Retail trend: merging store and online inventory

More retailers will integrate the distribution operations for their bricks-and-mortar stores and direct-to-consumer businesses, predicted Dan Whitnable, an engineering manager at Lands' End, the purveyor of clothing and home goods. Whitnable gave a keynote address at the North American 2010 Material Handling and Logistics Show in Cleveland, Ohio, in April.

The need for inventory reduction will drive this integration, creating a common pool of stock for both types of retail operations, Whitnable said. "Increased sales and margins are also driving this consolidation. Having a common pool of inventory that I can flow between both channels makes a lot of sense," he said.

As more retailers service both types of business in their warehouses, their distribution operations will have to be redesigned to handle both store and direct-to-consumer shipments. As a result, they may have to make such changes as repackaging goods that originally were intended for the retail shelves so they can be used to fulfill individuals' orders.

Along with accommodating different order types, distribution centers may have to adopt new metrics to measure performance. In the past, retail distribution centers were evaluated based on line-item utilization. An integrated distribution center, by contrast, will have to judge work activity on metrics that measure performance relative to eaches, Whitnable said.