During this past year with the global pandemic, several retailers have struggled to keep up with consumer demands for their products. Historically, customers had the option to either head to a mall or outlet store or purchase online. The trend is moving towards customers using eCommerce more each year. And with so many brick and mortar shops closed or operating with limited hours, or customers just not being confident in venturing into the public, online orders skyrocketed to unprecedented heights. Most Distribution Centers (DCs) in the United States support brick and mortar stores with around 13.3% of all demand supporting online sales.1 As such, DCs around the country struggled to adjusting to meet this new demand. Not surprisingly, even without an epidemic, eCommerce sales revenue is expected to continue to climb through 2025.
According to website Statista, we can expect around a 7% annual growth in revenue with e-commerce.
To meet this demand, a large retailer decided to pivot by utilizing some of their brick and mortar stores that were available. In addition to retrofitting many of their regional DCs to handle a larger online presence, they decided to utilize their store fronts to help fulfill online demand. And with that, the store of the future was born; one that could handle demand from customers on the floor as well as online.
The distribution transformation project has two primary goals:
– Reduced costs for product shipping/handling due to streamlining the picking, and handling process.
– Improved Customer experience due to cost and time savings in the shipping process.
In order to implement this type of change, several teams needed to come together to determine the scope and requirements: The Store, IT, and Warehouse Operations. Since this is a historical DC/tech team type of project, the addition of the Stores creates new challenges in both education on best process practices, warehouse nomenclature, and software limitations and expectations.
Here is an overview of how this project was implemented with the team:
- Obtain scope/Define goals:
Though this step has some challenges, there must be a clear scope and agreements to avoid scope creep as with any project. Early in the project, the Stores must understand that a perfect IT product is very expensive. The stores needed a MVP (minimal viable product) to start. It was imperative they learn what a modern software implementation could provide before they began to ask for enhancements. - Collect requirements:
An IT Project team may have done several implementations, but must be open to listening to the stores to understand their concerns and challenges. The project team must listen to the stores (who are their customers in this instance) to help get their buy in. Without the store buy in, the implementation may not be successful. - Discuss terminology and nomenclature differences:
Personnel in a warehouse use different terminology and processes than retail. Common question may include: What is a carton? Why do I need to pick to a tote? What is the difference in picking and pulling? Through educating the stores, the project team can introduce best practices in utilizing the new software. - Testing:
Testing is crucial. There will be some bugs found by a retail group of testers that are significantly different than a DC, especially if new integration is introduced for this type of project. - Define process and document, train, and distribute:
For the stores, they may have never fulfilled orders using a device before. They may not know how to use the system to pack out and print a shipping label. Reiterative training helps solve this. But also; document and distribute information to enable training to take place with new associates long after the project team is gone. - Observe metrics:
Once the project is live and the initial training hurdles are cleared, the business needs to observe metrics on the success of the system. How fast are orders fulfilled, what is the cancellation rate? Have any other problems come to light? (training, inventory issues)
Overall, these types of projects bring forward significant business value to the business and the stores. However, leaders within retail firms must have realistic expectations on what is expected at each site. Some challenges include:
- The Stores only have so much inventory compared to a distribution center.
- Inventory accuracy within a store tends to be much less accurate as shrinkage from theft and damaged goods could create a view of inventory that isn’t accurate to the online customer.
- Retails stores are prone to higher employee turnover rates as well. This makes a training program a critical part of employee onboarding.
If done correctly in terms of staffing and the proper distribution of orders to a store, this can be very lucrative for both the individual store and employees. Employees will have a steady stream of work to focus on and deliver that is not determined by the ebb and flow of a retail customer into a mall setting. Store sales will also be enhanced, which is a metric the store manager will always accept. And most importantly, the customer will be better taken care of due to increased turnaround times and reduced shipping cost.
REFERENCES:
1 Coppola, Daniela (2021). E-commerce in the Unites States – statistics & facts. Statista https://www.statista.com/topics/2443/us-ecommerce/#dossierKeyfigures
