Many retailers need to think twice before pursuing a ship-from-store initiative as part of their supply chain strategy.
An article on the Forbes website describes how Wal-Mart Stores Inc. and other large brick-and-mortar retailers are implementing omni-channel commerce “to better integrate their stores and e-commerce channels. For example, a retailer might support buy online, pick up at store; or order online, deliver to home from a store; several other fulfillment paths are also possible.”
The article essentially compares and contrasts e-fulfillment with an omni-channel structure in which orders are fulfilled from a company’s existing brick-and-mortar stores. Many companies are indeed implementing the ship-from-store process as part of their supply chain strategy, but it’s not the right strategy for everyone.
While there certainly are a number of advantages to the process, including faster local delivery and optimization of store inventory, there are also a number of pitfalls. These include two issues in particular.
- There’s an expectation that every store would be able to efficiently pick and ship orders like a fulfillment center. This may not be realistic because each store would need to allocate part of its space as a dedicated warehouse and would also need to have dedicated warehouse management systems and personnel.
- The savings from shipping to customers that are local to the store may not be that significant. Particularly for companies that have negotiated shipping rates with carriers such as FedEx and UPS Inc., there’s not likely much difference between shipping across town and across country. Plus, products must still be shipped from the distribution center to the stores to replenish their local inventory levels to enable local distribution, and then sent out on another set of trucks to be delivered to customers.
This strategy especially falls short when it comes to economy of scale. It would be much more cost-effective to build a couple of distribution centers that are optimized for storage, picking, shipping and receiving than to try to replicate this capability in a larger number of stores that don’t have sufficient space to create an efficient warehouse layout.
The bottom line is that this isn’t a strong supply chain strategy for many midmarket retailers. They would be better served by focusing on developing their existing channels, including e-commerce, and continuing to use their existing delivery methods.
Source: Forbes, October 2013