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product handling equipment—resources needed to achieve
safe and effective delivery of large appliances, bulk building
materials, and furniture.
Distribution centers also allow for inventory pooling,
which provides greater product availability and cost control. Rather than being dispersed to multiple locations for
fulfillment, product is held in a more central location until
demand is known, and then fulfillment and direct delivery
takes place. The need to prepare and transfer product to
stores is eliminated, which reduces the landed cost of goods,
according to advocates of this method.
Distribution center fulfillment is by no means perfect.
Many distribution centers are not configured for picking
and packing “eaches” for individual orders, which negatively impacts fulfillment cost and productivity. Longer
distances to delivery points impede rapid transit times. For
this reason, only 27 percent of the SRSC participants who
rely on their own distribution centers for urban fulfillment
offer same-day delivery to customers, while none of them
receives same-day service from logistics service providers
or product vendor facilities. Additionally, urban fulfillment may not be the top priority for distribution centers,
decreasing, as a result, the service quality provided to urban
shoppers.
In addition to their own distribution centers, some retail-
ers also use an external partner’s distribution facilities to
handle urban omnichannel fulfillment. This option does
decrease the amount of investment that retailers will have
to make in their own distribution operations as well as the
associated variable costs. For example, it may make sense to
use a logistics service provider for specialized “white-glove”
delivery services with product installation and packaging
disposal.
However, relying on logistics service providers for customer fulfillment causes retailers to lose significant control
of the process. This is an ongoing concern. One executive
lamented, “Your order-delivery partner has your reputation
in its hands. So, if we have problems with that company, customers aren’t pointing at that delivery driver, they’re pointing at us.” As a result, retailers must dedicate managerial
resources to engage reliable service providers and monitor
delivery processes. A lack of vigilance creates service failure
risks.
EMERGING SOLUTIONS
In addition to these more established solutions, retailers
are on a continuous quest for innovative omnichannel fulfillment solutions. Three emerging options are “dark store”
fulfillment, multi-tenant facilities, and pop-up fulfillment
centers. Each solution holds promise for retailers.
