Insights / Supply Chain / Article

Using In-Store Inventory to Accelerate Retail Fulfillment

July 15, 2016

Contributor: Christy Pettey

Store networks can provide a competitive edge in the ever-changing retail industry.

As online commerce companies like Amazon.com and Alibaba continue to improve the speed of deliveries from overnight to same day, retailers around the world realize they are at a disadvantage. Faced with fulfilment networks that revolve primarily around distribution centers (DCs), leading retailers are looking to compete with the one thing their online competitors don't yet have — a store network.

“The inventory held in store, when utilized effectively and supported by the right in-store logistics solutions, can enable improved fulfilment offerings and delivery lead times,” said Thomas O’Connor, principal research analyst at Gartner. “Stores provide proximity to the consumer, coupled with a wider variety of touchpoints than are available through pure online retail. These touchpoints include click and collect, reserve and collect and ship direct from store.”

“ Efficient same-day services such as click and collect, in which the consumer buys online and collects in store, become possible.”

A common constraint of online order fulfilment capabilities is retail supply chains treating online the same as brick-and-mortar stores within the distribution network. Fulfilment of all online orders is limited to a dedicated inventory held at a few select distribution centers (DCs).

“By leveraging the store network, as well as the inventory available in their DCs, multichannel retailers can deliver stock from the closest inventory holding point to the consumer, speeding up delivery times, expanding fulfilment offerings, ensuring the widest possible product offering to consumers and reducing their total inventory held,” said Mr. O’Connor. “Efficient same-day services such as click and collect, in which the consumer buys online and collects in store, become possible.”

Of course, retail is not a stagnant industry, and expectations for the pick, pack, ship process will continue to rise. Picking and packing orders within 24 hours and shipping the following business day will no longer be competitive. Businesses will push to compete with market leaders through cost-effective, same-day delivery, and click and collect. Retailers will need to implement scalable, time- and cost-effective in-store logistics to ensure the opportunity for on-time, in-full delivery is in line with consumer expectations and at the lowest possible cost.

Order fulfilment from stores will require supply chain leaders to get buy-in across the organization for new technology and other changes. Store operations, retail staff hiring and store design all influence the capabilities to deliver time- and cost-efficient fulfilment from the store. There are a multitude of stakeholders in these core areas of retail, from human resources (HR) to merchandising, IT and finance.

Traditionally, stores did not undertake fulfilment operations, so it is unusual for existing stores, technologies or processes to have been designed with this in mind. The supply chain organization must work closely with, and obtain buy-in for, fulfilment from a variety of teams across the organization. Through this cross-functional alignment, a project management team can be defined to create a future roadmap that leads to the implementation of advanced in-store logistics across technology, people and process. 

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