Making the Case for In-Store Fulfillment That Mimics the WarehouseMar 5, 2020
A Revelation in the Cereal Aisle
As I was grabbing a few groceries the other day, I noticed a fellow shopper scanning and putting items into his cart. But then I realized it wasn’t a fellow shopper at all—it was a store employee picking a grocery order for an online customer.
And that’s when it hit me: With the growth of in-store order fulfillment, retail environments are now functioning as warehouses. Maybe it’s time to take the solution that has helped optimize warehouse labor for decades and do the same for people performing in-store order fulfillment operations. In fact, I’m pretty sure the companies that get this right will lead in the omnichannel retail space going forward.
Back to Reality: How Did We Get Here?
As we all know, the Amazon Effect has had a tremendous impact on supply chains and consumers’ delivery expectations. Customers now expect ever-shorter delivery times, perpetually stocked inventory, and easy returns. Many of these uber-consumer-friendly services have stemmed from Amazon’s ongoing quest to justify the $120 annual Prime membership.
Embracing change has been slow for many major retailers, which have been trying to compete with Amazon to either grow market share or keep from losing ground. Many originally expanded into the omnichannel framework by adding direct-to-consumer components into warehouse operations and developing an online store presence. Now, to get an online purchase into the customer’s hand more quickly, these retailers are adapting to complete more fulfillment from the store.
Many national chains and even local retailers now offer online order fulfillment with same-day pick-up in the store—or even better, same-day delivery from the local store to your home. This is critical as a recent Forbes survey of U.S. consumers ages 18-65 reported that 76 percent of respondents would be more likely to buy from nearby retailers over Amazon if same-day delivery were an option. Fifty-four percent would be willing to pay for the convenience.
Where Will This Trend Lead?
We at 4SIGHT fully expect this trend of in-store fulfillment and direct delivery to do nothing but grow, which will require more human resources to pick orders in the store. No doubt we’ll see a rise in the number of store associates dedicated to order fulfillment. The problem is this type of specialized picking can be the costliest model in the industry. This means it’s critical for retailers to apply strategies and technologies geared toward staying viable while driving efficiencies.
The Role of Labor Management Solutions (LMS)
For years, large retailers have relied on Labor Management Solutions (LMS) with engineered labor standards in their warehouses to drive productivity and reduce fulfillment costs. But competing with Amazon on price has not been enough. While Amazon does have an extensive supply chain network, so do many other big-name retailers, which have inventory in stores as well as in warehouses that can be committed to customers. The potential is tremendous. But blindly adding capability can be a significant financial risk if it’s not done methodically.
Why Treating a Store Like a Warehouse Makes Sense
A store has similar attributes to a warehouse that affect how quickly a store associate can pick items to fulfill an omnichannel order. These details have allowed warehouses to build discrete standards for direct-to-consumer orders for years. We think the same can be done for the store.
These characteristics include:
- Location attributes of the specific place from where the product is to be picked
- Where the item is located in the store (used to calculate how much travel is required)
- The dimensional characteristics of the item itself
Benefits of In-Store Order Fulfillment
If LMS capabilities can be applied to those carrying out in-store fulfillment, we would expect to see a number of benefits. Specifically, you’d be able to:
- Standardize the fulfillment process, resulting in a more consistent order experience for the customer.
- Evaluate the store layout and planogram based on online purchasing trends, optimizing product placement and sales opportunity.
- Identify inter-day and intra-day resource utilization. This would help management see spikes in demand earlier so they could re-allocate resources as required. Staffing models could then be built on store-specific, real-world data.
- Provide online shoppers with near-real-time estimates of when they could reasonably expect their order to be ready for pick-up based on work in the queue and estimates derived from engineered labor standards.
How Future-Looking Is This Idea?
Labor Management Software to accomplish the above functionality is available, BUT it has yet to be specifically applied to the in-store environment. While a complete, in-store specific LMS that supports discrete engineered labor standards is not currently available, I think it’s only a matter of time until we see a blending of current solutions.
Contact 4SIGHT Supply Chain Group for more insight on the solutions available today and how to determine the best path forward for your workforce.