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Using Ship-from-Store to Offset Forecast Inaccuracy in Apparel

Analyst Insight: Retailers are starting to use brick-and-mortar stores as distribution nodes, to connect demand with inventory in the most flexible and cost-effective way. Ship-from-store enables them to leverage their entire inventory for higher sales, better margins and improved service. It allows them to offer omnichannel customers access to a broader array of products, and helps to offset the impact of an imperfect forecast. - Adam Mullen, Apparel Industry Leader, Fortna Inc.

Using Ship-from-Store to Offset Forecast Inaccuracy in Apparel

Forecasting is a best guess based on available data, but not an exact science. Getting the right product to the right place at the right time with 100 percent precision is the goal, but rarely achieved. Companies looking to offer better customer service, and achieve higher margins on their products, need a way to match inventory with demand more dynamically. Many are having success using brick-and-mortar assets as mini-distribution centers. This allows them to give customers access to their full inventory across the entire network and avoid markdowns from products languishing in stores.

Complete inventory visibility is the foundation to using stores as distribution nodes.  The key to leveraging inventory is to know where those products are located within your network.  That includes items in your DC, in your stores, and ideally merchandise in-transit between your suppliers and your DCs, and between your DCs and your stores.

Sophisticated order management systems are also needed to put demand and inventory together in real time. Retailers need systems that automatically route orders to the best fulfillment node based on cost and service criteria. But store point-of-sale systems are often not designed to fulfill orders or ship packages. And shipping cut-off times and volume discounts (or lack thereof) may be a challenge.

Additional considerations include impacts on the DC; will the DC have to replenish stores more frequently or prioritize orders from a store acting as a distribution node? Will you split shipments across stores and distribution centers? Ship-from-store may also impact a wide range of activities - from merchandising and back room space and layout, to the way you prioritize work, measure and incent associates, service customers and handle returns.

Finally, customer expectations for a seamless experience across channels require companies to look at things that are important to the customer experience, like consistent packaging and labeling.  Items shipped from a store should be packaged as professionally as those shipped from a distribution center (consistent cartons, filler, inserts and labeling). And you'll need to communicate order confirmations, as well as split shipment and tracking information in similar fashion. 

                                                      The Outlook

Expect retailers to continue to blur the lines between channels and create flexible fulfillment models to allow merchandise to flow seamlessly between stores, distribution centers and customers. To do so, they will need to enable complete inventory visibility across all channels and implement more sophisticated order management systems capable of optimizing inventory and demand in near real time.  And the cultural and procedural shifts required will have to be counted among the costs of ship-from-store fulfillment.

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