Jim Hendrickson, Vice President, Logistics Solutions at Pitney Bowes looks at the changing nature of retail and e-commerce delivery in today’s “omni-channel” world.
For the last two decades the shift to centralised, high-volume distribution centers made a lot of sense. Economies of scale, automation and lower labor costs worked together to increase efficiency.
Jim Hendrickson, Pitney Bowes
In just the last few years, shopping habits and options have not only changed but multiplied. With the growth of e-commerce, retailers are finding the traditional model isn’t working so well anymore. These managers are broadening their shipping and logistics network to include customer shipping of web orders from local stores—and finding ways to reduce costs, satisfy customers and grow same-store sales.
Omni-channel retail gives customers more ways to place orders and more ways to get merchandise than ever before. This increases customer convenience but creates new challenges for the retailer. With more orders coming from the web, same-store sales go down while overall revenue may be going up. While not a specific challenge, it is creating a new challenge for retailers in terms of fulfillment.
Should retailers reduce their local presence that is a key part of their branding structure? Is the centralized distribution model their future?
Ship from store
An emerging ship-from-store approach balances the need for efficiency with the need to keep the brand local. With this approach, retailers can balance customer fulfillment between central distribution centres and stores within the same zone as the customer.
Doing this allows stores with lower sales to become “zone fulfillment centres” bolstering their productivity while also reducing shipping costs by shipping within a given zone area.
But retaining the quality of the brand is important, and the demands placed on store associates in the ship-from-store model, is critical to success. Associates must not only manage the in-store traffic, but will also be picking, packing and managing shipments from the store to customers.
Although productivity will increase with the multi-tasking the associates can now do, ensuring that the associates are properly trained and place the same emphasis on the “virtual” customer as they do face to face with customers is key.
In balancing customer experience and productivity, the retailer must solve two new problems. The first is the ability to route to stores that can fulfill from existing stock. With Distributed Order Management software, a retail organisation can do what’s required to route orders to any channel of fulfillment. The second is an emerging solution, Distributed Parcel Management, which supports multi-carrier parcel shipping from both the distribution center and the local store.
The implementation of the technology is a bit different between the channels, but the new technology enables seamless solutions across channels. For optimum results, the technology must be flexible enough to handle the complexity of the distribution center while providing a simple process for the local store associates to learn and implement.
For most retailers, keeping up with market demands will require a new mindset. But when you open the newspaper this week and see that a retailer has reported an increase in same store sales, chances are you’ll know who’s already making the transition to a ‘ship from store’ approach.
Ship from store is but the first step. As customers have become comfortable with click and collect – buying online and picking up in store – service lines have gotten longer.
Today, you can pick up a web order during store hours. However, brick-and-mortar stores can enable an “always open” for pickup model with the adoption of “intelligent” lockers. Already in test in some US locations and in use in Canada, intelligent lockers are physical storage locations anchored just outside the store. Orders placed online during normal hours, provide the client with a delivery confirmation and a “pickup” code that includes the location, locker number, and unique code to retrieve the package.
The customer can choose to pick up the package even if the store is closed. Typically, packages that are in lockers more than 24 hours are collected by the service desk and stored until pickup, or trigger a direct contact to the customer. Further, as retailers begin implementing ship-from-store the focus is on domestic shipping.
As the model matures, so will the client experience and the efficiency. The potential to ship internationally from the stores also exists and there may be an even more compelling approach to retailers with global locations.
As stores adopt ship-from-store globally, web orders that today require international fulfillment may become “domestic” orders through stores located in other countries near the origin of the customer who place the order. This approach may enhance global supply chain design by providing for “mini-warehouse” within remote stores in global locations that would otherwise not justify a full warehouse build.
With ship from store, pick up in store, pick up at a locker, the retail market is changing driven by customer’s desire for choice and flexibility and the business’ desire to enhance customer experience; the one long term differentiator that will be pervasive in the future. Balancing customer experience, business productivity and efficient use of all assets in harmony with that desire is the critical activity that will define leaders and followers in the global market of tomorrow.
Jim Hendrickson is Vice President and General Manager of Logistics Solutions for Pitney Bowes. He is an industry expert in supply chain management and global logistics with more than 20 years of experience leading teams in supply chain, inventory and logistics management.
Source: Jim Hendrickson, Pitney Bowes