IN-STORE FULFILLMENT FROM A SUPPLY CHAIN MANAGEMENT PERSPECTIVE

In-store fulfillment for e-commerce has gotten stories done about it  Details as to what is done and how are sketchy.  They are written about retailers and from the retailer point of view.  They are not written about from the supply chain management perspective. What is missing too is the cost-to-serve and order-delivery performance metric.  

Some discussion points and to create comments for supply chain management side:

·       Retailers may be assuming store employees as no-cost workers to do this.  They are already there.  Otherwise, this seems to be an expensive order picking approach.  There is no technology used for picking and moving products.  Plus, factor in the poor store layout and the picking waste of employee add time and cost.

·       Online is about the customer expectation for order-delivery velocity.  That is the sum of order picking, preparation, and shipping delivery.  And, stores are close to customers?  So, how does this method satisfy that customer centric metric?  How does it compare with shipping from warehouses?  Better yet, how many retailers know their performance against this customer centric KPI?  Given where dominate e-commerce growth is, this is a valid question.

·       Store fulfillment is also to achieve cheaper delivery?  Much parcel shipping is essentially flat rate.  If employees make deliveries, how are they compensated with this Grubhub- like retail service and how does that compare to parcel delivery pricing?

·       How does the supply chain handle the velocity at and to all the stores?  This can be part of an extensive end-to-end network.  This means total velocity, not just downstream.  Supply chains may have limited velocity because of the pressure to keep transport costs down--which is often at the sacrifice of speed of inventory movement.  Add to this the unreliability of ocean carrier service.

·       How are stores restocked to keep the order performance going?  This is really about the end-to-end movement of inventory.  Out-of-stocks are a no-no for customer orders.  Fulfillment success depends on the upstream supply chain, where supply begins.  This issue may be masked with building inventories to avoid higher tariffs with trade wars.

·       What is the total inventory and working capital impact of using stores for this?  Additional stocking locations mean additional safety stock.  Are transport costs being traded for higher spending for inventory?  Is there the potential for being inventory rich?

It would be good to understand the analyses used by retailers as to cost and order performance for stores versus warehouses.  How does it compare to the maximum two-day order delivery?   What about an updated warehouse network built around omnichannel, not stores, with strong inventory positioning?

Also, the real issue is the total supply chain, not just one part, fulfillment.  How does forcing this at the end of the supply chain affect the total chain.  What changes were required upstream?  Or are there hidden problems if this is to be more than a Christmas time service?

Design the new supply chain's warehouse/fulfillment recognizing the different service requirements of the channels.  The solution may be a combination of approaches.  One way may not answer all needs, both cost and service.  That may require data analytics, such as regression analysis, to understand order size, number of SKUs per order, which products are likely to be ordered together, and other questions. 

With that, construct the network for what is the best way to meet customer demands—warehouses—how many, located where, size; or warehouses of different sizes depending on order volume; or a mix of warehouses and stores.  Segment based on common supply chain or other significant issues.  The monolithic purpose, one-size-fits-all supply chain is counterproductive to creating velocity.