According to projections by JDA, e-commerce channels will encompass nine percent of total U.S. retail sales by 2015–up from six percent this year. In an attempt to better service its online customers, a number of multi-channel merchants have begun to fulfill orders from in-store inventory. Macy's, for example is working to outfit approximately one-third of its retail outlets with the ability to fulfill online orders.
Macy’s has two goals. First, to cut shipping costs and increase the speed of delivery by moving distribution points closer to buyers. Second, to avoid the need to mark down slow-moving store products when they are still in demand at full price online.
The problem, as Dana Mattoli points out in the Wall Street Journal, is that retail associates working in a store are far less efficient at fulfilling orders than the highly automated, efficient environment of a typical distribution center.
This article outlines what retailers will need to do to enable their stores to be efficient distribution points–in short, to make their stores more like warehouses. This requires investments in both technology and people.
RFID Technologies to Improve Item-Level Tracking
A key challenge with in-store fulfillment is the surprisingly difficult task of accurate inventory tracking. Without this, software systems at the retailer’s headquarters can’t determine from where items should be fulfilled, nor can store associates always locate the item in the store. The answer is radio-frequency identification (RFID).
- RFID tags: Macy’s will deploy RFID tags in its stores by the end of 2012. It will ask suppliers of its replenishment items (items that require frequent restocking, often done manually) to affix RFID tags to them. By doing so, suppliers will have better insight into when to replenish inventory. RFID tags will also help store associates locate items–which isn’t always easy in large store, especially when, as the WSJ article points out, a tote bag might come in the cryptic color “Journey.”
- Mobile RFID readers and scanners: Readers are needed to keep tabs on inventory within the store, and scanners help employees find items, scan them and print packing slips. Many high-end RFID scanners, such as this one from Motorola, operate on the Windows Mobile platform and can integrate with the store’s fulfillment alert system. This allows associates to go about their floor-level duties in addition to fulfilling online orders.
Workforce Planning Technologies
Workforce management is common in many warehouse environments; even marginal improvements to the workforce can result in more efficient operations. An ARC Advisory Group study found, for example, that four in five users of RedPrairie Workforce Management saw at least a five percent increase in productivity.
Retailers can invest in technology solutions to improve inventory visibility and item tracking, but proper training and guidance for associates tasked with in-store fulfillment may be just as important–or more so, according to Shawn Casemore, supply chain consultant and President of Casemore & Co.
Two technology solutions that retailers can deploy to improve workforce efficiency are:
- People counting: One of most valuable benefits of utilizing people-counting systems is greater visibility into store traffic as it ebbs and flows. These systems help retailers align staff to the busiest store hours. Ensuring these stores are well-staffed at peak times will be increasingly important if associates are additionally tasked with fulfilling online orders.
- Workforce management software: Once the ideal workforce size is determined, it’s important to ensure that associates are scheduled to fit customer demand. There are a number of workforce planning systems, such as Infor10 WFM, that can forecast labor needs and schedules. This system can even take into account the skill set of employees, such as in-store fulfillment capabilities.
Staffing and Training Issues
In addition to workforce planning, retailers must rethink personnel issues, too. The front employees in a retail store are often young adults making low wages–and with little incentive to ensure inventory is tracked correctly.
Retailers may have to re-evaluate their hiring criteria to improve the productivity of their workforce in an in-store fulfilment world: hiring exceptional multi-taskers who take pride in doing their work–the right way–and can be motivated by management to fulfill orders quickly.
Retailers must train their staff to approach the fulfillment side of their roles in a systematic manner. Retailers will have to go over scenarios, such as which employee should be in charge of fulfillment (and when), or how to interact with an in-store customer when an online order needs to be immediately picked-and-packed before the delivery truck arrives.
Beyond Successful In-Store Fulfillment
By any means, this article isn’t intended to be a comprehensive checklist for in-store fulfillment. In addition to the above, stores will need to dedicate space to package and store items awaiting shipment, as well as to store shipping materials. This can be challenging given the limited space most retail outlets have.
Beyond in-store fulfillment, more accurate tracking and shipment capabilities at the store-level provides retailers with the ability to link their store and warehouse inventories levels and achieve true, omnichannel inventory management. This would provide retailers with powerful merchandising and demand planning possibilities, currently unachievable by retailers that manage distinct inventories for both online and store customers.
So, in addition to improving item-level tracking in the store and rethinking the workforce, what other changes will retailers have to make for in-store fulfillment to be successful? If you have any additional thoughts, please leave a comment below.
Thumbnail image created by Mark Hunter.