The New “Ship From Store” Reality

By: Jim Hendrickson, Vice President, Logistics Solutions, Pitney Bowes

The move to a centralized, high-volume distribution centers made sense. Economies of scale, automation and lower labor costs worked together to increase efficiency.

Now, some retailers have found the pendulum has swung too far. These managers are broadening their shipping and logistics network to include customer shipping of web orders from local stores—and finding ways to reduce costs, satisfy customers and grow same-store sales.

Omni-channel retail gives customers more ways to place orders and more ways to get merchandise than ever before. This increases customer convenience but creates new challenges for the business. With more orders coming from the web, same-store sales go down while overall revenue may be going up. While not a specific challenge, it is creating a new challenge for retailers in terms of fulfillment. Should retailers reduce their local presence that is a key part of their branding structure? Is the centralized distribution model their future?

An emerging ship-from-store approach balances the need for efficiency with the need to keep and the brand local. With this approach, retailers can balance customer fulfillment between central distribution center and stores within the same zone as the customer. Doing this allows stores with lower sales to become “zone fulfillment centers” bolstering their productivity while also reducing shipping costs by shipping within a given zone area.

In balancing assets and productivity the retailer must solve two new problems. The first is the ability to route to stores that can fulfill from existing stock. With Distributed Order Management software, a retail organization can do what’s required to route orders to any channel of fulfillment. The second is an emerging solution, Distributed Parcel Management, which supports multi-carrier parcel shipping from both the distribution center and the local store. The implementation of the technology is a bit different between the channels, but the new technology enables seamless solutions across channels.

For most retailers, keeping up with market demands will require a new mindset. But when you open the newspaper this week and see that a retailer has reporting an increase in same store sales, chances are you’ll know who’s already making the transition to a ‘ship from store’ approach.

Supply Chain Management Review