As consumers expect ever faster and more efficient delivery, effective fulfilment and order management have become critical to the customer experience. Moreover, eCommerce now regularly accounts for 25% or more of total sales at brick-and-click retailers and good fulfilment processes are critical to managing costs and maximising profitability.
Going beyond Click & Collect and using stores as mini DCs to perform a ship-from-store function is an easy way to expand the inventory available for sale, the scope of delivery options and the efficiency gains of using existing resources. Another obvious benefit of ship-from-store is the potential to reduce the financial cost and emissions to pick, pack, dispatch, and deliver each order.
For example, in moving fulfilment from distribution centres to stores, Target US reduced the average per unit fulfilment costs by more than 50%. By using stores as fulfilment locations, retailers can also alleviate some of the pressure on their distribution centres or even delay the need to invest in new or expanded warehousing.
To truly leverage stores in this way, retailers need to deploy modern OMS technology that works with and understands the less predictable environment of a store. One of the strengths of distribution centres is that they are fit for purpose and typically designed to perform the pick and pack process efficiently. A store is a much more fluid environment and performing tasks like Click & Collect or ship-from-store are things that operate alongside their core function of attending to customers that walk into the store.
It follows that the system needs to be smart enough to cater for this variability. Automation and real-time availability of inventory are key. Stores should only be asked to pick orders that they have stock for at the time they go to pick.
To do this the system needs to understand exactly what products are being sold through the till, what has been allocated for Click & Collect, what buffers have been set and what the previous stock on hand was. Only then, with this complete and real-time view, can the system make smart routing decisions about what orders stores can pick. This concept is known as demand-based routing or pull-based routing.
When implemented, pull-based routing makes a massive difference.
Briscoes Group operates more than 90 brick-and-mortar stores across New Zealand (Briscoes Homewares and Rebel Sport) and generates more than $700m in sales revenue annually. Even though online now equates to 15% of total Group sales, fulfilment costs have not grown accordingly, improving profitability. This has been made possible by leveraging the store network.
The store network fulfils 95% of online sales. Briscoes’ smart order management system allows stores to ‘pull’ an order only when they have the stock and staff on hand to fulfil it, significantly reducing voided orders and shortening the average time from order placement to dispatch to less than two days. Briscoes also have automation that deals with short picks and exception handling that used to tie up considerable time and administration.
Getting started
The best way to start leveraging stores is by offering Click & Collect and making it an efficient and scalable function for the stores. A modern OMS helps orchestrate Click & Collect orders and can typically support Click & Collect from store inventory with faster pick-up times and Click & Collect with inventory coming from other stores or distribution centres. Click & Collect remains one of the most effective and profitable delivery options Online as there are no shipping costs. It also has the advantage of bringing more people into the store and impulse purchases that come as a result. So mastering this function is a great place to start.
The next step would be to add one or two stores as ‘ship from store’ locations. One way to keep those operations simple is to only have those stores ship goods when the DC doesn’t have them. This will keep the scale relatively small until the store team comes up to speed with new processes. Once stores have begun to master the functionality you can begin to layer in more scale, delivery options and smarter routing logic to support same-day delivery and other delivery options that are highly valued by the customer. Again, a clever OMS solution is critical.
When bringing stores into the fulfilment operations it also is important to monitor and measure performance. It is also important that you’re able to identify and distinguish eCommerce costs from those of the wider business. This means identifying the fixed and variable eCommerce components of, for example, labour, packaging, and freight costs.
eCommerce managers and operations team members need to align on defining profitability measures. Think about the hidden costs of processes such as customer service, returns to the store, or replacing an incorrect item sent, which may not be recorded against the eCommerce channel.
As retailers strive for ways to compete on the customer experience within a constrained budget, looking seriously at an in-store fulfilment strategy may provide both tangible and intangible returns.
Patrick Gaskin is sales director at Viare.