OCM: The omnichannel platform for the retail network
The Swedish food retailer, Axfood, had long been looking for a solution that would bring together its traditional store business with its E-Commerce business in one logistics center. The OCM strategy of WITRON helped the Scandinavians with this challenge. Axfood is not only building an automated omnichannel warehouse of more than 100,000 square meters / 1.1 million square feet that will supply both store and online customers from one central location, but they are also developing a retail platform together with the systems integrator from the Upper Palatinate (Bavaria, Germany). Starting in 2023, the responsible experts are planning a pick performance of 1.6 million pick units per day. And science confirms the approaches of the retailer.
Omnichannel: Hybrid scenarios are becoming more important
For Prof. Alexander Hübner from the TU Munich (Munich University of Technology) things are quite obvious: “Omnichannel is a must-have in retail business. If you want to survive as a retailer, you have to be present on all channels.” Hübner knows his way around, he has been investigating the topic for years. His research focus is on the design of sustainable supply chains, where he holds the Chair of Supply and Value Chain Management at the University’s Straubing Campus as a responsible expert. In the past, the topic of omnichannel was mainly a source of concern for traditional retailers. But the major E-Commerce platforms shook up an entire industry sector. “Today, many small retailers also have their own web platform to serve their customers”, explains Hübner.
Does an omni-channel strategy require new logistics centers? Hübner sees a concentration of logistics centers when it comes to consumer goods or fashion. And the challenge for food retail? “The demands companies have on logistics are increasing. Store business is running in cases and home shopping in units. In addition, there are click & collect, drives, pick-up points, etc. The challenge for the coming years will be to map all of it cost-efficiently, flexibly, and sustainably with automation. Hybrid scenarios are therefore gaining in importance.”
High-performance retail network without parallel worlds and self-sufficient silos
WITRON’s CEO, Helmut Prieschenk also confirms this thought-pattern. “The logistics requirements in retail business have changed fundamentally in recent years: A one-dimensional supply chain has become a multi-dimensional demand network. While in the past it was enough for efficient logistics centers to be able to supply as many stores as possible with a wide range of items, the challenge today is to find a feasible answer to the resulting complexity within the retail network that represents a cost-efficient logistics solution for this paradigm shift.”
The industry sector has been talking about transparent networks for many years. Little has happened so far.
But the CEO of WITRON and his team want to meet exactly these challenges: The WITRON response to this is called OCM - Omni Channel Machinery. “OCM stands for the integration of all horizontal and vertical players of an omnichannel network: Suppliers, logistics centers, transportation, as well as the different distribution channels, stores, home delivery, click & collect, and drives”, explains Prieschenk. The aim is to create a platform, an efficient end-to-end retail logistics center where all nodes communicate with each other constantly and at the same time optimize each other. “Inefficient parallel worlds and self-sufficient silos are a taboo”.
WITRON is therefore convinced that an omnichannel central warehouse, a mothership, in a running network is much more attractive for food retailers and for its consumers than operating numerous micro distribution centers.
“Definitely yes! The central core idea of OCM is: “Leverage the lion’s share in the stream”, emphasizes Prieschenk. In terms of “Economies of Scale”, the drive of the store business should be used to generate synergies for all business models. “In a high-performance omnichannel logistics center, for example, there is no need for separate inbound, inventory management, product master data, technologies, service processes, or manpower for the different distribution channels. The goal is to simplify complexity, not to set up parallel worlds, and to use the strengths and volumes of the successful store business to economically integrate the increasing online business, and thus responding with a high degree of flexibility to changing channel dynamics.” The distribution center reacts flexibly to the agility of day-to-day business - today more store orders, tomorrow more online orders, peak days, average days, product promotions, etc. - in real time using the same infrastructure.
Benefits for consumers, food retailers, and the environment
“In addition, such a solution must be holistic, with clear benefits for the consumer, the food retailer, and the environment.” For the consumer, the solution should generate a premium customer service, for the retailer a cost-efficient business model, and for the earth, it should achieve sustainable logistics processes.
But what exactly is OCM? A consulting service, a software tool, or a new warehouse concept? “All of that”, explains Mr. Prieschenk. The integration of OCM begins with a targeted benefit analysis, which Helmut Prieschenk calls “sweat your assets”. What is already available in the existing logistics network of the WITRON customer? The next step is to determine what is still missing. And finally, it’s about merging all of that to an efficient omnichannel network and optimizing this network with the goal to supply the goods to the consumer in a cost-efficient, economic, and sustainable manner - independent of the distribution channel - stationary or digital.
“Consequently, OCM is an integrated retail platform. It includes a high-performance omnichannel logistics center, interfaces to all horizontal and vertical players, and, in addition, an optimizer that makes it possible to easily and efficiently manage the generated network according to different priorities - by time, costs, performance, transport, or volume”, Prieschenk summarizes pragmatically. However, WITRON does not want to develop a new route scheduling system or a new order management software, and certainly not act as a service provider between the retailer and its customers. “We combine existing technologies, develop a platform from the supplier, over the warehouse, through to the store or end customer, create transparency within the retail network, and enable data exchange between all participants”, promises Prieschenk “to the store and to the end customer”.
Solution optimally adapted to Axfood
One of the first who will use the new WITRON concept is Nicholas Pettersson, Managing Director Logistics of Axfood in Sweden. “We always thought that we would never find a company that would realize our dream of an omnichannel warehouse”, says Pettersson. He and his team were looking for a combination of store picking and online picking – an all in one warehouse. Pettersson traveled around the world, looked at many warehouse solutions, and is now building his new warehouse near Stockholm together with WITRON. “The scale achieved there has never been seen before.” The highly automated logistics center will supply Axfood stores as well as online customers with more than 22,000 different items. The temperature zones range from +25 degrees Celsius to minus 26 degrees Celsius. The system is designed for a daily pick capacity of approx. 1.6 million pick units.
The highlight in the new omnichannel warehouse of Axfood: The online business accesses the same inventory as the store business. Processes that would have to be handled in two separate sections of a conventional warehouse and which would therefore need to be consolidated extensively, are covered by the system in only one integrated warehouse logistics system. The result: significant efficiency, performance, and quality increases of the picking and packing processes as well as considerable investment savings. The elimination of the need for most of the consolidation of online deliveries is a huge advantage for the retailers. “You will no longer find a standard solution”, says Pettersson. “Every retailer must find an own way and an own solution for the respective market.”