Hybrid Commerce: The Future of E-Commerce

Multi-Channel Commerce

In an exclusive interview with cloud inventory expert Shawn Coultice, Head of Channel Partnerships at Katana MRP, we delve into hybrid commerce to understand how manufacShawn Coultice of cloud inventoryturers, distributors, and retailers adopt this strategy to adapt to changing market conditions. Shawn provides valuable insights into implementing a hybrid model's benefits, challenges, and future trends. He explains how Katana MRP's unified platform helps businesses manage the complexity of hybrid operations by consolidating data, integrating systems, and enabling real-time visibility across sales, inventory, production, accounting, and fulfillment.

In today's rapidly evolving e-commerce landscape, businesses constantly seek innovative ways to optimize their supply chain and order fulfillment processes. One such approach gaining traction is hybrid commerce, which combines different fulfillment models to create a more flexible and efficient system.

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Types of Hybrid Commerce Models

The growth of e-commerce has enabled many manufacturers, distributors, and retailers to adopt innovative hybrid models that blend different types of order fulfillment, as Shawn from Katana discussed:

“Our customers today, 70% of them actually do a mix of all those different order fulfillment types. And that’s really what technology has enabled them to do.”

These hybrid approaches allow companies to diversify their operations across areas like:

• Manufacturing their proprietary products while distributing other items as a wholesaler or distributor. As Shawn explained, this increases the overall SKU count and provides more options to meet customer needs:

“As a brand, they now can not only produce and sell their own products, they can bring other products which they can buy, pull that into their brand and utilize different sales channels to get that to the end consumer and market.”

• Utilizing both direct-to-consumer and wholesale sales channels. This combines the higher margins of D2C e-commerce with the scale and reach of selling through distributors or retailers.
• Offering a mix of B2B, wholesale, D2C, and marketplace fulfillment. This provides multiple diversified revenue streams to mitigate risk.

By consolidating these models into unified workflows, businesses can optimize their broader supply chain capabilities across both internal and external supply chains.

Benefits of Hybrid Commerce

Adopting hybrid manufacturing, distribution, and retail models provides significant strategic advantages:

As Shawn explained, key benefits include:

• As a brand, Katana can now produce and sell its products; it can bring other products that it can buy, pull that into its Katana brand, and utilize different sales channels to distribute that to the end consumer and market. This increases product selection and ability to meet customer needs.
• Leveraging both direct-to-consumer and wholesale relationships provides well-rounded customer insights. First-party data from D2C sales informs wholesale strategy.
• Diversified revenue streams across B2B, wholesale, D2C, etc., mitigate risk and even out seasonal revenue swings. Not relying on just one fulfillment model provides stability.

Related article: Hybrid Order Fulfillment: The Future of E-Commerce - Discover how hybrid order fulfillment strategies can help you meet the demands of your customers and grow your business.

Centralizing production and distribution of proprietary and distributed items also enables valuable economies of scale that reduce costs across hybrid models.

By leveraging internal and external supply chains, businesses can be more responsive to shifts in customer demand. Hybrid strategies enabled by solutions like Katana are becoming a competitive necessity.

Implementing Hybrid Commerce

Shawn highlights how many manufacturers today are utilizing a hybrid order fulfillment model, with around 75% of Katana customers combining different fulfillment methods like in-house manufacturing, outsourced manufacturing, wholesale distribution, and direct-to-consumer sales.

Implementing a hybrid model provides flexibility but also introduces complexity in operations. Katana aims to help manage this complexity through its unified platform that connects and syncs all sales channels, inventory, manufacturing, and accounting. This consolidation of systems enables real-time visibility across the entire business.

My analysis is that a hybrid model allows manufacturers to adapt quickly to changing market conditions and leverage their unique capabilities. However, careful planning is needed for inventory allocation between channels to balance utilization and service levels. Robust analytics are crucial to monitoring profitability by product, channel, and segment.

Challenges of Hybrid Commerce

Shawn notes some key challenges manufacturers face with hybrid models, especially around data silos that hinder visibility. Disparate systems like separate e-commerce platforms, ERPs, and accounting software can obscure insights.

Related article: Adopting Cloud Technology to Enable Manufacturing Agility - Learn how cloud technology can help you adapt to changing market conditions and improve your overall agility.

I agree lack of visibility is a significant hurdle in hybrid models. Without unified data, understanding costs, margins, and operational trade-offs between make vs. buy or direct vs. wholesale decisions is difficult. Extensive manual work is often needed to reconcile information across systems.

Master data management and removing duplicative data entry are critical when operating multiple channels. As Shawn mentioned, providing contextualized data to guide better decisions is key to overcoming these challenges.

Examples of Successful Hybrid Models

Companies like Harry's and Dollar Shave Club demonstrate how hybrid models blending DTC e-commerce with wholesale retail can benefit from both. Harry's acquisition of a razor factory allowed it to control quality and costs while expanding brand reach via Target.

Companies that leverage unique assets through a hybrid approach can be very successful. For example, a specialty manufacturer sells proprietary products online while wholesaling excess capacity. The hybrid model provides economies of scale and maximizes production.

In summary, hybrid models enable flexibility and growth but require tight integration between sales, inventory, production, and fulfillment enabled by platforms like Katana. Unified data and analytics are essential to gain visibility and optimize the hybrid operation.

Future Trends in Hybrid Commerce

Continued Blurring of Manufacturing, Distribution, and Retail

Shawn from Katana MRP discussed how the lines between manufacturing, distribution, and retail are becoming increasingly blurred due to the rise of e-commerce and the adoption of hybrid commerce models. He mentioned that “70% of Katana customers now use these hybrid approaches, ” combining different fulfillment methods like in-house manufacturing, outsourced manufacturing, wholesale distribution, and direct-to-consumer sales.

As businesses continue to adapt to changing market conditions, we'll likely see even more hybrid commerce models emerge in the future. This trend will be driven by the need for flexibility, diversification, and the ability to leverage unique capabilities across different sales channels.

Omnichannel Sales and Fulfillment

Another trend in hybrid commerce is the growth of omnichannel sales and fulfillment strategies. As Shawn explained, businesses need a way to “bring all that demand into one solution” to manage inventory, manufacturing, and fulfillment across multiple sales channels. This is where solutions like Katana MRP come into play, providing a unified platform that consolidates orders and real-time visibility across the entire business.

We think that if you look towards the future you will see that ny supporting both B2C and B2B e-commerce, your hybrid platform lets you quickly support new business models like subscription. Adobe see great efficeincies in this thought as well.

My insight is that as more businesses adopt omnichannel strategies, the need for solutions like Katana will only increase. Companies will require technology that seamlessly integrates with various sales channels and provides a comprehensive view of their operations.

Achieving Real-Time Visibility

One of the key benefits of using a cloud ERP solution like Katana is the ability to achieve real-time inventory visibility and demand planning. Shawn mentioned, “The moment a sales order is created in your Shopify store that creates the sales order within Katana. And we will now create the demand on that finished good.”

This real-time nature of the system allows businesses to identify purchasing needs and production requirements as soon as an order enters the system. There is no lag between sales orders and corresponding inventory/production demand, enabling more responsive planning and fulfillment.

My analysis is that real-time visibility is crucial for businesses operating in a hybrid commerce environment. It allows them to make informed decisions about inventory allocation, production planning, and order fulfillment, leading to more efficient operations and better customer service.

Transitioning to Cloud ERP

Shawn discussed the benefits of transitioning from on-premise ERP systems to cloud-based solutions like Katana. He mentioned that on-premise systems are often rigid and stiff to customize, whereas cloud-based solutions offer greater flexibility and easier integration with other technologies.

One example he shared was a company that struggled with its 15-year-old ERP system. By adopting Katana's cloud ERP, they could integrate Shopify for D2C sales and consolidate wholesale/B2B orders. The CEO explained, “Katana's inventory and production planning capabilities gave us real-time visibility and easier reporting.”

I believe transitioning to a cloud ERP solution can benefit businesses operating in a hybrid commerce environment. Cloud-based solutions' increased flexibility and integration capabilities can help businesses streamline their operations and adapt to changing market conditions.

Digitizing and Automating Shop Floor Processes

Shawn also discussed the importance of digitizing and automating shop floor processes. He contrasted Katana's digital shop floor control with manual “hoppers” – printed job lists. Workers can view prioritized digital tasks on phones/tablets, providing “all the information that they're going to need to run that job effectively right in the palm of their hand.”

By automating these processes, businesses can improve efficiency, accuracy, and real-time visibility on the shop floor. This is particularly important for companies operating in a hybrid commerce environment, where managing multiple sales channels and fulfillment methods can be complex.

Achieving Accurate Inventory Valuation and COGS Reporting

Finally, Shawn explained how Katana integrates with QuickBooks Online for accurate inventory valuation and COGS reporting. He said, “When you go and ship out a product, and you generate that invoice over in QuickBooks Online… that will make a journal entry over in QuickBooks Online. So it will increase your costs of goods sold and decrease your inventory relative to the associated costs.”

We believe that the future of commerce is fast and flexible. North American businesses are resilient, setting trends by working smarter with automation, optimizing experiences. Orginaztions like Square share our sentiments as well.

This integration ensures that financials accurately reflect inventory value and costs, which is crucial for businesses operating in a hybrid commerce environment. By consolidating operational and financial data in the cloud, companies can gain a more comprehensive view of their operations and make better-informed decisions.

Hybrid commerce models offer businesses the flexibility and diversification needed to adapt to changing market conditions. However, implementing and managing these models can be challenging without the right technology. Solutions like Katana MRP can help businesses consolidate data, streamline processes, and achieve real-time visibility across their operations, ultimately enabling them to succeed in the evolving world of hybrid commerce.

Conclusion

Hybrid commerce strategies enable businesses to leverage unique capabilities across diverse fulfillment models. This provides the flexibility and diversification needed to thrive in modern commerce. However, businesses require technology like Katana MRP to manage the inherent complexity of hybrid operations. By consolidating data and systems, Katana gives businesses real-time visibility to optimize their hybrid models. Sign up for a Free Katana MRP trial today. (No Credit Card Required) See how Katana MRP can help your business succeed with hybrid commerce.

Watch our Software Spotlight podcast featuring Katana MRP: In this episode, Shawn Coultice of cloud inventory management leader Katana MRP explains how the solution helps online sellers efficiently manage multi-channel order fulfillment, manufacturing, purchasing, and financials - enabling small businesses to save time, reduce costs and scale using enterprise-level technology.