From SCDigest's On-Target E-Magazine
- Nov. 14, 2012 -
Logistics News: Should E-Commerce Fulfillment and Regular Distribution Be Housed in the Same Distribution Center?
enVista's Jim Barnes Says There are Opposing Forces that Need to Be Juggled
SCDigest Editorial Staff
Multi-channel commerce is roiling the logistics operations of many companies, as consumer direct channels bring major changes to distribution requirements and processes for manufacturers, wholesalers and retailers.
Even more, logistics costs, from piece picking to discounted or free shipping, are taking a big bite out of e-commerce profits, to the point where many if not most retail consumer dot com businesses are said to be losing money.
SCDigest Says: |
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| Barnes also believes the "Amazon effect" will push many retailers to separate store and B2C distribution. |
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What Do You Say?
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Last week, SCDigest editor Dan Gilmore explored these issues and more in his weekly First Thoughts column (See Multi-Channel Commerce and the Supply Chain.) Part of that discussion was the question of whether dot com/consumer direct fulfillment operations should be located within the same distribution center where normal fulfillment to stores or regular distribution channels is operating, a debate that has been going on as long as e-commerce itself.
Gilmore included some comments in that column on this issue from Jim Barnes, CEO of enVista, a consulting firm that does a lot of work in the retail supply chain. As promised then, we have more of the extensive comments Barnes offered to SCDigest here.
"We like the idea of combining the dot com and retail distribution operation if and only if the retailer has the ability to consolidate reserve inventory but logically keep it separated using a Distributive Order Management (DOM) or what I like to refer as enterprise commerce flow (ECF) application," Barnes told us.
The problem, however, is that many retailers don't know how to do manage that or have the right software capabilities, Barnes says.
"So you see a lot of physical or virtual fences separating dot com from retail order distribution. Why? The inability to separate inventory and protect the channel, and the fact that order profiles are vastly different," Barnes says.
Barnes also says the very different distribution missions in retail between store service and consumer direct have to be considered.
"With retail it is all about store ready merchandise (making it easier for stores), picking by department or by store planogram, allowing stores to receive and put to shelf without sorting. The order profile is few orders per day, but many lines," he says.
Barnes notes that enVista has a specialty cosmetic retail client that picks 75 stores per day and 10,000 lines, all picked by its six major departments. Naturally, he says, the slotting for their retail orders is much different than that required for its dot com order profile, where the retailers sees 15,000 orders per day, with 3.2 liners per order or roughly 30,0000 lines per day.
He says that "Although the picking methodology is the same for both channels (pick to cart with Voice) the slotting of their SKUs for each channel is completely different," and the form factor of the product makes picking automation difficult.
On other hand, Barnes says, there are retail sectors such as apparel and footwear where the picking process can be automated through utilizing a sorter (cross-belt, Bombay, tilt-tray, etc.), making it more attractive to combine retail and B2C in one facility.
(Distribution/Materials Handling Story Continues Below
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Barnes also believes the "Amazon effect" will push many retailers to separate store and B2C distribution. 