The ship-from-store (SFS) trend was growing even before the COVID-19 pandemic left inventory sitting idly in stores. It is predicted to increase another 13% this year. The benefits are alluring, and include quicker delivery of e-commerce orders, increasing capacity to fulfill orders, and experiencing fewer markdowns.
However, the path to efficient SFS is long, and largely depends on which lever the company is trying to move — fulfillment speed, capacity, inventory position, transportation cost, profit margin or resilience. Generally, this is how most companies evolve, and suggests what the future holds.
As companies begin to think of stores as part of a larger market strategy, many start with buy online, pick up in store (BOPIS), before progressing to a pilot SFS program. They install a sophisticated order management system (OMS) capable of allocating inventory to the best fulfillment mode and tracking inventory in real time — a difficult task when some merchandise may be on the floor or in transit. Extensive order profile and inventory analysis is needed to determine which SKUs to hold in each location across the network. Questions to be answered include: How much store inventory can be made available for online purchases without impacting the store experience? Will stores need to be replenished more frequently? And how will costly split shipments be minimized and handled? Store modifications might be needed to expand backroom space for packing and shipping orders. And equipment and systems will need to be added to stores.
SFS has many benefits, but fulfilling orders from a distribution center is typically much more efficient. At some point, companies look to get the best of both worlds by adding regional fulfillment centers (FCs) – nodes that are in-market (close to customers) but much more efficient than picking in stores. Network planning and inventory strategy is the lynchpin to determining the best approach. Will the benefits of having forward FCs offset the increase in transportation costs? How many FCs are optimal? Could underperforming stores be turned into “dark store” FCs? Should the FC fill both store and e-commerce orders? Does the strategy support the brand promise to both online and in-store customers?
Many companies find a hybrid model works best. Some leave slow-moving items in their DCs and focus their FCs on fast movers. Some use a combination of dark stores and third-party logistics providers. Finally, companies in the advanced stages look at automation technologies to make the process more efficient. There’s new technology that can be installed in the small spaces like FCs, and even in backrooms. High-density goods-to-person systems like AutoStore are extremely efficient, relieve the struggle for labor, and are highly scalable so they can flex to meet future needs.
The SFS trend will continue as e-commerce grows and the role of the store continues to morph. More in-market fulfillment centers will be built to bring greater efficiency and flexibility to a network. The network of the future will be a portfolio of distribution centers, fulfillment centers and stores. There will be further breakthroughs in technology that can automate these small-footprint facilities, adding even more efficiency and lowering labor dependence.
Chris Slover is vice president sales with Fortna.
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