Part 2:Omni-channel Flexible Store Fulfillment Series
Ship from store program allows retailers to keep their stores open around the clock selling products. The customer does not need to be physically present at the store to pay and take delivery of the product, which means he could be shopping at any store in the country at home or at the office, and gets the product delivered at his home in a reasonable amount of time. Simple – right?
To make a ship from store program successful for an enterprise and its customer, we discuss a few important considerations for program design, technology enablers, and change management techniques to ensure “whole hearted” enterprise adoption.
Process Design Best Practices and Considerations
Stores were not designed with the mindset that one day they would need to pick, pack and ship product to the customer, and very rarely have we seen retailers open to changing any physical layout / design aspect of the store, product or labor to accommodate fulfillment. This leaves the current store designs with minimal changes as the default option to accommodate ship from store programs.
The very first question to be asked while designing store fulfillment program is “Are all product categories suitable to fulfill from stores or in other words which product categories should only be fulfilled from a distribution center?” For example, a leading department store chose not to ship expensive china from stores due to the risk of possible damages while picking/packing and even during transportation due to poor packaging. A different departmental store chose not to ship expensive watches from stores due to the risk of shrinkage. A sporting good retailer excluded bulky items such as treadmills from its store fulfillment program – “the economics did not work out.” An apparel chain excluded high selling product categories during their “in season” period. And a men’s apparel retailer chose to exclude items on order that needed special attention such as monograming services. Careful thought is needed to decide what product categories should be excluded (or included) from the store fulfillment program Day 1, Day X, and forever.
The second consideration is the store format i.e. size, layout, and backroom space as it will dictate how you will go about picking the items for the order from a process and location standpoint, and where the order will be staged for sortation, and packing in the boxes. We have seen two clear store fulfillment process designs – First, suited for large departmental stores or specialty stores with store size greater than 20,000 SQFT, and SKU count of 15,000 or more, and Second, for smaller stores that are less than 10,000 SQFT.
- In large departmental stores, picking has to be modeled similar to a warehouse, store associates are assigned tasks, and they go about picking by department or zone. The product is brought back to a staging area where it is sorted out and arranged by order in individual bin location. The product is packaged in boxes and manifested for small package carrier to pick up and deliver.
- In a smaller format store, a single picker is able to cover the entire store and backroom efficiently. The store associate monitors the order queue and downloads a list of items to be picked. The product is brought back to a staging area where it is sorted out and arranged by order in individual bin locations. The product is packaged in boxes and manifested for small package carrier to pick up and deliver.
The third consideration is agreeing on the logic to calculate “available to sell”, which is defined as the SKU inventory that can be sold to web orders after accounting for one or more of a) safety stock, b) expected cash & carry customers, c) store promotions d) distribution service level and e) inventory inaccuracies. The “available to sell” calculation is done at the product category, department or even at the SKU level. A leading sports apparel retailer excluded new release of Jordan shoes from store fulfillment as it is “hot” item in much demand that draws traffic into stores and the retailer did not want to disappoint the customer who decided to walk into the store to purchase the item. Instead the new Jordan line of shoes were fulfilled from their distribution center.
The forth consideration is how to best utilize the store labor for fulfillment functions. The design will vary depending on your decision to have dedicated or shared staff for fulfillment, compensation structure i.e. salary and/or commission, and the general skill level with respect to labor functions. A leading fashion retailer told us, “My store associates are sales persons, they wear $1,000 dresses and suits to assist customer make a purchase. “ The point being, since stores are not warehouses and the store associates are more salespersons, there is a whole aspect identifying the right candidates to do this job, and for shared resources incentivizing them to do fulfillment functions in the store. Finally how many average workers you plan to use for fulfillment orders dictate if the current staff can take on additional work or you need more personnel to do the job.
Finally, the last consideration is defining the process to go about evaluating and selecting the right store to fulfill the order. We have seen customers use a variety of factors including one or more of these variables: shortest delivery, transportation costs, store category, minimize number of shipments, combination of product and location, etc. You could use a variety of factors, however, invariably we have seen the decision criteria boiled down to function of “speed to customer” and “cost to deliver.”