that eight DCs is more than enough for Wal-Mart to
fulfill consistently and that the physical stores would be
needed only as sources of backup inventory. The mix of
physical stores and DCs may be the proving ground for
Wal-Mart’s next move, which would be next-day deliveries,
Cook said.
The analyst added that even one DC might be adequate
for Wal-Mart’s current task at hand, so long as the company
is prepared to absorb the higher transportation expenses
required to deliver over longer distances. “It just depends on
what they want their shipping costs to be,” he said last month
in an interview at the MHI annual meeting in Atlanta.
Wal-Mart’s dilemma, Cook said, has less to do with the
network that’s needed to move the stuff, and more to do
with the amount of stuff it has available to move. “The
breadth of products Amazon sells is so much greater than
what Wal-Mart offers,” he said. As a result, Wal-Mart can’t
go head to head with Amazon unless it expands its online
selection, he added.
James A. Cooke, principal analyst at consultancy Nucleus
Research, said in-store fulfillment poses more problems
than opportunities. For one, there is a lack of visibility at the
item level, meaning store employees may know the product
is there but not exactly where, he said. Radio-frequency
identification (RFID) tags that identify a product’s location
are fine for expensive items like jewelry and electronics,
Cooke said. However, it would be too costly and time-consuming to tag every item in a superstore, he added.
The store fulfillment model also suffers from unfavorable
comparisons to the dedicated DC operation in terms of
labor costs relative to worker productivity, according to
Cooke. Hourly picking productivity at the dedicated DC
level can be eight times higher than in a store setting, especially if the brick-and-mortar retailer also has floor workers helping customers rather than just processing online
orders, Cooke said.
Wal-Mart’s best chance lies with transforming shuttered
stores into fulfillment houses where it is practicable to do
so, Cooke said. The company closed 154 U.S. stores earlier
this year. The challenge, he said, would be to identify which
of those “dark” locations can tolerate a steady stream of
vehicles moving in and out without causing serious traffic
congestion, which would be self-defeating for Wal-Mart’s
fulfillment model and would risk generating ill will with
surrounding businesses.
For traditional retailers trying to make sense of an unfamiliar logistics model, it is a daily balancing act to allocate
orders across different nodes and to do so cost-effectively.
Jindel of SJ, who recently released a summary of a white
paper arguing that Wal-Mart has a clouded future in an
Amazon-dominated e-commerce world, said Wal-Mart’s
fate depends on the company taking its fulfillment expertise
to a new and higher level.
“They better wake up, or they’ll find themselves like
Sears, losing business every year,” Jindel warned.
—Mark Solomon with Ben Ames
16 DC VELOCITY JUNE 2016 www.dcvelocity.com
Symphony EYC, a company that delivers ROI for retail-
ers and manufacturers using customer insights to drive
execution, has acquired Fifth Dimension, a space opti-
mization solutions provider. … Dayton
Freight Lines Inc. celebrated its 35th
anniversary in April. … Port Manatee, a
Florida Gulf port, has reported a 36-per-
cent year-over-year increase in contain-
erized cargo handled in the first half of
its fiscal year. … Maersk has agreed that
it will ensure that any vessel it charters
is covered by an ITF (International Transport Workers’
Federation) or similar agreement, which puts in place
protections for crews on flag-of-convenience ships. …
Hannibal Industries Inc. has released a video covering
the implementation of its Pushback Rack System in M.G.
Produce’s warehouse in Vernon, Calif. … Highly trained
master riggers have moved 42 large steel pieces that
will ultimately form a Northeast Florida manufactur-
ing facility. The cargo moved through the heavy lift
and specialty cargo berth at Jaxport’s Blount Island
Marine Terminal. … Ametek Prestolite Power, a
manufacturer of lift truck battery chargers and fleet
management solutions, has developed an opportu-
nity charging solution specifically for the food
and beverage industries that reduces downtime.
… FedEx has launched the 2016 Access 25, a list
of 25 people, places, and ideas defining global con-
nectivity. … The Transportation Marketing & Sales
Association’s board of directors has implemented chang-
es in three key areas: diversifying to serve all modes
and market segments of transportation and logistics,
expanding the organization’s events offering to include
regional programming in various markets around the
U.S., and increasing its membership more than 15 per-
cent over the last eight months. … UniCarriers Americas
Corp. has expanded its UniCarriers University’s College
of Technical Service program for 2016. … XPO Logistics
Inc. has launched a North American campaign through-
out its less-than-truckload and full truckload networks
to promote National Distracted Driving Awareness
Month, a designation of the National Safety Council.
short takes
DAYTON
