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OmniChannel: The End of Retail Fulfillment Centers

by Mike DeFabis on 2016-08-29 13:03:26

Omnichannel has been a buzz word for the last few years in the retail industry.  Omnichannel is a way to provide customers a seamless shopping experience from all sales channels.  The idea that a customer can order online, pick up in-store or order from a third party website and have it drop shipped from a retail store is omnichannel.  This is great for customers because they have a wide range of inventory available to them and quickly have access to it, whether through delivery or in-store pickups.  omnichannel.png

If retailers were able to achieve a true omnichannel supply chain, it could mean the end of dedicated fulfillment centers for these retailers.  As more and more retailers push to become omnichannel, you are seeing supply chains shorten.  A smaller supply chain means middle men could be getting cut out. This blog will discuss some ways retailers are beginning to phase out dedicated fulfillment centers.

Cross Docking to Fulfill Stores

Cross docking orders directly from inbound trailers or containers to fulfill retail stores would be one way of moving away from dedicated fulfillment centers.  There has to be a way to get product into the retail stores and if managed properly a cross docking operations could work.  The most difficult challenge would fall on managing timeliness of inbound shipments to create larger outbound shipments from the cross docked product in order to reduce freight cost. 

Fulfilling Direct to Consumer Orders from Retail Stores

One of the first steps in moving away from a dedicated fulfillment center is the ability to distribute product directly from retail stores.  This is not as simple as it sounds because rather than managing several fulfillment centers you need to manage fulfillment from a much larger number of retail stores where this type activity is not a core competency.  Standardizing packing and presentation can be difficult and utilizing the technology to make it all work can be a challenge.    

Leveraging Supplier and Wholesaler Warehouses for Drop Shipping

Drop shipping has often been viewed as a way for retailers to reduce inventory carry or to test different products to see how they sell before purchasing their own inventory.  Retailers who are trying to achieve a true omnichannel supply chain might also look at drop shipping from that perspective, but they could look at it as a way for the customer to receive product faster and at a lower shipping costs.  If the drop shipper’s warehouse is closer than a retail store, then shipping from your vendor’s warehouse would be able to shorten the supply chain.

Utilizing Technology to Shorten the Supply Chain

Rather than looking at inventory from a micro approach and singling out inventory in a particular store or warehouse, taking a macro approach and looking at the inventory as a whole can improve fulfillment.  In order to do this, you need the right technology to be able to allocate inventory for restocking one retail store together with the inventory for fulfilling a direct to consumer orders from that store.  In order to make this happen, technology and integration stand at the forefront.  Knowing the total inventory needed for store and direct to consumer sales by individual retail location requires the right technology in place to manage inventory and create seamless integrations that will allow retailers to slowly phase out fulfillment centers.

For many companies, they are just taking the first few steps into omnichannel and learning about the capabilities that are out there.  In order to make a lot of this happen, technology lies at the forefront.  Dedicated fulfillment centers are not going anywhere in the near future, but as we progress into true omnichannel, the need for dedicated fulfillment centers becomes less and less. 

For more information on how IDS can help with your omnichannel fulfillment needs, contact us today!

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