DC Velocity - February 2016

58 DC VELOCITY FEBRUARY 2016 www.dcvelocity.com
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and 8 percent to store operations, while 44 percent make it a shared responsibility. At the opposite end of the spectrum is labor scheduling: 67 percent put store operations in charge, 10 percent assign it to the supply chain group, and 23 percent say it’s a shared responsibility. (See Exhibit 1.)

“One of the surprises we had when we kicked off the study six years ago was that for almost all retailers, the supply chain ended at the back door of the store. From that point forward, inventory management and handling was 100 percent a store operations responsibility,” says Dr. C. Clifford Defee, associate professor of supply chain management at Auburn University.

One thing that is bringing the two organizations together is the need to train store associates in efficient order picking, packing, and shipping processes. Most of the interviewees said they are using DC personnel not only to train store associates, but also to assist in developing store fulfillment processes and identifying system change requirements. Among survey respondents, 54 percent leave that up to store operations, with the rest making it a supply chain or shared responsibility.

Another is retailers’ intensifying focus on customer
service. A comparison of respondents’ overall strategies
in 2015 and 2016 shows that the percentage saying a
cost-related strategy (“control supply chain costs” or “bal-
ance cost and service”) was their primary strategic focus
declined, while the percentage who identified “enhancing
customer service” as their primary strategic focus more
than doubled, to 24 percent in 2016 from 10 percent in
2015. Store operations and supply chain organizations
historically have been separate divisions in the retail envi-
ronment, with separate goals, according to Defee. “The
fulfill-from-store movement has created a dynamic that
brings these organizations closer together in some instanc-
es, but not all,” he says. “We anticipate that store, supply
chain, and omnichannel organizations will become better
aligned in the next few years as the goal of serving the cus-
tomer takes top priority, regardless of where the customer’s
order originates.”
That trend seems to be well under way: Just 16 percent of
respondents said that store-based fulfillment hinders their
ability to provide quality service to customers. Still, the cost
vs. customer service question is central to store fulfillment
decisions. That’s why some of the responses to questions
about the impact of store-based fulfillment on costs, inven-
tory, and efficiency were somewhat surprising. For exam-
ple, 45 percent of respondents said that store-based fulfill-
ment would force them to hire additional store associates,
and 42 percent stated that store-based fulfillment requires
higher in-store inventory levels—both implying significant
ongoing additional costs—yet only 13 percent said that
store-based fulfillment is not cost-effective.

In-store inventory accuracy, at 74 percent, is far and away respondents’ most significant store fulfillment challenge, followed by effective labor scheduling ( 49 percent). Managing peak volume and achieving timely fulfillment tied for third place with 46 percent, while in-store inventory visibility was close behind at 41 percent.

Retailers are tackling those problems in a variety of ways. “Many are in the midst of system overhauls to provide a more holistic view of inventory across the network, but this does not deal with the issue of inventory being misplaced in the store itself,” Defee says. A technology like radio-frequency identification (RFID) could give some retailers a way to verify inventories on the shelf relatively quickly, he says. In the short term, uncertainty about inventory accu-