News & Events

Omni-channel strategy: the DC is your best line of defense for keeping customers happy

April 9, 2015

Online retailers have raised the bar for convenience and fast delivery.  And brick and mortar retailers are scrambling to keep up.  To speed order fulfilment, they are shipping from stores closest to customers.  To build on their strengths, they are focusing on the in-store customer experience.  To bring more online shoppers into stores, they are providing Buy Online, Pick Up In-Store (BOPUS) options.   They are rapidly investing in additional inventory and store labor to stay competitive.  Most retail stores are not set up to function as mini-DCs.  Retailers, will admit that they are pulling off omni-channel processes in store, but they are not doing it profitably.

While many retailers feel that they are being slowly squeezed by Amazon, smart practices at the distribution center can drive efficiencies, revenue and more importantly, profits.

Securing the Sale – At Any Cost

The need to secure the sale at any cost has led to some extreme measures, with single items being expensively air freighted from stores thousands of miles apart.

Su Doyle, industry programs Manager for Checkpoint Systems, tells of a story about a colleague in the Boston area of the US looking for a new pair of winter hiking boots.  After a record-breaking snowfall, he was unable to find a pair his size within a 500 mile radius. Keen to satisfy the customer the retailer sourced a pair – from Anchorage, Alaska – with free expedited shipping thrown in. That is a costly exercise to keep a customer happy that cannot become the regular way of handling omni-channel fulfillment.

It is equally costly to have out-of-stocks in the store or worse, to be unclear what stock is being held. The latter can lead to problems such as ‘frozen inventory’ where the retailer might think the store is holding the minimum acceptable level of stock for an item but due to theft, misplacement or poor stock-keeping practices the shelf is actually empty. It can take a long time, if ever, to spot and fix this kind of anomaly and the out-of-stock could be fueling customer negativity over a long period.

However, retailers do have strengths to draw on to help maintain stock visibility as well as their competitiveness. In particular, a well-run, disciplined distribution centre (‘DC’) that correctly uses technology to accurately monitor inventory data can really make a difference.

Real time data is a winner

Retailers that have invested in RFID process automation at the DC and are source tagging merchandise are ahead of the game. With an RFID solution integrated into warehouse management and inventory management systems of record, the creation of 100 per cent accurate Advance Shipping Notices for retailers is possible. Every item ordered will have its own unique identifier encoded into its label. The physical inventory contained in crates, pallets and individual boxes can be checked against the shipping manifest and errors addressed before they are dispatched to the retailer, saving time for hard-pressed store staff to sort it out on their end.

Automating shipment confirmation is key to making sure the truck loads are fully optimised in the right way. Doyle says that real time data means DC operations “can be smarter with how they allocate, pick, pack and ship inventory to stores”.  Shipments based solely on historical retail data are not going to allow for flexibility or meet ‘real world’ demand – the end result can be those high airfreight charges for single item despatch.

Instead of sending a set number of shipments at regular intervals fixed long ago to a store it must be more profitable to supply what is actually selling in outlets in the different regions. RFID delivers a quick and accurate snapshot of a specific local demand that the DC can go on to fulfill.

This way there will be no wastage, transport costs overall will be reduced and the right products will be in the right place – as Doyle notices: “You want full trucks – and full of things people are actually going to buy.”

The rise of the mini DC?

Finally, the best practices found at the most optimised DCs can be migrated along the supply chain to flagship stores. Clever retailers are beginning to look at RFID inventory management and RFID-enabled Omnichannel fulfillment to turn flagship stores into mini distribution centres to service smaller stores and the large surrounding populations.

If such operations properly invest in their mini DC status and do not just overload the existing staff with online fulfilment duties on top of regular store functions then this could be a win-win strategy for retailer and customer.

Online retailers may initially appear all-dominating but the use of innovative tools and strategies from source to shopper, combined with unmatchable in-store personal service, will give bold brick and mortar retailers a competitive edge.