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DCs Are Best Line of Defense for Driving Omnichannel Profits, Satisfying Customers

Online retailers have raised the bar for convenience and fast delivery - and brick-and-mortar retailers are scrambling to keep up. To speed order fulfillment, they are shipping from stores that are closest to customers. To build on their strengths, they are focusing on the in-store customer experience. And to bring more online shoppers into stores, they are providing Buy Online, Pick Up In-Store (BOPUS) options. At the same time, they are rapidly investing in additional inventory and store labor to stay competitive.

DCs Are Best Line of Defense for Driving Omnichannel Profits, Satisfying Customers

But most retail stores are not set up to function as mini distribution centers (DCs). In fact, retailers will admit that while they are pulling off omnichannel processes in stores, they are not doing it profitably. The good news is that while many retailers feel that they are being slowly squeezed by Amazon, smart practices at their distribution centers 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. For example, a colleague in Boston was looking for a new pair of winter hiking boots. After a record-breaking snowfall, he was unable to find a pair in his size within a 300-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, and cannot become the standard way of handling omnichannel 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 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 one hundred percent accurate advance shipping notices for retailers is possible. Every item ordered has 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. In this manner, errors can be addressed before they are dispatched to the retailer, saving time for hard-pressed store staff to sort it out at their end.

Automating shipment confirmation is key to making sure the truck loads are fully optimized in the right way. 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 dispatch.

Instead of sending a set number of shipments to stores at regular intervals based on last year's sales data, it is more profitable to supply what is actually selling today to outlets in different regions. RFID delivers a quick and accurate snapshot of specific local demand that the DC can go on to fulfill. This eliminates waste, reduces overall transportation costs and ensures that the right products are in the right place. To reduce transportation and handling costs, retailers want full trucks heading to stores and full of things people are actually going to buy.

The rise of the mini-DC?

Finally, the best practices found at the most optimized DCs can be migrated along the supply chain to flagship stores. Insightful retailers are beginning to look at RFID inventory management and RFID-enabled omnichannel fulfillment to turn flagship stores into mini-DCs 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 fulfillment duties on top of regular store functions, then this can be a win-win strategy for retailers and customers.

While online retailers may initially appear all-dominating, the use of innovative tools and strategies from source to shopper, combined with unmatched in-store personal service, gives aggressive brick-and-mortar retailers a competitive edge. And that ultimately results in increased customer satisfaction and profitability.

Source: Checkpoint Systems

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