In a recent McKinsey & Company article, the authors identified four core trends – growing e-commerce demand, overstored/excess physical space, shrinking tolerance for long delivery times and increasing pressure on costs and labor – which are prompting retailers to take their fulfillment planning beyond the distribution center (DC).
Over the past couple of years, e-commerce has become ubiquitous in the modern shopping experience. So much so, that it is now permanently woven into the fabric of buying. Consumers can be physically shopping in a brick-and-mortar store and be shopping online at the same time. With this evolution of the shopping experience naturally comes the evolution of fulfillment planning. Whether you’re a brick-and-mortar retailer with a store network, a direct to consumer (DTC) or a manufacturer brand going direct, you need a fulfillment process that aligns to the modern shopping experience.
Here are three steps to retail fulfillment planning that can meet your shopper expectations in a modern retail environment.
3 Steps to Retail Fulfillment Planning
1. Select a Fulfillment Model
With rising delivery costs, customer expectations for fast fulfillment, warehouse labor shortages, inventory issues and climate change, it seems like hyperlocal fulfillment is a no-brainer. For brick-and-mortar retailers, your fulfillment planning should include your existing space to better serve the omnichannel customer. This might mean store fulfillment and ship from store. For other types of retailers, it could mean micro-fulfillment centers. Unfortunately, there are still retailers shipping from one or a handful of DCs to customers across the country. If this sounds like you, now is the time to pick a side.
2. Prepare Your Store Operations
If your fulfillment planning calls for hyperlocal (as it probably should), it means accounting for e-commerce fulfillment in your store inventory, staffing and replenishment processes. You will need to analyze the buying trends of e-commerce shoppers and in-store shoppers within a geographic area to build a holistic inventory plan for each store. This will help prevent out of stocks and disappointments for store and e-commerce shoppers alike. Store layouts and staffing also need to be addressed because the definition of the store is changed. Your store is no longer just a showroom, it is also a fulfillment center.
3. Invest In Your Tech Stack
While legacy systems might have worked for fulfillment planning in the past, they are soon becoming obsolete as market leaders and savvy niche-players are making increased investments in technology. Investments like a cloud-native SaaS order management system (OMS) capable of advanced order routing and inventory management (among other things) and a SaaS e-commerce warehouse management system (WMS) are optimized for eaches picking and automation-ready. The days of having an ERP handle order management and pen and paper handle DC fulfillment will soon be over. A modern omnichannel experience requires modern omnichannel systems.
Fulfillment Planning Like A Pro
Most likely you will need to make some significant investments to successfully execute your fulfillment plans, but don’t forget there will be significant benefits too. To be a fulfillment planning pro, you need to make your business case to justify your plans. Work with your CFO and take a very broad look at the benefits – beyond your distribution operations – in purchasing, forecasting, sales, and inventory management. I firmly believe that the retailers who make investments in fulfillment will be the ones who gain a competitive advantage in the market.