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Feature Article from Our Distribution and Materials Handling Subject Area - See All

From SCDigest's On-Target E-Magazine

- Jan. 21, 2015 -


Supply Chain News: Sears Holdings Builds Its Own DOM Solution, Increases eFufillment Capacity, Avoids Costly CapEx Investment

Sears Builds a "Cheetah Stores" Network for eFulfillment; Home Grown DOM System Provides the Smarts


SCDigest Editorial Staff


No company likes to spend lots of money on capital investments, although the way has been throwing up fulfillment centers in recent years maybe it is an exception.

Sears Holding Corp. of course is the parent of retailers Sears and Kmart. It's no secret that the company has had some operational and financial challenges in recent years, and spending tens of millions in capital to construct more distribution centers to handle growing ecommerce volumes likely was not an attractive option.

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It's good story that well illustrates the strategic and operational complexity of multi-channel - and the value of DOM technology.
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So Sears took another route, using a subset of its stores and some existing store DCs and building efulfillment capabilities in them, powered by a internally built Distributed Order Management (DOM) system that decides what orders should be fulfilled where and provides flexibility to adjust those decisions in near real-time based on capacities and other issues at the fulfillment points.

The aggressive program earned Sears Holdings the second place in the 2014 Supply Chain Innovation award, as presented last Fall at CSCMP's annual conference in San Antonio.

In its case study on the project submitted to CSCMP, Sears noted that "As customers have shifted more of their shopping online, best-in-class competitors are building capabilities by investing in distribution centers throughout the country in order to provide one to two day delivery service to customers. SHC [Sears Holding Corp.] needed a way to improve the speed of online fulfillment quickly without significant capital investment."

Ultimately, Sears decided to invest in building fulfillment capabilities in a small subset of its store network as well as a few existing DCs that were being used exclusively for store replenishment. The goal was to provide rapid delivery (two days or less) to the entire country, in part by selecting stores for this new mission that aligned well with UPS' existing delivery network.

In addition, Sears needed to strike a balance between having enough stores doing efulfillment to attain the customer coverage it desired with being able to send enough orders to each store such that they could drive efficiencies in their pick, pack and ship processes.

Before this new program, Sears had just a single ecommerce-focused DC in the Midwest, which obviously made it difficult for swift delivery to the East and West Coast customers. The store-based fulfillment strategy would address this challenge, additionally supplemented by moving some efulfillment operations into Sears' existing DC network, as mentioned above.

The selected outlets were named "Cheetah stores," for the obvious focus on speed.

Sears says that its team "developed staff dedicated to online fulfillment in the stores, and engineers worked with the store teams to develop efficient processes for online fulfillment operating in the midst of a retail store environment."

It says its engineering teams routinely perform time studies across the network, identify opportunities for improvement, and continue to work with the store teams to adjust processes moving forward.

"Consistent, engineered processes lead to reasonable fulfillment costs and member experience metrics compared to the online DCs," Sears says.

A portion of the back room in these Cheetah stores is converted into an order fulfillment area where picked orders are packed and scanned out for delivery. Orders are typically picked from the floor and staged in the area for packing and shipping, though a few high-moving items are stored right in the backroom, as shown in the photo below.


Sears' Backroom Fulfillment Area


(Distribution/Materials Handling Story Continues Below )


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Orders are received throughout the day, and the stores acknowledge receipt of the order, pick the items, pack, and confirm order completion. The stores have designated pick-up times with UPS to ensure that all orders picked throughout the day make the sort at the UPS hub, and meet or exceed the promise for delivery made to online customers

The result of all this is that Sears is able to provide two-day ground coverage to more than 99% of the US population, and one-day coverage to more than 80%.

Home Grown DOM System Provides the Smarts

Almost mandatory for any sort of multi-point fulfillment network is the use of Distributed Order Management or DOM technology.

While there are a number of commercial DOM packages, Sears decided to build its own. The company says the technology optimizes the total fulfillment cost for each customer order.

An algorithm takes all fulfillment locations under consideration (stores, online DCs, retail DCs), and selects the optimal location based on total fulfillment cost. It evaluates the handling cost and considers all potential shipping modes before making a final determination of source point and transportation mode to ensure that the order makes it to the customer on or before the promised date. The system also makes upgrade or downgrade decisions regarding the service offered to the customer.

If a facility is unable to fulfill the order, such as due to an inventory system discrepancy, the order goes back into the DOM system's logic for a ‘retry' to identify the next best location for fulfillment.

The system also looks at capacities versus volumes and various "weighting factors" in making a sourcing decision.

"The weighting factor became a critical tool in managing peak capacity in real-time," Sears says. "Additionally, the logic can apply flexible "caps" on capacity by fulfillment location, which can be adjusted in real-time depending on conditions in each facility."

Various dashboards also provide visibility into capacities, constraints, order volumes, progress, etc. at each fulfillment point in the network, which managers sometimes use to change an order's sourcing point.

Cheetah Store Program is a Success

With the program, Sears was able to increase its store fulfillment capacity by some 60%, and total capacity in the 2013 peak period by about 30% with very little capital investment. That additional capacity enabled Sears to fulfill more than twice as many ecommerce orders in the 2013 peak as it did in 2012.

The strategy is also enables Sears to provide high levels of customer service with little increase in inventory levels.

Sears says another key benefit is that the Cheetah store program also supports one of Sears' key strategic initiatives, what it calls "Shop Your Way Rewards."

"Shop Your Way is aligned with Sears' transition to a member-centric organization, and the store network enables SHC to offer tiered services to members (including faster shipping)," Sears said.

It's good story that well illustrates the strategic and operational complexity of multi-channel - and the value of DOM technology.

What's your take on the Sears' strategy?
Let us know your thoughts at the Feedback button (email) or section (web form) below.

Recent Feedback

As an ex store manager for Sears, I have found that their online ordering is managed to a number, not to customer satisfaction. Our district and regional managers always expected us to say yes to online orders, knowingly deceiving the customer. Often times we would try to calm the customer and offer a substitution, but if the customer did not answer this initial phone call we would assume that they wanted this and fulfill the order. The customer would then have difficulty trying to exchange their merchandise in the store as only the site who sent the order could see it online. 

Not Provided
Store Manager
Sears Holdings
Jan, 22 2015