DC Velocity - January 2019

Str at e g y OMN I CHANN E L CO MM E R C E

require: proximity to customers to support next-day delivery options, availability of a flexible and scalable work force to handle demand spikes, and connectivity to the retailer’s warehouse management system. Retailers like Walmart and Urban Outfitters have used pop-ups to fulfill urban orders for their top 1,000 SKUs.

STEPS TO SUCCESS

To succeed in omnichannel urban fulfillment, retailers must deploy the right combination of resources and processes. One of the primary drivers of success is establishing fulfillment facility types and locations that align properly with the retailer’s order profiles, infrastructure capabilities, and demand patterns. To create this alignment, retailers must first consider product characteristics, typical order size, and service requirements. Next, they must factor in the capacity, current activities, and location of current and potential facilities. The decision should also consider anticipated volume and the distribution of e-commerce orders.

Finally, retailers must take into consideration cost. As
one supply chain executive noted, “The urban fulfillment
landscape is fraught with peril … financial peril.” Retailers
must evaluate the value proposition of their urban fulfill-
ment offerings against the requisite resource needs and
associated expenses. Compared with other online shoppers,
urban customers are more willing to pay for delivery of
their online orders. This certainly helps to monetize urban
fulfillment services, but it also raises the bar on customer
expectations of service.

In the end, speed and convenience will be critical to winning over urban e-shoppers. Right now, retailers are relying on their existing supply chain footprint through store fulfillment and distribution centers. However, as urban demand continues to ramp up, successful retailers will be the ones that can build and develop new urban fulfillment capabilities to meet customer requirements—and do it profitably.

Note:

1. Pete Saunders, “Where Educated Millennials Are Moving,” Forbes (January 12, 2017)

Editor’s note: Brian Gibson is the Wilson Family professor at Auburn University’s Raymond J. Harbert College of Business.

He is also executive director of the Center for Supply Chain Innovation. Cliff Defee is the EBSCO associate professor of supply chain management; Rafay Ishfaq is the W. Allen Reed associate professor of supply chain management; and Beth Davis-Sramek is the Gayle Parks Forehand associate professor of supply chain management.