Retail stores can't handle omnichannel fulfillment on their own

If retailers are going to be successful in conducting e-commerce with an omnichannel fulfillment strategy, then supply chain managers will need to get involved in some aspects of store operations. That's because—as the results of a recent study I was involved in made clear—retail stores are not capable of efficiently filling online orders.

The findings of the research on omnichannel distribution, which I worked on with Steve Banker of ARC Advisory Group, points to the problems encountered when stores perform pick, pack, and ship activities for Web-ordered merchandise. The study was conducted for Supply Chain Quarterly's sister publication, DC Velocity magazine.

Thirty-five percent of the 177 retail executives who participated in the study said they filled online orders from stock in their retail stores, and another 18 percent were doing so only at selected outlets. Now, if stores want to fill online orders, they obviously have to know what's in stock. Yet only 30 percent of respondents reported that their store inventory-accuracy level reached 98 percent or higher. That's noticeably lower than the cycle-count accuracy levels of nearly 100 percent achieved by distribution centers that are using warehouse management software.

One possible reason for the low accuracy rate was that most respondents failed to take advantage of point-of-sale (POS) information to update store inventory. Only 46 percent of the study sample said they use POS information to keep in-store inventory up to date. That's a concern, because a dearth of information on the whereabouts of items in the store could lead to retailers making promises to online buyers that they cannot meet.

There's another key issue associated with stores filling online orders, one that's so obvious that it should go without saying: Retail store operations are designed to sell products to shoppers; they are not set up, like distribution centers, for the efficient handling and picking of orders. For in-store order fulfillment to work, moreover, personnel must be taken away from cash registers, stocking shelves, or helping customers to pick and pack online orders.

If retailers want to successfully engage in omnichannel commerce using store inventory for online orders, then, they will need specially trained personnel in the stores to handle those assignments. And, I believe, those employees should be under the control of the supply chain chief, not the store manager.

In other words, if supply chain executives don't oversee pick, pack, and ship at the retail outlet level, then their retailer employers will fail at e-commerce.

Editor's note: For more about the omnichannel distribution study's results, read "Stores: the weak link in omnichannel distribution." The research will also be the topic of a special webcast on October 15, 2013, at 2 p.m Eastern/11 a.m. Pacific. Watch for details on DC Velocity's website. In addition, Steve Banker and I will be presenting the findings at the Council of Supply Chain Management Professionals (CSCMP) annual conference in Denver in October. I hope to see you there.