What are the weak points of in-store processing? – RetailWire
Sep 21, 2021
A new McKinsey Study finds that retailers can benefit significantly from using their stores for fulfillment or online pickup, including enabling greater overall inventory productivity, speeding up customer speed, and avoiding markdowns. However, this also comes with challenges.
The five in-store fulfillment challenges identified in the study were:
- Inventory accuracy: McKinsey finds that stores typically have lower inventory accuracy rates (70 to 90 percent) than fulfillment centers (typically over 99.5 percent).
- SKU complexity: With online assortments typically including channel exclusives, endless aisles, and third-party drop shipments, it becomes difficult to minimize split shipments that erode margins on the network.
- Demand forecast. McKinsey finds that, given the challenges inherent in positioning inventory between distribution centers, various types of stores and market distribution centers, accurate forecasting of demand and placement of distributed inventory remains one of the greatest challenges. apart from network changes.
- Pick-up costs. For the majority of retailers, the cost of in-store picking is typically 1.5 to 2 times higher on a cost per pick basis than that of picking at distribution and distribution centers.
- Quality of execution. The stores were not designed to place large-scale online orders. Particularly during peak hours, managing exceptions, ensuring accurate picks, and tightly controlling cycle times for customers present challenges.
Retailers regularly tout the benefits of in-store fulfillment, which includes not only the convenience for the buyer and the cost savings associated with in-store pickup, but also faster outbound deliveries.
A DC speed last year’s article, âDisadvantages of in-store fulfillment,â highlighted the inefficiency of online order fulfillment costs in stores compared to warehouses in low-rent areas, as well as the risks to the in-store customer experience of preparers delivery that clutter the aisles.
Target, where stores process around 80% of orders online, just announced that it is preparing to open two new sorting centers in October, followed by two more after the holidays, to support its shipping capacity since store.
“These new facilities offer faster delivery times at a lower cost in high shipping density markets,” said John Mulligan. COO of Target, in its second quarter conference call. âIn addition, they free up space behind the scenes of the stores they serve, increasing capacity for increased digital growth over time. “
DISCUSSION QUESTIONS: Where do you see the biggest issues or hurdles to overcome as stores increasingly rely on in-store fulfillment for online orders? What technological and non-technological solutions do you see?
âThe biggest challenge and the biggest opportunity transcend the store: dynamically allocating inventory across the network for maximum flexibility and response to customer demand. “