More retailers to merge store, online inventory

An increasing number of retailers will choose to integrate the distribution operations for their bricks-and-mortar stores and direct-to-consumer businesses. That prediction came from Dan Whitnable, an engineering manager at Lands' End, the purveyor of clothing and home goods that began as a mail-order catalog and has since branched out to include online sales and retail shops in its parent company Sears' stores. Whitnable made his forecast in a keynote address at the North American 2010 Material Handling and Logistics Show in Cleveland, Ohio, USA 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 commented.

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-toconsumer 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 lineitem utilization. An integrated distribution center, by contrast, will have to judge work activity on metrics that measure performance relative to "eaches," Whitnable said.