12:55Order Fulfillment within Retail Supply Chain
This post depicts such business ideas, and concepts, technologies, and tools used in Order Fulfillment by shippers and retailers, as follows: brick-and-mortar, eCommerce, e-tailing, Warehouse Management System, hybrid distribution center, ship-from-store, last-mile delivery. There are also some explanations of order fulfillment and omni-channel, and multi-channel retail, as well as crowdsourced shipping and delivery, in the blog's post.
Order Fulfillment within Retail Supply Chain
What happened in retail?
Traditional stores had large, expensive, and illiquid facilities as new competitive forces in the market had begun to take hold. Some stores have been possessing such facilities for a long time. They are still known and recognizable. However, brick-and-mortar retailers are particularly vulnerable to the new realities of the market [Dawes].
Brick-and-mortar is a traditional street-side business that deals with its customers face to face in an office or store that the business owns or rents. The local grocery store and the corner bank are examples of brick-and-mortar companies [Investopedia].
Now, stores face with downward price pressure, unavoidable fixed costs (e.g., labor, leases and fixtures), less customer traffic directly to a room shop and less frequent large-cart purchases, almost impossible competition on speed and convenience against the Internet, etc. [Dawes]. eCommerce customers don’t like having to wait, partly because the internet has conditioned them for instant gratification [Prickett].
eCommerce is the trading or facilitation of trading in products or services using computer networks, such as the Internet or online social networks [wikipedia.org].
As we can make sure, eCommerce is growing up and this tendency will continue (Table 1 [Akter]).
According to Dawes and Racciatti [Dawes], in 2015 alone, Internet sales went up 23 percent. Amazon is the leader in the e-tailing and it keeps increasing its market share and putting pressure on many market players. However, it is not easy to be like Amazon for other retailers.
E-tailing (less frequently: etailing) is the selling of retail goods and services on the Internet. Short for "electronic retailing," and used in Internet discussions as early as 1995, the term seems an almost inevitable addition to e-mail, e-business, and e-commerce. E-tailing is synonymous with business-to-consumer (B2C) transaction. However, electronic retailing can include business-to-business (B2B) sales through subscriptions to website content, or through advertising [Techtarget, Investopedia]
In 2001, Hau L. Lee and Seungjin Whang noted that order fulfillment can be the most expensive and critical operation for companies engaged in e-commerce. The ability to fulfill orders at reasonable cost and to deliver on time could determine an e-tailer’s success [Lee].
Order Fulfillment is the sequence of steps involved in processing an order (receiving, processing and delivering orders) to the satisfaction of the end customer and making the necessary changes in the inventory records. It may also include processing of returns and re-adjustment of the records. Also called order processing [Businessdictionary].
What is being done?
It is worth noting that, firstly, online order fulfillment was moved from store replenishment into completely separate facilities with the applying of warehouse management system (WMS), which were fit only for pallet and carton picking, not for units [Dawes].
WMS is a software application that supports the day-to-day operations in a warehouse. WMS programs enable centralized management of tasks such as tracking inventory levels and stock locations [TechTarget]. Also, read more about WMS at [Inventoryops].
Next technology hybrid distribution centers (DCs) didn't cope the complexity inherent to managing channels both for online and offline order fulfillment from the same facilities. That is why, centers later were dedicated and optimized to specific purpose. The improving of DCs, and systems, devoted to warehouse management, and distributed order management has been making omni-channel retail more efficient.
Omni-channel retail is a cross-channel approach to sales that seeks to provide the customer with a seamless shopping experience whether the customer is shopping online from a desktop or mobile device, by telephone or in a bricks-and-mortar store. It is a cross-channel business model that brings all the key parameters - online and offline channels (physical locations, FAQ webpages, social media, live web chats, mobile applications and telephone communication), data and technology, customer behaviour and experience - onto one platform. It enable free communication between channels, allowing each channel, for instance, to view the inventory levels of another. A customer of an omni-channel retail has constant opportunity to buy what he/she needs from anywhere because of and similarly, order can be shipped to him/her from anywhere. [Happiestminds, TechTarget, Visual-2000, Wikipedia.org]
Multi-channel retail unlike omni-channel manages each channel with disparate systems. As a result, channels in a multi-channel business cannot communicate with each other [Visual-2000].
Nevertheless, many retailers found that they are weak competitiveness versus emergent e-tailers in terms of speed, convenience and cost leadership.
To compete in today’s complex, multichannel retail environment, retailers must build a loyal customer base as the key factor for business success. There are the main steps they are taking [Dawes, Fortna, Prickett]:
To execute on that goal, many companies are integrating a ship-from-store model as part of the fulfillment supply chain [Fortna].
Ship-from-Store is about connecting demand with inventory in the most flexible and cost-effective way. It is a fulfillment process, by which retailers use stock from their store estate to fulfill orders. It makes it easy for manufacturers and multichannel retailers to ship orders from any authorized retail location where inventory lies. As a truly omni-channel process, the orders might have come from any channel, for example the website. Fulfilling orders in this way makes the store into a virtual distribution hub. [Retail-Assist; Fortna].
Retailers are also investigating how they can guarantee that merchandise will be delivered to customer at the right time or in the shortest time, as soon as possible. A part of issues about delivery time they have been discussing is classified as the problem of "last-mile" delivery. Last mile delivery (logistics) refers to the final step of the delivery process from a distribution (fulfillment, transportation) center or facility to the end user.
The last mile is a metaphor used to describe the movement of goods from a fulfillment center to their final destination. In other words, the last mile is the last leg of your product’s trip before it arrives on your customer’s doorstep [Prickett].
Last mile can can range from a few blocks to 50 or 100 miles. Usually, it involves the use of parcel or small package carriers to deliver products to consumers. According to McKinsey and Company, parcel shipment are valued at more than $83 billion [Cerasis].
Some of companies (ex., DHL and Wal-Mart), use crowdsourcing for deliveries.
Crowdsourced shipping – travelers or in-store customers bring items/packages to people (online buyers) along their route. Customers who accept to deliver packages would receive a discount on their purchases. It also called Social delivery.
Crowdsourced delivery a web or mobile-based courier service which leverages large groups of geographically dispersed individuals to match demand with supply digitally [Fbicgroup].
The ship-from-store model consists of three distinct components (with its own benefits, challenges and ROI), which together help create an inventory strategy, aimed at deficit-free sales to instore and online shoppers [Fortna]:
Big-Box Store is a large retail store whose physical layout resembles a large square or box when seen from above. Big-box stores often can offer lower prices because they buy products in high volume. Also called supercenter, superstore, megacenter [Businessdictionary].
New technologies may help eCommerce retailers overcome the last mile problem, involving the next [Prickett]:
There are also a number of startups focusing on the last-mile due to the requirement to meet customer expectations and forecasts, which state the growth of product deliveries. These innovations and startups include [Lee, at al]:
Business model for last-mile delivery [Lee, at al]:
The first two business models indicates that merchandise can be delivered by seller's employees, or crowds, or automated vehicles. The third one replaces employees with buyer.
Crowdsourced delivery would bring such gains, as [Rouges]:
The Ultimate Guide to Last Mile & White Glove Logistics (2017). Cerasis, 48 p.