This is an archived post from OrderDynamics, now Tecsys retail division.
How to ‘Ship-From-Store’ - the Right Strategy! Ship-from-store is the concept of using stores as fulfillment centers. Since retailers' physical stores are closer to most customers than the typical warehouse, last mile costs become lower. Better yet, an intelligently applied ship-from-store strategy uses a merchant’s entire set of assets. This includes the retail stock found in the stores themselves. Beyond that, it leverages the retailer's physical resources, like the stores and associates. Done well, it really does use the whole organization. Done well, it improves the retailer’s impact by using their entire asset base - effectively. Just whipping something together to make ship-from-store happen – is possible. In retail, I have seen this many times. The haphazard approach can make it happen. Undoubtedly, you have to admire the enthusiasm. But, done poorly, it can cost through margin erosion. Add to this the poor customer experiences, and you can end up with a negative impact. Instead, think about what follows for your right ship-from-store strategy:Back to List View
Intelligent Routing and Inventory VisibilityTo get the ship-from-store model right, you will need good order management technology with inventory visibility features. Inventory visibility is key to catering to consumer expectations. But it also means you can use the full supply chain in your fulfillment strategy. Full stock visibility means when your order management system (OMS) takes all your goods locations into account. It then considers fulfilling online orders from the best options (retail stores, DC’s, 3PL’s …). Now, the OMS intelligent routing kicks in. Getting ship-from-store right means having a flexible system. Especially, it has to adapt to your needs. For example, simple systems may have a few fixed business rules. We often see online sales fulfilled using a ship-from-DC model. Simple ship-to-store (from a distribution center) under a click and collect model is common, too. Dangerously, this gives retail executives the sense that they are working the strategy. But, it might only be adding complexity. The OMS has to be smart enough to notice that a store has plenty of stock of an item for pickup. Undoubtedly, it frustrates store managers to no-end when the system sends them items their store already has. See our article “BOPIS & Ship-To-Store – NOT the Same!” for a deeper perspective. Unlike simpler systems, an intelligent order routing knows all stock positions. The intelligent system uses the retailers’ business rules to prioritize and optimize the routing. That means a store with 900 pairs of yellow rubber boots, will not have yet another pair shipped to it, for order fulfillment.
AutoRoutingObviously, today, speed is a customer demand. For in-store pickups, 78% of omnichannel Superconsumers expect orders to be ready within 24 hours. Occasional click and collect users are even more demanding. They expect items to be ready within 2 hours. So, there is no time to let fulfillment orders linger. A good ship-from-store strategy means each store needs to assess if it can fulfill an order fast. Here, an in-store application tells the retailers' staff about online orders sent to the store for fulfillment. Clearly, delivery times are important. So the application can wait for confirmation from the store. If confirmation is not received in time, the system autoroutes to the next best location. Additionally, if the store staff is overwhelmed with orders or with in-store traffic, a manager can reject the order. Again, in this case, the order autoroutes to the next best location. Autorouting is an important way to stay focused on delivery times. Let’s face it, speed is a key customer expectation in omnichannel retailing. Autorouting gives store operations the ability to balance workloads and to ensure a fast fulfillment timing is always met.
In-Store Pick and PackRunning a ship-from-store strategy effectively means using store inventory well. It increases store inventory turns, keeping stock fresh. It improves store sales velocity. And don’t forget, it also lets you sell at full price rather than at markdowns. With less stagnant inventory, there is less pressure to discount. So, having an effective pick, pack and ship application is important. The in-store application needs to provide employees with pick lists. Ideally, these can optimize the picking route. This is particularly important for large stores, and big-box brick and mortar locations. Naturally, the application will also accept feedback to highlight missing items. The application also needs to provide packing and shipping printouts to complete the process. To review a good example of such an in-store application, read about the OrderDynamics Stores application.
Split Shipments and Order ConsolidationA huge problem with using a ship-from-store strategy is the split shipment proliferation. Retail ship:order (RSO) ratios can easily skyrocket. This is particularly problematic because last mile shipping costs are high. Plus, consumers expect to receive their online orders at one time and in one package. Doing ship-from-store the right way means adjusting to your needs. At times, split shipments also make sense, to get even partial orders to customers ASAP. However, most of the time, consolidating orders into single shipments (even if it requires a small delay) is the smart choice. There is a dumb way to do this, and a smart way. The dumb way is that if the optimal store location does not have all required stock, the order is fulfilled from the DC. The smarter way is for order consolidation technology to internally transfer the needed goods to the consolidating location. This leverages in-store inventories to fulfill more online orders. When considering a store fulfillment strategy, make sure your OMS has both capabilities. More importantly, make sure it can switch between split shipments and order consolidation – easily.
Shipping Rate BrokeringA final key part for a ship-from-store strategy with impact is shipping rate brokering (SRB). SRB is an OMS feature that selects the lowest cost shipping carrier for every delivery route. As an automated part of the fulfillment process, it makes sure every shipment is optimized. The best part is that once set up, this is an automatic process that requires no effort. It also lets you rest assured that you are constantly working to keep your shipping costs low.
Ship-from-Store Strategy – the Smart WayDon’t try to run a ship-from-store strategy without order management. You may be able to run it for a short period, but in the long term, it will fail. The right order management technology for you should include an in-store application for autorouting, with pick pack capabilities. Part of the main engine should provide robust order routing and inventory visibility. Avoid the embarrassing errors that so many retailers are experiencing today. They are trying to run ship-from-store without a solid order consolidation engine. Stock situations in different stores vary. Insist that your system have both order consolidations (at the store level), and SRB to keep your shipping costs contained. Omnichannel retail is a tricky business. Ship-from-store is becoming an increasingly important strategy. It should be yours. But, only if you choose to do it well!
Author:Charles Dimov is VP of Marketing at OrderDynamics. Charles has 23 years experience in Marketing, Sales and Management across various IT and Technology businesses. Previous roles include Chief of Staff, Director Product Marketing, and Director Sales. Charles has held roles in brand name firms like IBM, Ericsson, HP, ADP, and OrderDynamics.