S-16 A SPECIAL SUPPLEMENT TO DC VELOCITY
When it comes to their omnichannel distribution strategy, retailers, especially in the United States, are drawn to the concept of a “common pool of
inventory.” What that means is they want to have the flexibility to fill online orders from any available stock no matter
where it’s held: in a store, in a distribution center, or in a
supplier’s warehouse. And that creates huge challenges for
distribution center operations.
One of those challenges is figuring out
how to handle online order fulfillment in
DCs that were designed to ship cases or split
cases to stores. Compared with case picking,
the picking and shipping of individual items
or “eaches” for online orders is a complex
and labor-intensive operation—one that
requires its own equipment and workflows.
As a result, DCs often end up running parallel
operations. One section of the warehouse is
dedicated to resupplying the stores, with its
own processes and equipment, and another
section takes care of e-commerce, using separate processes and equipment. Surely, there
must be a better way.
That’s why the approach taken by the
British retailer The John Lewis Partnership is worth consideration. The retailer has 41 department stores in England,
Scotland, and Wales and also owns the grocer Waitrose. It
pioneered a service called “Click & Collect” that allows consumers to order online and pick up the items at a John Lewis
store or Waitrose supermarket. It also ships orders directly to
the consumer’s door. And it’s been quite successful where
others have foundered.
But that success didn’t happen overnight. Early on, the
company struggled to find the right distribution strategy.
When it first got involved with e-commerce, John Lewis
operated separate distribution networks for each channel,
using one set of fulfillment centers to handle online sales
and running a separate network of DCs for store replenish-
ment. The distribution system turned out to be convoluted.
For instance, if an online order was intended for the Click &
Collect program, the e-commerce fulfillment center would
have to truck the items over to the DC so the product could
be delivered to the store for customer pickup.
The U.K. department store decided to restructure its entire
DC network, setting up “hybrid” facilities that could handle
both online and store fulfillment. The concept of hybrid
facilities is not new in omnichannel commerce, but Lewis’s
approach was. Instead of shipping cases or pallets to stores,
Lewis moved to a replenishment model of
“buy one, replace one”—which means it only
ships individual items to the stores. Among
other benefits, the move has eliminated the
need for retail locations to store full cases in
their backrooms—a change that has allowed
them to convert stockroom space to floor
The hybrid DCs are set up for a single task:
the picking, packing, and shipping of individual items. The automated systems and workflows are designed to support “each” picking
whether the order will be shipped directly
to a consumer or sent to a store. Although
all of the hybrid DCs are dedicated to “each”
It should be noted that when it comes to restocking its
stores, John Lewis has an advantage over most U.S. retailers—the size of its service territory. The company, which
replenishes its stores overnight, says its longest resupply run
extends from metro London to Scotland—a trip of under 12
hours. In a vast country like the United States, U.S. merchants
using this model would have to adopt a regional approach
for daily store replenishment. Despite the need for adaptation, the Lewis model makes more sense for retailers than
going with a “common pool of inventory” and having stores
fill online orders from their limited stock.
HAS A BRITISH RETAILER SOLVED
THE OMNICHANNEL PUZZLE?