Strengthening your supply chain one link at a time.

When to Ship From Store?

St. Onge has a long history of helping retail clients design their distribution networks through our network optimization and facility design services.  I’ve performed dozens of retail network optimization studies, and pretty much every one has an e-commerce fulfillment requirement, except for some of the off price/dollar retail chains.  Through this process, the question always arises:  Should we utilize our stores to fulfill e-commerce orders?  As with most supply chain strategies, there are pros and cons.  The primary pros are the following:

• Liquidate clearance merchandise – Shipping from store allows for end of season merchandise to be made available to anyone, anywhere, not just those that walk into the store. This also allows stores to maintain margin on products instead of selling items in highly discounted clearance sections.
• Reduce transportation costs – Shipping parcel packages “in zone” reduces the transportation costs vs. a shipment from a centralized distribution center. This can change next day and second air shipments into ground shipments.  This zone reduction can result in a significant transportation savings.
• Service improvement – Shipping from store can greatly reduce the lead time to customer. This can also open the opportunity of same-day shipping to a broader list of locations, instead of those customers that happen to live in close proximity to the distribution center.
• Black Friday – Utilizing stores as e-commerce fulfillment centers can help take the load off the distribution center(s) during peak periods, like around Black Friday. Distribution centers don’t have the instantaneous capacity to handle the huge spikes in demand during this time.  Allowing the stores to handle these shipment levels that exceed the current fulfillment capacity can help distribution centers stay current, and help maintain acceptable customer service lead times.
• Labor – One can argue that up to a certain number of packages, the labor associated with picking, packing, and shipping in a store is “free”. I know.  I hear you laughing, but if you are not adding staff to a store to ship a few packages a day, then there is no additional cost to the store payroll.  Also, pulling labor requirements from the distribution center(s) and regionalizing them to the stores lowers the labor pool risk and reduces the reliance on temp labor.  Staffing large distribution centers, especially during peak times, can be a daunting task.

Of course, there are also cons to shipping from store, or at least challenges to overcome.  These include:

• Store setups – Some stores are just not setup to perform these types of activities (mall stores, stores with no backrooms, etc.). When planning for new stores, companies would be wise to consider these activities as the need for speedy service increases.
• Systems – Store fulfillment of e-commerce orders requires greater visibility of store inventories, so that the order management system can rout the order to the appropriate fulfillment location.
• Capacity – Each store needs to be evaluated as to how many orders per day it can handle. This can vary greatly in retail chains with multiple store footprints and configurations.
• Labor – Labor was listed in the pros, but it can also be a con. All things being equal, from a labor standpoint, it should always be less labor intensive to fulfill an order from a distribution center as opposed to a retail store.  Distribution centers are designed for labor efficiency, retail stores, typically, are not.

With all this said, a network optimization can help you determine the proper use of retail stores in your e-commerce fulfillment process, and we’d love to help!
 
—John McDermott, St. Onge Company
 
 

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