and laggards, enterprise-wide inventory inventory
23% Shared DC
visibility is a key differentiator in omni-channel execution. inventory
41%
Approximately 63% of winners said they have access
to inventory across the entire enterprise, while only 25%
of laggards are in the same position. Poor visibility Store inventory
27%
prevents laggards from fulfilling non-store customer
orders from store inventory, the report revealed.27
Figure 14: Inventory sharing strategies in 35 years; Source: JDA
Traditional Fulfillment Model Omni-channel Fulfillment Model
1. Dedicated inventory by channel; 1. Seamless inventory visibility and

limited to no cross-channel visibility optimization across channels
2. Channel-specific warehouses 2. Omni-channel warehouses

Scope: Online or offline | B2B or B2C | Scope: Online and offline | B2B and B2C |
Retail store or home delivery Delivery to stores and homes
Fixed-space, fixed-term contracts; no flexibility Dynamic space allocation within network and
to move from one location to another flexible contract terms
3. Warehouses used purely for storage and 3. Warehouses used as showrooms or for
processing customer-facing activities
4. Reactive customer management with time- 4. Proactive and personalized customer

consuming quotes, focus on status reporting management with logistics marketplaces and
focus on maximizing value for the customer
Figure 13: Differences between traditional and omni-channel fulfillment
27
https://www.rsrresearch.com/2014/01/08/retail-analytics-moves-to-the-frontline-benchmark-2014/
Retailers must be able to dynamically allocate and fill

orders across the omni-channel enterprise. Omni-channel is very much about inventory
optimization through technology. Inventory
One of the core challenges in this transition is real-time visibility across all stores and channels is the
inventory visibility of the merchandise in retail stores. key enabler.
According to global management consulting firm Kurt
Salmon, inventory accuracy in traditional retail stores Terry Lundgren, Chairman, President and
ranges from 5080%. CEO of Macys Inc.
Technology is now ready to address this issue. Apparel

powerhouse Inditex SA plans to roll out RFID technology
throughout its Zara store operations to improve accuracy. Advances in inventory visibility, and using that visibility
RFID chips can store information about the items they to manage inventory across channels, promises multiple
are attached to, and emit this data to a scanner when benefits to retailers. The Australian retail chain Harvey
prompted. Norman has undertaken this journey and its case study
demonstrates a successful approach to cross-channel
Inditex is burying the chips inside its garments plastic inventory optimization.
security tags, an innovation that allows the fashion chain
to reuse them after the tags are removed at checkout.
By the end of 2015, more than 1,000 Zara stores will be
using this technology.28
28
Christopher Bjork, Zara Builds Its Business Around RFID, Wall Street Journal, September 16, 2014
Harvey Norman
Harvey Norman noticed that, before visiting a store, its customers

regularly went online to check in-store product availability. Clearly,
no-one liked making a wasted journey. So the retailer decided it had
to make in-store product availability clearly visible to customers online.
To achieve near-real-time inventory visibility for all its stores, the company
had to integrate legacy systems and build a new and robust order
management system. This system incorporates fulfillment optimization
algorithms based on Harvey Norman products and its business model.
Online customers can now undertake real-time searches to find their closest store with the item in stock. They can
also select their preferred delivery options such as click-and-collect at a nominated store, or home delivery. The
online system distinguishes between smaller items that can be trucked all the way across Australia and larger items
(for example, a refrigerator) that can only be delivered within a defined radius of the store.
It also reflects online orders in the stores POS system, just as if the order had been taken in-store. Harvey Norman
sees further opportunity in a direct-ship model. With this, if the customer orders a fridge that is currently unavailable
in a Harvey Norman store but available from a nearby supplier, the item is dispatched directly from the supplier
to the customer as this reduces the turnaround time. This model requires visibility of supplier inventory and better
collaboration between the retailer, its suppliers, and its logistics provider.
Omni-channel Starter Kit
As these various case studies demonstrate, the omni- The concept is quite simple. This kit would provide a
channel approach requires significant IT investment. pay-per-use cloud-based solution that is easily integrated
Forward-looking organizations have already committed across multiple supply chain channels and partners.
the required expenditure, time, and effort; but many Set up as a control tower above the stores and online
more have yet to make this investment. One way to channels, it would enable seamless information flow
get an omni-channel approach off the ground is for and inventory visibility. Suitable for small and large
logistics providers to offer a replicable, standardized, organizations alike, it would allow return on investment
and cost-effective IT solution: an omni-channel starter (ROI) to be proved prior to making a more substantial
kit (Figure 15). and widespread investment.
1 Visibility across channels
2 Collaboration with partners/suppliers

Omni-channel
starter kit
3 Algorithms to offer real-time fulfillment options to customers
4 Algorithm to decide optimal fulfillment location
Figure 15: Differences between traditional and omni-channel fulfillment

3.1.2 Omni-channel Warehouses comprises two automated storage and retrieval systems
(ASRS), three delivery halls, and one distribution center.
Omni-channel warehouses serve both online and The IWS covers automated storage, batch picking, auto-
offline, B2B and B2C channels, and are managed as mated sorting, delivery and returns processing. As well
part of a flexible fulfillment network that can easily as ASRS, it includes voice picking, case conveyors, spiral
respond to changing demand. conveyor systems, and cross belt and pop-up wheel
sortation systems. A unique barcode identifies each
Today, theres a tendency to segment supply chains item, enabling accurate storage, distribution, and sales
by channels, which results in duplication of inventory processes. Automation helps to increase fulfillment
and infrastructure. Some companies such as Vargo are capacity and shortens lead times and, by combining B2B
beginning to offer omni-channel distribution center and B2C volumes, the order profile becomes more evenly
designs.29 Separate channel spaces within the same distributed (with fewer peaks and troughs), achieving
warehouse and different automation solutions are labor management savings.
used to fulfill the varying supply chain requirements
of B2B and B2C channels, yet inventory is shared In future there could be facilities such as hyper multi-
across both channels. sector warehouses built with high automation to support
small quantity picking in shorter timeframes with almost
Other companies are choosing to develop an omni-channel 100% accuracy. These new types of warehouse must be
campus with space allocated for multiple types of pick- managed as part of a dynamic and flexible network.
and-pack operation. An example is Heilan Home, a major Companies will no longer accept fixed-space and fixed-
clothing manufacturer in China, which sells high-end term contracts. The omni-channel business approach
business clothes via stores and online. When online
30
requires capacity to be managed across multiple locations
sales increased and its customers started to expect fas- with space traded as a virtual asset. It will become
ter delivery, the organization opted to establish a single the norm to share warehouse space between multiple
highly automated logistics campus for both B2B and organizations (see the Flexe case study). Omni-channel
B2C activities. Today, an intelligent warehouse system warehouses will play a more active and direct role in
(IWS) handles the entire fulfillment process. This system order fulfillment for all channels.
Flexe
Seattle-based Flexe is a first-of-its-kind shared economy online market-

place for warehousing space. It connects organizations in need of flexible
warehousing capacity with warehouse owners that have available space.
A cloud-based software platform enables Flexe customers (goods owners,
retailers, and manufacturers) to locate warehouse space (in 20 markets across
North America) that best meet their specific needs, and then manage their
inventory 24/7, across all facilities, from their desktop. This provides immediate
access to warehouse space without committing to a long-term lease.31
29
http://www.vargosolutions.com/vargo-partners-to-design-waveless-distribution-center-for-large-retail-client/
30
http://go.dematic.com/gs_gated_short?doc=http://now.eloqua.com/e/er?s=2102163319&lid=1132
31
http://www.prnewswire.com/news-releases/on-demand-warehousing-start-up-announces-north-american-expansion-150000-pallet-positions-now-available-in-85-
locations-across-us-canada-300100377.html
3.1.3 Warehouse as a Showroom and

Pick-up Location
Along with more flexible space, omni-channel warehouses

of the future are likely to offer new capabilities.
Warehouses can become retail showrooms. The concept

of merging retail front and warehouse is not new. IKEA
successfully uses this model for a highly cost-efficient
supply chain. Warehouses can also be used as a pick-up
location for online orders. Reports indicate that Amazon
may launch pick-up points for Prime Now orders at its
fulfillment facilities.32 that provides this type of logistics marketplace (see the
Shipwire case study). These make it easy to access specific
services and grow into new markets. In the future, we
could see more and more retailers, manufacturers, and
online marketplaces such as Alibaba and Amazon incor-
porate a logistics marketplace approach as part of the
B2B and B2C ordering process. Customers can choose their
preferred transportation option and this is factored into
the total cost of the product (see the FreightOS case study).
Shipwire
2 Your customer
shops on your
website
3 Order is sent
Imagine a warehouse that offers a drive-through Order
to Shipwire
capability like a McDonalds fast-food restaurant. This

is being piloted by Walmart33 as a free service to its 1 You send SHIPWIRE
merchandise in
customers (particularly senior citizens, people with bulk to Shipwires
warehouse
disabilities, and parents with young children). They can 4 Shipwire fulfills order
from your inventory
place their orders online anytime from two hours to three
weeks in advance, and then drive up to the warehouse
5 Customer can
kiosk; a Walmart associate brings their order out to the return product
to Shipwire
car. As well as providing added customer convenience,
this encourages customers to use Walmarts digital plat- Source: Shipwire
form, and the company gathers valuable information
Runs network of fulfillment centers worldwide
from customer searches and shopping habits.
with high levels of automation and a variety of
value-add services
3.1.4 Logistics Marketplaces and Real-time Companies send inventory to any warehouse and
Customer Engagement store on demand in a very easy and stress-free way
Direct integration with order entry systems

Today companies can already access end-to-end orchestra- handling the pick up of goods, order fulfillment,
tion and fulfillment capabilities on web-based enterprise and delivery
fulfillment platforms. Shipwire is one among many others
32
http://www.geekwire.com/2015/amazon-set-to-launch-new-amazon-flex-package-pickup-service-in-seattle-area-with-prime-now/
33
http://www.forbes.com/sites/retailwire/2014/10/02/walmarts-drive-through-grocery-concept-is-a-head-scratcher/
Logistics Marketplace FreightOS Private and public sector organizations, particularly in

Europe and Asia, are in active discussion about SuperGrid
USD 415.84 Queens County US JFK LHR Southall, GB networks. Their potential to simplify information exchange
5 days PREMIUM
and compliance processes while adding visibility and
USD 412.24 Queens County US JFK LHR Southall, GB
transparency to global supply chains is highly attractive.
7 days REGULAR
USD 294.53 Queens County US USEZA GBLON Southall, GB

How can small businesses benefit from omni-channel?
28 days
The cost of going online can be prohibitive for small
traditional retailers. Similarly, it can be difficult for online
An Expedia-like platform for freight providing
businesses to justify building a brick-and-mortar store.
instant, online real-time quoting for all legs of
Logistics providers can work with regional or city govern-
shipment
ments to develop networks that support small businesses
Shippers can generate and book instant, door- (see the Online City Wuppertal Project case study).35
to-door quotes directly online, using their own
internal negotiated rates or rates shared online
by forwarders
Online City Wuppertal Project
With more transparent supply and demand, logistics

providers can also proactively deliver personalized
promotions to customers. For example, companies can
make a special offer to optimize the customers total
network cost (based on a comparison with other logistics
companies) and inform the customer of cost-saving alter-
natives and opportunities. Targeted promotions could
be triggered automatically to inform specific customers
of discounted storage space or transportation as these
options become available.
The new phenomenon of SuperGrid networks promises

real-time visibility.34 These next-generation transportation Wuppertal City in Germany has embarked on a
networks integrate swarms of production enterprises and collaborative journey. The Online City Wuppertal
logistics providers to provide full visibility on the entire Project is a public/private initiative to create an
multi-modal supply chain; they require standardized data omni-channel framework for small local retailers
and a common information exchange platform (Figure 16). comprising:
Shop station: a centrally located city showroom
Driver & Owner

Support Center 3PL Repair Shop
where retailers can showcase/test products
Goods
Service station: closely integrated with the shop

Dangerous Goods
Fleet Company Mgmt
station, this centralizes goods delivery and returns
INFORMATION
processes; DHL is enabling local specialists to
EXCHANGE
Carrier/Customer
PLATFORM
Insurance &
Financial Institutes provide (local) same-day delivery services
Training: for brick-and-mortar retailers that want

Ship Carrier
Sea & Air Ports to establish a new online sales channel
Customs &
Air Carrier Authorities
Rail Company Consignee & User

Network Operators
Figure 16: A common information exchange platform enables

supply chain visibility
34
http://www.ericsson.com/news/1884299
35
http://www.onlinecity-wuppertal.de/home/
3.2 Enhance Speed, Flexibility, and

Convenience in Last-mile Delivery
The last mile is important for everyone. For the customer,

its the moment when they hold their new purchase for
the first time. For the company, its the most expensive
step in the entire delivery process. So its no surprise to
find substantial last-mile innovation in traditional and
omni-channel logistics. We review these innovations
below.
3.2.1 Leveraging Stores for Pick Up and Delivery
Brick-and-mortar stores remain a crucial component of the

global shopping experience, and their role is changing in
the omni-channel business model. Stores are becoming
fulfillment centers, serving as pick-up locations for online
orders (buy online, pick up in-store) and fulfilling local Collaboration is fueling another innovation. Today,
deliveries in the city (ship-from-store). More businesses many e-tailers are partnering with brick-and-mortar
are likely to adopt these programs in the omni-channel retailers to enable speedy and cost-effective delivery
journey to generate maximum return on their brick-and- by leveraging store merchandise. The stores benefit
mortar investments. because the e-tailer provides an additional sales channel.
The e-tailer benefits by leveraging stores as fulfillment
The buy online, pick up in-store cross-channel fulfillment centers (see the Tmall.com case study on next page).
option has many benefits. Both the customer and the com-
pany save money. And when picking up their orders in the There are some difficulties with this model, however.
store, customers often make additional purchases. Most retail stores are not set up to fulfill orders. Traditional
stores typically lack good inventory visibility (see Chapter
Walmart embraced the showrooming trend about six years 3.1.1.) and backroom space is limited (it is usually devoted
ago by enabling customers to purchase online and pick to merchandise and store supplies). Also, store employees
up their items in the store of their choice. Since then, are trained to sell and are not motivated as warehouse
the retailer has added services like web returns centers workers.
and additional pick-up locations to boost online sales
and meet customer expectations. This strategy has been
a success 50% of Walmarts online sales are now picked As the store evolves to be more of a showroom and
up in a store, leading to huge savings in inventory and take on greater fulfillment responsibilities, we may
transportation.36 see more microwarehouses in the future.
A handful of early-adopter retailers offer ship-from-store

programs. Leveraging store merchandise to fulfill online To overcome these challenges requires several solutions.
orders, the US retailer Nordstrom saw annual inventory Store backrooms could be organized as microwarehouses,
turnover rise to 5.41 from 4.8. Retailers also benefit from particularly to stock smaller items. The store can evolve
being able to move products on markdown at a much into a showroom, displaying just one kind of each product
higher gross margin rate. One major department store with variants stored in an automated storage area nearby
reported a significant increase in same-store sales growth (see the Hointer example in Chapter 2.1.1). And retailers
resulting in a US$ 200 million improvement in gross could outsource store fulfillment activities to third-party
margin. 37
logistics providers.
36
http://www.nytimes.com/2012/07/05/business/retailers-lure-online-shoppers-offline.html?_r=0
37
Dave Lodwig, Winning the Omni-channel Fulfillment Wars, W&H Systems, 2014, p. 2.
Tmall.com Collaboration with Jack & Jones
Chinas largest B2C website Tmall.com is currently exploring a bricks-

and-clicks delivery system with Jack & Jones, a popular Danish male
apparel retailer.38 The service, currently only available to Beijing
consumers, speeds the receipt of orders because online purchases
are shipped directly from Jack & Jones physical stores, and not from
warehouses. When Tmall.com receives an online order, the IT system
analyzes merchandise availability and dispatches from the store thats
closest to the customer. Orders are picked up by Winshine Logistics
couriers (a partner of Alibabas logistics arm Cainiao) and delivered
to each customers home.
3.2.2 Anytime, Anywhere Delivery Models DHL Paketkasten
Consumers expect delivery anytime, anywhere. We no

longer tolerate limited store opening hours. Modern
shoppers have a growing number of options, many of
which exploit new technologies.
Parcel lockers automate and simplify the process of

parcel collection and drop-off on a 24/7 basis. Invented in
Germany, the DHL Packstation solution is now available in
more than 2,000 locations countrywide. In future, retailers
in Germany could use this network of parcel lockers to sell
Parcel locker solution offered to customers in
items, transforming them into parcel vending machines.
Germany
This network could also be used to enable consumer
returns. Bought or rented, and installed near the
customers home
Innovation beyond the parcel locker concept has achieved Accessed via RFID chip or the delivery couriers
a more personalized solution, the Parcel Box. Located hand scanner
next to the consumers home, this dropbox provides a
convenient location for parcel delivery and pick-up (see
the DHL Paketkasten case study).
trunk delivery in Germany.39 Similarly, items (particularly
A recent innovation is to deliver parcels into a car trunk. heavy goods) can be delivered directly inside the customers
Via a smart mobile application, the delivery agent receives home or garage.
the exact location of the car along with an access code
to its trunk. CarDrops.sg already offers this service in This requires the installation of Internet of Things-enabled
Singapore, and DHL, Amazon, and Audi are piloting car doors and locks.
38
https://www.cep-research.com/news/alibabas-tmall-tests-deliveries-in-3-hours
39
http://postandparcel.info/64623/news/dhl-parcel-amazon-and-audi-launch-pilot-project-for-car-drop-delivery/0
Uber-style on-demand delivery services leverage the flexibility of a DHL Packstation with the speed of a drone
existing movement of cars and taxis to deliver parcels. could achieve new levels of service for urgent deliveries.
Orders are delivered by drivers either within the next hour
or during a customer-selected timeframe. Pilots providing Pilot projects and emerging models will lead to longer-
this type of service have been recently launched in Hong term solutions that enhance the consumer experience.
Kong and Singapore, and companies such as EasyVan Uptake will vary between countries according to market
(launched under the name of Lalamove in Bangkok) and specifics such as population density, infrastructure,
GoGoVan are offering similar smartphone app-based regulations, and local preferences.
on-demand delivery services. MyTaxi Delivery offers
40
customer delivery of German retailers products (e.g.,

Media Markt).41 Dynamic Customer Service for the Last Mile
Consumers dont want rigid delivery times and options.

Using the DHL Parcel service in Germany, customers
can easily change their minds about delivery times
and locations via a single personalized online platform,
Paket.de. On the web or via a mobile app, they can set
up and change their delivery preferences.
Consumers also demand flexibility in the communication

channels beyond the web and mobile apps. They demand
the same logistics access and interaction via WhatsApp,
Vchat, and other unstructured channels. For logistics
providers and retailers, the challenge is to create and
maintain a single view of all customer service channels
(a single platform, see Figure 17) to enable seamless
Companies like Amazon, Google, and DHL are piloting the and streamlined communication. The fact that cost
use of drones, delivering at this early stage to remote or per transaction for these channels is much lower than
dangerous regions. In future, drones may be deployed in
42
traditional customer service channels provides an added
the first- and last-mile of parcel movement. Combining the incentive to implement such platforms.
Figure 17: Integrating all customer interactions in a single platform provides a single view of the omni-channel customer
40
https://www.techinasia.com/hong-kongs-easyvan-rebrands-aslalamove-just-in-time-for-launch-in-bangkok/
41
http://www.dhl.com/en/press/releases/releases_2013/logistics/dhl_crowd_sources_deliveries_in_stockholm_with_myways
42
http://www.livescience.com/48032-dhl-drone-delivery-service.html
Increasing Need for Speed: Same-day Delivery and 3.2.3 Omni-channel Value-added Services
Anticipatory Logistics
Increasing the Scope of Home Delivery
Delivery lead times are decreasing. Many companies
Shutl (eBay), Amazon, Google Express, and DHL now Home delivery is the most typical method of delivery
offer same-day and one-hour delivery services in several for online purchases, and its role is getting redefined in
cities. Businesses also have to balance customer require- the omni-channel context. A problem for e-tailers is that
ments of speed with the cost of fulfillment. Rather than online transactions involve no direct contact with the
setting up its own delivery hubs, many companies save customer. This is likely to change.
money by leveraging Postmates, Deliv, Uber, and other
service providers for on-demand delivery. In future the delivery courier could provide additional
value-added services to improve the consumer experience
Meeting the need for same-day speed requires for example, installing the delivered product on behalf
companies to look beyond the traditional approach of of the e-tailer. During a delivery, this person could also
route optimization. In the same way as retailers offer perform simple health checks on elderly customers, an
real-time promotional discounts to sell over-stock, initiative that DHL is trialing in Germany. Other tasks
companies can incentivize customers to select its most for the delivery courier could be to identify upselling
profitable delivery services by providing free add-on opportunities, and to facilitate product returns by
features, reduced fees, and other special offers. immediately (or at an agreed date and time) taking back
unfit-for-purpose products, such as ill-fitting clothes.
Predictive analytics allows companies to look into future
demand patterns, and locate products closer to the customer
to enable speedy and cost-effective delivery. Taking this
one step further, it may even be possible to ship to the
customer ahead of the order. This approach is called
anticipatory logistics (see the Amazon case study).43
Amazons Predictive Purchasing
Customization and Postponement
Customers want speedy delivery but they also want more

product customization and personalization. How can
companies provide both? The solution is to undertake
customization activities during transit or at the last stage
of the supply chain.
Patent for anticipatory delivery of parcels

Customization and postponement services done at the
Aims to ship high-demand products (e.g., newly distribution center have been increasing in skill level.
published books) close to expected customers Examples include technical inspection, rework services,
Planning to go one step further by sending goods consolidation, final assembly, and product customization.
directly to customers who havent yet ordered To fulfill merchandise for one of the worlds leading
the item football clubs, DHL customizes products at its distribution

center.
43
http://techcrunch.com/2014/01/18/amazon-pre-ships/
Customization can also be undertaken during transit. There are many challenges to managing returns. Retailers
Many manufacturing companies are creating modular and manufacturers can find the cost of returning a product
designs to build much greater flexibility into their demand back to origin exceeds the valueof the product. Also in
forecasts and to enable manufacturing to be located as many countries there are no clear regulations on returns
close as possible to the customer (see the Bayer Process processing, leaving either the customer or the retailer/
Equipment Container case study).44 The new concept manufacturer legally exposed. Logistics providers today
of manufacturing in a container would allow some extend beyond basic warehousing services to provide on-
manufacturing and customization activities to occur site or in-warehouse evaluation of returns and advise the
during transit in future. retailer or manufacturer on the best course of action.
Bayer Technology Services 3.3 Starting the Omni-channel Journey:

Process Equipment Container Key Success Factors
From companies that have undertaken the omni-channel

journey, there is clear evidence of how to start an omni-
channel implementation and identify the key success
factors:
1. Focus on the consumer journey
Source: F3Factory
Great customer experiences start with great interactions
at every opportunity. It is essential to understand the end
Successful pilot for a multi-step synthetic batch
customers cross-channel journey and develop solutions
process for pharmaceutical intermediates
and systems that meet the customers expectations.
A fully continuous manufacturing process in a
modular, flexible infrastructure It is important to realize that what works for one customer
in one segment or geography may not work for another.
There can be tremendous variation in customer preference
Enabling Seamless Returns Logistics for buying, receiving, and returning merchandise, and for
required levels of customer service and human interaction.
A high percentage of purchases are returned in omni- Its therefore essential to localize omni-channel supply
channel and e-commerce models. It seems that some 27% chain solutions, and give special consideration to local
of all online-ordered clothes are returned by customers. 45
regulations (e.g., consumer data protection and privacy)
Many people order multiple items (for example, in when defining the omni-channel strategy.
different sizes or colors) with the intention of keeping
only one of them. It is therefore important for e-tailers
to offer a hassle-free, convenient, and seamless returns 2. Organize as per the consumer journey
process, as this will attract online customers. Fashion
retailers and department stores such as Zara, Mango, To create a seamless consumer experience, the organization
Macys, and Target offer a seamless returns process may have to change, aligning itself with the omni-channel
regardless of purchase origin online or offline. When shopper. Companies cannot retain separate online and
the customer wants to return an item, they can bring it offline organizations for marketing, merchandising, and
back to any store, have it collected from home, or use logistics. Instead, they must create one common strategy
any of the various drop-off methods discussed earlier and vision for an omni-channel customer experience.
(including parcel lockers, parcel boxes, and car trunks) Incentives and metrics must be aligned to this common
with the convenience of anytime, anywhere returns, 24/7. strategy to ensure successful implementation.
44
http://www.f3factory.com/scripts/pages/en/about_f3/industrial_case_studies/cs5/index.php
45
http://www.aftermarketsuppliers.org/Doc-Vault/AASA/E-Commerce-Reverse-Logistics.pdf
3. Optimize the omni-channel supply chain network and distribution centers serve a greater role in direct-
to-consumer fulfillment (in some or all locations,
Optimizing the supply chain network in support of an and possibly with phased introduction)? Is it possible
omni-channel approach requires the following steps: to segment and evaluate fulfillment options based
on product characteristics such as value, volume,
Integrate inventory across channels and in transit. seasonality, service requirements, and margin?
This requires significant technology investment and
may also require a review of the existing inventory Consider innovative last-mile delivery options.
allocation and ownership model. Do last-mile capabilities complement the product
portfolio and omni-channel customer expectations?
Design a flexible and dynamic distribution network. Companies must model the preferred delivery options
Can existing storage and processing capacity be trans- for cost impact to select the right approach. Would
lated into a virtual network? Can this be managed it be better to develop in-house delivery centers or
and reallocated based on demand? Are suppliers and outsource to service providers?
logistics providers appropriately aligned with flexible,
dynamic contract terms? For all the above steps, technology is a key enabler.
The combination of new IT solutions and strong ROI
Expand the utilization of physical assets in support of projections will help to drive omni-channel strategy
the omni-channel strategy. Could stores, warehouses, at every level of the business.
30 Conclusion and Outlook
CONCLUSION AND OUTLOOK
Omni-channel is here to stay. Companies that enable Implementation requires significant organizational
consumers to find, buy, receive, and return goods most change and investment.
conveniently and at the lowest cost are being rewarded
with increased customer loyalty, revenue growth, Internet businesses such as Google and Facebook are
differentiation, and profitability. at an advantage, as they started out as user-centric
organizations with a wealth of customer insights
Right now, omni-channel is bringing companies closer generated via online usage profiles. To compete
to customers with more real-time and personalized effectively, traditional businesses must leverage new
engagement. Looking ahead, we expect to see the technologies and big data analytics. Locked-in assets
physical assets of logistics networks being virtualized in the form of brick-and-mortar stores can be turned
and managed much more dynamically in line with to competitive advantage by rethinking their role and
customer demands. We also anticipate more focus on scope in the new omni-channel business.
predictive logistics and analytics to support the omni-
channel network. 3D printing will take cost-effective For any company embarking on the journey to omni-
product customization to a new level and predictive channel, the starting point is clear. You need to consider
technologies enabled by smart sensors will improve how your customers would like to shop, and then
customer service and convenience. commit to enhancing and personalizing the customer
experience.
Will omni-channel completely transform the way
businesses are managed? The answer is yes, but this A special insight chapter follows on omni-channel trends
will not be a sudden transformation. Retailers in in Asia, the largest and fastest-growing B2C e-commerce
mature e-commerce markets such as the US and UK market in the world.
have been on this journey for more than a decade.
Special Insight: Omni-channel in Asia 31
SPECIAL INSIGHT:
OMNI-CHANNEL IN ASIA
Asia is experiencing a digital revolution fueled by strong The complex customs and regulatory environment is
economic growth and increasing consumer buying power. another key challenge in the region. There are more than
Despite low Internet penetration rates, 45% of all global 50 borders in the region with no single unified customs
Internet users today are from Asia. E-commerce growth procedures. The cultural preferences, levels of trust, and
is being fueled by increasing consumption (driven by payment practices in these countries are very different.
economic growth and urbanization) and fast-growing And all of these factors impact the go-to-market approach.
Internet and mobile penetration (Figure 18). According
to the Ecommerce Foundation, Asia Pacific is now the Asian consumer expectations for an omni-channel
largest and fastest-growing B2C e-commerce region in experience are growing, yet there is sparse research on
the world (valued at US$ 567 billion). 46
omni-channel trends in Asia. To better understand the
trends and needs of companies in the region, DHL and
While Asia offers a lot of opportunities, it is also a IDC Manufacturing Insights conducted a web-based and
highly diverse and complex region. Emerging econo- telephone survey with 56 fast-growing companies in the
mies are developing faster than the infrastructure that region across the retail, consumer, and technology sectors
is required to support that development. The poor with participants from over 10 countries (see the profile
transportation infrastructure is increasing trade costs in the Appendix). The following pages highlight the
and delivery lead times while reducing flexibility. Sub- key findings from this survey on omni-channel trends,
optimal supply chain infrastructure can directly affect consumer priorities, and planned investments in Asia.
the consumer. For example, it can take up to six weeks
to send mail from Singapore to Indonesia, despite
the fact that they are neighboring countries.47
Increasing Consumption The Rise of E-commerce

GROWING DISPOSABLE INCOMES AND INCREASING URBANIZATION WILL FUEL CONSUMPTION.
INTERNET PENETRATION
GDP GROWTH RATES DISPOSABLE INCOME PER CAPITA (USD) MALAYSIA 68%
7.5% INDIA $452 CHINA 49%
7.0% CHINA $731 DISPOSABLE INCOMES ARE VIETNAM 48%

6.3% VIETNAM $334 EXPECTED TO GROW IF APAC USA APAC
87% 36%
THAILAND 35%
5.8% MALAYSIA $979
CAN SUSTAIN ITS FAST
GROWTH RATES. INDIA 18%
5.0% INDONESIA $304 (Source: Nationmaster, 2014)
INDONESIA 17%
2.3% THAILAND $502
2.2% USA $3,150 APACS CURRENT INTERNET PENETRATION IS
EXPECTED TO GROW BY 21% FROM 2014 TO 2018.
(Source: InternetLiveStats, InternetWorldStats, Government data; all Q1 2015)
URBANIZATION RATE
BY 2030, APACS MOBILE PENETRATION B2C E-COMMERCE
URBANIZATION
RATE WILL 81%
INCREASE BY USA
75% 32% 29%
30%
35% NORTH AMERICA
MALAYSIA USA APAC APAC
79%
56%
CHINA 54%
INDONESIA 50%
29% 26%
7%
OTHERS
16%
12%
EUROPE
AND ACCOUNT
THAILAND NORTH
APAC EUROPE AMERICA
34%
FOR ABOUT 33%
B2C Sales Growth Rate
54%
VIETNAM
INDIA
APACS CURRENT LOW APAC IS THE WORLDS BIGGEST
MOBILE PENETRATION IS AND FASTEST GROWING
OF THE GLOBAL EXPECTED TO GROW BY 30% B2C E-COMMERCE REGION.
URBAN POPULATION. FROM 2014 TO 2018. (Source: eMarketer, 2014)
(Source: United Nations Bank, 2014) (Source: eMarketer, 2014)
Figure 18: Increasing consumption and urbanization fuel the rise of e-commerce in Asia
46
http://www.ecommerce-europe.eu/news/2015/asia-pacific-strongest-e-commerce-region
47
SingPost
32 Special Insight: Omni-channel in Asia
Consumer Expectations
Fast delivery, and product variety and availability are Internet that enable them to get the fastest possible
key consumer expectations in Asia (Figure 19), and this delivery. These expectations reflect consumer preferences,
is in line with global trends. The survey provides a very lifestyles (advanced mobile phone use), and the fact that
interesting insight: that consumers in Asia value speed fast, free delivery is used to differentiate or incentivize
more than flexible delivery options. Also, consumers in many competitive markets (especially China and India)
expect enhanced search functionalities on mobile and to convert the sale.
What are your consumers expectations for omni-channel experience?
Fast delivery 71%
Product variety and availablity 64%
Enhanced search functionality 59%
Flexible delivery options 54%
Easy return and exchange 52%
Figure 19: Top 5 consumers expectations; Source: DHL-IDC Manufacturing Insights Survey, 2015
Sales Channels Mix
Changing consumer behavior also impacts the sales 25 years, online marketplaces and online stores will
channels mix. While the brick-and-mortar stores and enjoy higher growth. As a result, the sales channels
distributors remain the biggest sales channels for mix will be more evenly spread and will necessitate
companies in Asia, Figure 20 shows that in the next an omni-channel strategy.
What are your current sales channels? Where do you expect

Current % of sales most growth in 25 years?
Retail stores 33% 13%
Distributors 22% 11%
Multi-channel
retailers (e.g., Walmart) 14% 18%
Online marketplaces
(e.g., Alibaba) 14% 24%
Independent
online stores 10% 23%
Multibrand online
retailers (e.g., Zalora) 7% 11%
Figure 20: Shifting sales channels mix; Source: DHL IDC Manufacturing Insights Survey, 2015
Order Fulfillment Models
Regardless of the purchasing channel, customers in it is only an emerging trend in Asia. Logistics providers
Asia have a preference for home delivery (Figure 21). have an opportunity to be first movers in this space.
The next closest preference is to pick up in-store. In small geographies and in environments with high
Currently, few customers like to pick up their purchase real-estate value (e.g., Singapore), businesses should
from a warehouse or locker box. While locker box also consider investing in facilitating warehouse pick-up.
pick-up is common in Europe (particularly in Germany),
What are the order fulfillment models that you currently offer and plan to offer in the next 13 years?
Currently offered 13 years No plans

Online order & direct to home 63% 19% 18%
In-store order & direct to home 56% 10% 34%
Mobile order & direct to home 48% 26% 26%
Online/mobile order & pick up in store 44% 22% 35%
Online/mobile order & pick up at warehouse 21% 31% 48%
Online order & pick up from a locker box 18% 28% 54%
Figure 21: Types of order fulfillment model; Source: DHL-IDC Manufacturing Insights Survey, 2015
Increasing online sales is a key regional trend. Figure 22 Looking to the future, there is an even spread of choice,
shows how companies in Asia facilitate the fulfillment showing that there is no single preferred method for
of online sales today and plan to do so in future. Most all companies to follow. This also reflects the fact that
companies are currently fulfilling their online sales different approaches are required in different Asian
either via stores or shared distribution centers for countries (according to geography, local infrastructure,
online and offline fulfillment. volumes, and market maturity).
Which fulfillment models for online sales do you currently use and plan to use in the next 13 years?
Currently offered 13 years No plans
Stores 48% 20% 32%
Shared distribution centers for online & offline 47% 25% 28%
Direct ship from manufacturer 37% 25% 38%
Dedicated distribution centers for online 33% 34% 33%
Figure 22: Order fulfillment for online sales; Source: DHL-IDC Manufacturing Insights Survey, 2015
34 Special Insight: Omni-channel in Asia
Key Supply Chain Investments
Companies have already started to invest in omni- as this is a key enabler for visibility, real-time engage-
channel facilitation (Figure 23), including automation, ment, and supply chain collaboration. The key growth
mobility-driven shopping, click-and-collect models, area highlighted by the survey is predictive logistics
digitalization of stores, and same-day deliveries. Some techniques. As discussed in Chapter 3, these techniques
58% of respondents have invested or plan to start change the meaning of fast, cost-effective delivery in
investing in cloud-based logistics/supply chain services, the logistics world.
Have you or are you looking to invest in these areas of your supply chain?
Started/implemented Planned Nothing planned
Automation in distribution center 63% 13% 24%
Mobility-driven shopping 55% 14% 31%
Click-and-collect models 54% 14% 32%
Digitalization of stores 54% 15% 31%
Same-day deliveries 52% 17% 31%
Cloud-based logistics/supply chain services 43% 15% 41%
Predictive logistics techniques 38% 29% 33%
Figure 23: Key investment areas to support the supply chain; Source: DHL-IDC Manufacturing Insights Survey, 2015
Overcoming Implementation Challenges
The survey shows a key challenge in driving omni-channel the organization for growth. Logistics providers can play
implementation in Asia is justifying ROI (Figure 24, and a valuable role in ROI justification by designing standard,
see the ROI section in Chapter 1). With Asias growth replicable tools and assets for multiple companies to use
potential, companies are struggling to strike the right for omni-channel fulfillment, delivery, and returns. Given
balance of immediate and downstream investment. the particularly high expectations of Asian consumers,
Businesses must appreciate that omni-channel invest- investing in faster, more flexible delivery will provide
ments will future proof the supply chain and prepare substantial benefit to the business.
What are the top challenges for implementing omni-channel strategy?
Business model to justify ROI 21%

Low priority due to other initiatives 14%
Lack of metrics or incentives 14%
Cost pressure 13%
Current infrastructure and process challenge 13%
Figure 24: Challenges for omni-channel adoption; Source: DHL-IDC Manufacturing Insights Survey, 2015
Role of Logistics
Companies in Asia have the highest expectation that Asian economies, consumers have a preference for
logistics providers should integrate multiple payment cash on delivery. To achieve omni-channel commerce
options (Figure 25). This is because of diverse payment in the region, it is therefore essential to integrate
practices and payment options (mobile/credit card/cash locally preferred payment modes and practices into
on delivery) in the region. In India and some other the fulfillment model.
What do you expect from logistics providers to enable omni-channel experience?
Integration of multiple payment options 45%

IT back-end integration 36%
Customer service 36%
Marketing services 34%
Automation in distribution center 32%
Provide flexible delivery options 30%
Figure 25: Expectations of logistics service providers; Source: DHL-IDC Manufacturing Insights Survey, 2015
Summary and Key Takeaways
The omni-channel trends and implementation challenges Now is the right time for companies in Asia to prepare for
that Asia faces are similar to those in developed countries. an omni-channel future. Strategy should be influenced by
However, the pace of change is much faster with extremely the key findings of this survey:
rapid growth of mobile and Internet technologies.
Asian consumers value speed more than flexible
delivery options.
Given the diversity of the region, it is

of utmost importance to understand the The biggest growth is expected to come from online
consumer journey and local preferences stores and online marketplaces.
when defining the omni-channel approach.

Home delivery is the most prevalent delivery model.
Businesses in Asia are used to working in complex Consider a range of options for fulfilling online sales
environments and are quick to innovate to meet changing either via stores or shared/dedicated distribution
consumer demand. These companies are likely to create centers based on location and accessibility.
varied omni-channel approaches, based on local market
realities while also learning from global trends. Examples Current supply chain investments are being made
of innovative approaches that have been pioneered and in the automation of distribution centers, mobility-
developed in Asian markets include on-demand delivery driven shopping, click-and-collect models, digitalization
services, collaboration between e-tailers and stores to of stores, and same-day deliveries. Future investment
enable speedy delivery, and establishing online factories is expected in predictive logistics techniques.
to enable product customization.
36 Appendix
APPENDIX
Survey Respondents Profile Operation Industry
The survey was run online and by telephone with

Other
56 companies. The figures below show the profile 8%
of the survey respondents. In addition, more than
Technology
10 detailed interactions were held with decision 13%
makers in companies that are in various stages of
Retail
omni-channel adoption. 43%
Consumer goods
Headquarters 36%
China 18%
Taiwan 11%
Singapore 11%
India 11% Revenue in 2014 in mn USD

Philippines 7%
Japan 7% 750 to
1000
Hong Kong 7% 7%
Malaysia 5% 500 to 749

18%
Indonesia 5%
>1000
48%
Other (<2%) 18%
200 to 499
27%
We would like to thank the following people for sharing

their valuable insights with us:
Gary Wheelhouse (Harvey Norman)

David Hogg, Amit Bikram Mukherjee,
Anuj Malhotra and Ajay Kushwaha (IBM) Nature of Operation
Robert Mellin and Marcus Velin (Ericsson)
Andrew Welch and Nicholas Kontopoulos (SAP)
Others
12%
We would also like to thank our customers who shared
their insights with us.
Manufacturers
50%
Retailers
38%
Others: Distributors, raw materials component supplier, online retailers, import/export

Sources 37
SOURCES
3D Body scanners DHL Drones currently being tested.

Take exact body measurements and make online shopping for URL: http://www.dhl.com/en/press/releases/releases_2014/group/
tailor-made clothes easier. dhl_parcelcopter_launches_initial_operations_for_research_
URL: http://www.dailymail.co.uk/news/article-2947866/ purposes.html
Is-future-clothes-shopping-men-Train-station-3D-body-scanner-
spells-end-ill-fitting-attire.html DHL Myways provides crowdsourcing deliveries in Stockholm.
URL: http://www.dhl.com/en/press/releases/releases_2013/
Accenture logistics/dhl_crowd_sources_deliveries_in_stockholm_with_
Reported in a 2013 study that 88% of consumers admit myways.html#.Vdw_2vmqpBc
to browsing online and then buying in a store.
URL: https://newsroom.accenture.com/industries/retail/ DHL Pack Station are automated self-service booths for collection
accenture-study-shows-us-consumers-want-a-seamless-shopping- and dispatch of parcels.
experience-across-store-online-and-mobile-that-many-retailers- URL: http://www.dhl.de/en/paket/pakete-empfangen/
are-struggling-to-deliver.htm packstation.html
Amazon Dash Button DHL Paketkasten are parcel boxes located right next to the
A physical hardware that lets the consumer press the button consumers home.
to replenish a particular product. URL: https://www.paket.de/pkp/appmanager/pkp/desktop?_
URL: http://www.businesswire.com/news/home/2015042300 nfpb=true&_nfxr=false&_nfxr=false&_pageLabel=pkp_portal_
6485/en/Amazon.com-Announces-Quarter-Sales-15-22.72- page_info_depotbox
Billion#.VbWuWvmqqko
DHL Internet of Things in Logistics Trend Report.
AndyVision robot URL: http://www.dhl.com/en/about_us/logistics_insights/dhl_
A pilot by researchers at the Carnegie Mellon University to trend_research/internet_of_things.html#.VgimF8uqqko
improve in-store navigation.
URL: http://www.cmu.edu/homepage/computing/2012/ DHL Fashion in Flux: Mastering Omni-Channel Retail White Paper.
summer/robots-in-retail.shtml URL: http://supplychain.dhl.com/Fashion-in-Flux
Audi City Demand Shaping

Launched a digital showroom of the future. Can help to meet customers fast delivery requirements
URL: https://www.audi.co.uk/audi-innovation/audi-city.html costeffectively.
URL: http://www.supplychain247.com/article/demand_shaping_
Bayer with_supply_in_mind/supply_chain_insights
Bayer Process Equipment Container pilots a multi-step
synthetic batch process for pharmaceutical intermediates. EasyVan
URL: http://www.f3factory.com/scripts/pages/en/about_f3/ Known in Bangkok as Lalamove.
industrial_case_studies/cs5/index.php URL: https://www.techinasia.com/hong-kongs-easyvan-rebrands-
as-lalamove-just-in-time-for-launch-in-bangkok/
Beacons
Technology used to recognize customers by detecting Ecommerce Foundation
smartphones. Reported that Asia-Pacific is the strongest B2C e-commerce
URL: https://www.umbel.com/blog/mobile/15-companies- region in the world.
using-beacon-technology/ URL: http://www.ecommerce-europe.eu/news/2015/asia-
pacific-strongest-e-commerce-region
Best Buy
A U.S.-based electronics retailer. Ericsson
URL: http://business.illinoisstate.edu/bestbuy/situation.shtml Published the Ericsson Mobility Report, On the Pulse of the
Networked Society, November 2013
Burberry URL: http://www.ericsson.com/res/docs/2013/ericsson-mobility-
Opened a physical store with state-of-the-art digital report-november-2013.pdf
technology in London.
URL: http://retail-innovation.com/burberry-regent-street/ Facebook
Announced a new feature in Messenger that gives people a
CommerceHub more convenient and secure way to send or receive money.
Provides hosted integration and fulfillment services. URL: http://newsroom.fb.com/news/2015/03/send-money-to-
URL: http://www.commercehub.com friends-in-messenger/
CWT Carla Flexe

A Personal Virtual Travel Assistant introduced by Carlson Seattle-based on-demand warehousing start-up.
Wagonlit Travel to provide customers with personalized services. URL: http://www.prnewswire.com/news-releases/on-demand-
URL: http://www.tnooz.com/article/cwt-brings-virtual-face- warehousing-start-up-announces-north-american-expansion-
to-mobile-service/ 150000-pallet-positions-now-available-in-85-locations-across-
us-canada-300100377.html
DHL
DHL Car Trunks is a service that delivers parcels to the
consumers car trunk.
URL: http://arstechnica.com/business/2015/04/amazon-audi-
and-dhl-want-to-turn-a-car-trunk-into-a-delivery-locker/
38 Sources
FreightOS Omni Definition

An Expedia-like platform for providing real-time quotes. By Merriam-Webster
URL: https://www.techinasia.com/hong-kong-startup-dragging- URL: http://www.merriam-webster.com/dictionary/omni-
international-shipping-industry-21st-century/
Online City Wuppertal Project
GoGoVan An example of a public-private partnership in Germany to offer
Offers a smartphone app-based on-demand delivery service. a shared fulfillment network.
URL: https://www.techinasia.com/hong-kongs-easyvan-rebrands- URL: http://www.onlinecity-wuppertal.de/home/
as-lalamove-just-in-time-for-launch-in-bangkok/
Outfittery
Google Installed photo booths equipped with 3D body scanners near
Google Maps 6.0 displays detailed indoor floor plans on smart- train stations and airports in Germany.
phones. URL: http://www.dailymail.co.uk/news/article-2947866/Is-future-
URL: http://googleblog.blogspot.sg/2011/11/new-frontier-for- clothes-shopping-men-Train-station-3D-body-scanner-spells-end-
google-maps-mapping.html ill-fitting-attire.html
Google Play store customers connect with service representatives SuperGrid logistics
via video or voice chat. Will greatly facilitate cross-border fulfillment.
URL: http://www.csmonitor.com/Technology/2015/0209/Google- URL: http://www.dcvelocity.com/articles/20120403-brave-new-
introduces-expert-gadget-advice-through-live-video-chat world-of-logistics/
Haier Target
Developing online factories to provide customized products. American retailer offers a seamless returns process regardless
URL: http://www.haier.com/my/newspress/pressreleases/ of purchase origin, online or offline.
201502/t20150217_262012.shtml URL: http://www.aftermarketsuppliers.org/Doc-Vault/AASA/
E-Commerce-Reverse-Logistics.pdf
Harvey Norman
Fully embraces omni-channel retail. Tesco
URL: http://www.cmo.com.au/article/559744/harvey-norman- Launched a social media network for customers called the
finds-value-omni-channel-retailing/ Orchard.
URL:http://www1.planetretail.net/news-and-events/rob-gregory
Heilan Home /blogs/tesco-looking-grow-engagement-through-orchard
A China B2C retailer.
http://go.dematic.com/gs_gated_short?doc=http://now.eloqua. Tesco Mystore mobile application lets shoppers prepare a
com/e/er?s=2102163319&lid=1132 shopping list.
URL: http://www.mediapost.com/publications/article/222767/
Hointer tesco-trials-ibeacons-with-a-mystore-app.html
Reinvents the in-store experience.
URL: http://retail-innovation.com/us-retailer-hointer-uses- Tesco Clubcard is used by more than 16.5 million customers.
robots-to-deliver-your-selections-to-the-fitting-room/ URL: http://www.telegraph.co.uk/finance/personalfinance/
household-bills/10273842/Tesco-Clubcard-vs-Nectar-Best-
IDC Retail Insights loyalty-schemes.html
IDC Retail Insights Global Shopper Survey, 2015
URL: http://www.idc.com/getdoc.jsp?containerId=RI245468 Tmall.com
Chinas largest B2C website is exploring a bricks and clicks
IDC Retail Insights 2014 Top 10 Predictions delivery system.
URL: https://www.idc.com/getdoc.jsp?containerId=prUS URL: https://www.cep-research.com/news/alibabas-tmall-
25233514 tests-deliveries-in-3-hours
Lowes Robot Vargo

A pilot at Lowes stores to improve in-store navigation. Offers omni-channel distribution center designs by allocating
URL: http://www.lowesinnovationlabs.com/innovation-robots/ separate spaces within the same warehouse campus and using
different automation solutions.
Macys URL: http://www.vargosolutions.com/vargo-partners-to-design-
Omni-channel success based on a three-pronged strategy. waveless-distribution-center-for-large-retail-client/
URL: http://macysinc.com/macys/m.o.m.-strategies/default.aspx
Walmart
MyTaxi Implemented a successful strategy to lure online shoppers offline.
Crowd delivery or Uber-style on-demand services. URL: http://www.forbes.com/sites/retailwire/2014/10/02/
URL: https://de.mytaxi.com/blog/mytaxi-delivery-wir-liefern- walmarts-drive-through-grocery-concept-is-a-head-scratcher/
im-stundentakt.html
Half of Walmarts online sales are now picked up in a store
Oculus Rift URL: http://www.nytimes.com/2012/07/05/business/retailers-
Virtual reality eye gear used in Tescos virtual reality supermarket lure-online-shoppers-offline.html?_r=0
prototype.
URL: http://www.independent.co.uk/life-style/gadgets-and-
tech/tesco-dreams-big-with-fully-immersive-virtual-reality-
tesco-store-for-the-oculus-rift-9211854.html
OUR PARTNERS
Words Europe Limited Rasterpixel Mediendesign

Kay Mussellwhite Sebastian Narloch
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Winchester SO23 9AT, UK Phone: +49 2131 5247331
Phone: +44 208 144 1340 Mobile: +49 176 61628125
e-mail: kay@words-europe.com e-mail: narloch@rasterpixel.de

www.words-europe.com www.rasterpixel.de
FOR MORE INFORMATION
About OMNI-CHANNEL LOGISTICS, contact:
Dr. Markus Kckelhaus Pang Mei Yee Tamanna Dahiya

DHL Trend Research DHL Asia Pacific Innovation Center DHL Asia Pacific Innovation Center
Junkersring 55 1 Greenwich Drive 1 Greenwich Drive
53844 Troisdorf, Germany Singapore 533865 Singapore 533865
Phone: +49 2241 1203 230 Phone: +65 6879 8365 Phone: +65 6879 8331
Mobile: +49 152 5797 0580 Mobile: +65 8127 2775 Mobile: +65 9826 2043
e-mail: markus.kueckelhaus@dhl.com e-mail: Pang.MeiYee@dhl.com e-mail: T.Dahiya@dhl.com
RECOMMENDED READING
LOGISTICS AUGMENTED REALITY LOW-COST SENSOR BIG DATA

TREND RADAR IN LOGISTICS TECHNOLOGY IN LOGISTICS
www.dhl.com/trendradar www.dhl.com/augmentedreality www.dhl.com/lcst www.dhl.com/bigdata
UNMANNED AERIAL VEHICLES SELF-DRIVING VEHICLES INTERNET OF THINGS

IN LOGISTICS IN LOGISTICS IN LOGISTICS
www.dhl.com/uav www.dhl.com/selfdriving www.dhl.com/IOT

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OMNI-CHANNEL LOGISTICS

A DHL perspective on implications

Powered by DHL Trend Research

PROJECT MANAGEMENT AND EDITORIAL OFFICE

1 Understanding Omni-channel ............................................................................................. 3

2 Omni-channel Best Practices ............................................................................................... 7

3 Omni-channel Logistics: Fulfilling the Customer Promise ................................................ 15

Conclusion and Outlook .............................................................................................................. 30

Special Insight: Omni-channel in Asia ........................................................................................ 31

Appendix: Survey Respondents Profile .................................................................................... 36

You see an advertisement for jeans

Awesome! At home, you browse for a pair of

Happy customers make for great publicity Enhanced search functionalities

You see a shirt you like, scan

Customers who pick up in-store

Figure 1: The modern shoppers omni-channel journey

Single channel Multi-channel Omni-channel

Figure 2: Omni-channel delivers a seamless customer experience across all channels

1.1 Why Invest in Omni-channel?

Meeting the omni-channel shoppers expectation is

The number of smartphone subscriptions is expected to

How prepared do you think your organization is to handle omni-channel retailing?

33% 29% 26% 10%

Todays leading omni-channel adopters typically focus Long queues

2.1 Personalized In-store Shopping

A study conducted by IDC Retail Insights in June 2015

Personalized in-store shopping Personalized customer engagement

Results Flight Info

SIN > PAR SIN > PAR

My Trips Singapore to Doha

2 hour(s) layover in Doha

Virtual expert advice

Send tailored offers to customers as they moved

Let customers know about in-flight entertainment

Inform ground staff when the temperature dropped

Another example of combining a physical store and state-

3D & Product Scanner

Figure 7: Components of the Lowes robot; Source: Lowes

Figure 8: Supermarket of the future leverages augmented reality

2.2 Personalized Customer Engagement

Results Flight Info

SIN > PAR SIN > PAR

Omni-channel customer engagement continues beyond My Trips Singapore to Doha

who prefer to do their shopping outside brick-and-mortar

To support the shopping experience, it is essential to

Figure 10: Amazons Dash Button works with a smartphone application

2.2.5 Customizing Products 2.3 Case Study: Macys Omni-channel Journey

n Seamless inventory visibility and optimization across channels

Figure 11: Key areas of seamless omni-channel logistics

Real-time Proactive Network Same-day/ Flexible Delivery

Targeted Change Delivery

Virtual Advice Dash

Optimal Fulfillment Location & Options

3.1.1 Seamless Inventory Visibility and

According to an RSR (Retail Systems Research) study of

Figure 14: Inventory sharing strategies in 35 years; Source: JDA

Traditional Fulfillment Model Omni-channel Fulfillment Model

1. Dedicated inventory by channel; 1. Seamless inventory visibility and