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Streamlining the DC


By John Lowe and Sundip Naik

It’s the holidays, and a parent is seeking the hot toy of the shopping season. Whichever retailer can be the go-to supplier of the prized gift can make a child happy — and also win the loyalty of a grateful parent and customer. From online to in store, retailers have multiple channels through which they can save the day for desperate parents. Unfortunately, until very recently, this type of opportunity has actually been more a challenge than a benefit for retailers.

The reality is that multiple channels have meant multiple distribution centers that frequently do not interact well, creating inefficiencies across the supply chain and insufficiently meeting the expectations of retailers and consumers. But this is gradually changing as many organizations have begun implementing new technologies, automation and process changes to optimize their product DCs.

This streamlining of DCs has helped retailers to better manage multiple fulfillment channels in the same facility (a process referred to as all-channel fulfillment) and has enabled the speed and quality that consumers demand.

With these improvements, retailers are able to fully integrate their online and in-store operations to leverage the rapid growth of online opportunities with the customer service aspect of the in-store experience. Improvements in technology and technique are allowing retailers to transform the DC from a cost center into a competitive differentiator.

BIG DATA: By leveraging analytics and big data, organizations can better allocate inventory across channels within the same DC footprint to optimize sales, minimize markdowns and drive increased levels of profitability. Big data and predictive analytics can also allow organizations to proactively shift inventory across channels within the center, enabling increased revenue and the ability to respond rapidly to changing consumer demand.

Retailers are installing advanced technologies, such as RFID tagging and robotic voice-directed systems, to receive, locate and distribute products to customers. Additionally, they are improving the assortment of inventory carried and the effectiveness of DCs by complementing the inventory management aspects of the centers with operational analytics that leverage sensors and network logs. Stocked with products that are more likely to be in demand, optimized DCs provide greater flexibility while improving customer service opportunities.

By bringing all channels under one umbrella and supporting them with an optimized DC, retailers will have one solution for order management, inventory tracking, fulfillment and consumer interface to improve costs — and to give consumers greater flexibility for arranging delivery, pickup or returning a purchase.

As consumers increasingly use mobile devices to shop, research, purchase and track products, it is critical that retailers have the most up-to-date information on inventory, regardless of channel, and tracking from order to delivery in order to increase competitiveness and customer retention.

ORDER MANAGEMENT: But achieving inventory visibility across channels and optimizing product flow within the four walls of the DC is not enough. Companies must also optimize how and where orders are fulfilled based on cost, capacity, speed, markdown risk, etc. Integrating distributed order management into a warehouse management system combines the routing intelligence of distributed order management with the four-wall optimiza-tion/track/trace capabilities of warehouse management systems. This helps organizations optimize their overall distribution network.

Optimized DCs with a more optimized product mix determined by analytics can also result in faster delivery and a reduction in overall inventory dollars. Retailers such as Amazon, American Eagle Outfitters, Bobcat, Chico’s and Costco are already implementing these optimizations to their DCs, enabling such capabilities as same-day delivery, all-channel fulfillment and real-time track/trace capabilities from the receiving dock right to the front door.

John Lowe is senior manager, North America supply chain technologies at Capgemini, a global provider of consulting, technology and outsourcing services. Sundip Naik is VP supply chain technologies, innovation and digital services, Capgemini.

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