{"id":29570,"date":"2021-06-29T11:01:00","date_gmt":"2021-06-29T15:01:00","guid":{"rendered":"https:\/\/hy-tek.com\/?post_type=resources&p=29570"},"modified":"2022-04-27T16:33:37","modified_gmt":"2022-04-27T20:33:37","slug":"choosing-a-retail-distribution-strategy","status":"publish","type":"resources","link":"https:\/\/hy-tek.com\/resources\/choosing-a-retail-distribution-strategy\/","title":{"rendered":"Choosing a Retail Distribution Strategy"},"content":{"rendered":"\n

Omnichannel, Brick & Mortar Stores, Digital eCommerce, Distribution, Fulfillment, Dark Stores, Micro-Fulfillment, BOPIS (Buy Online, Pickup in Store), DriveUp, Delivery, Warehousing, Logistics, Supply Chain, Agility, Resilience\u2026\u2026.<\/em>   <\/p>\n\n\n\n

The above are terms and buzzwords that fly around today\u2019s world of choosing a retail distribution strategy.\u202f Some of these processes and approaches are tried and proven, some were tested and proven pre-COVID-19 pandemic, some during COVID-19 pandemic, and some now in the early stages of post-COVID-19 pandemic times. \u202fSome are terms that can seem vague such as \u201cAgility\u201d and \u201cResilience\u201d.\u202f Nevertheless, all are processes and approaches that we find clients wanting to chase and explore during supply chain network strategic optimization efforts.\u202f While the topic of \u201cChoosing a Retail Distribution Strategy\u201d is very broad and includes a lot of moving parts in the supply chain (which often can include the \u201cfront-end\u201d\u202felements, such as sourcing and the merchandising areas of the supply chain), we offer these key constructs that are needed to develop, fully vet, and analyze such strategies: <\/p>\n\n\n\n

  1. Define the Strategic Objectives<\/strong> \u2013 establishing clear scope and objectives are key to the beginning of a successful retail distribution strategy optimization effort.\u202f This includes identifying what\u2019s important \u2013 operating costs and service levels to customers (some call these SLAs = Service Level Agreements).\u202f Most would say that in today\u2019s\u202f\u201cAmazon effect \u2013 I want it now\u201d world, that optimizing operating costs AND service levels are vital and should be considered table stakes.\u202f However, specific details rule the day here and while we can optimize for minimized operating costs (including capital investment depreciation), we have to put a stake in the ground on service levels such as \u201cI want all orders to ship out the same day if received by 2 PM, and then delivered in no more than 1 days (or 2 days or 3 days?) after the physical order picking or processing is complete\u201d.\u202f Should my supply chain be more \u201cresilient\u201d with respect to the inbound transportation\/sourcing side with closer sources (\u201cnear-sourcing\u201d); if so, what are the assumptions for that input?\u202f These can be built as variable inputs into a strategic modeling exercise so that you can vary the service levels to see the impact upon operating costs and vice-versa, but they have to be established at the start.\u202f Business growth plans for 3 to 5 years need to be provided as part of the objectives or if not developed, then established collaboratively between client and consultant.\u202f Yes, you may know the 3 year plan is pretty solid, but a shot at another 2 years is required to be able to provide at least a 5 year runway for the strategy (and there are some that might say they want a 10 year look, also!). <\/li>
  2. Document the Current State \u2013 <\/strong>\u201cYou can\u2019t know where you are going, unless you know where you are today\u201d; which sounds simple, but often isn\u2019t.\u202f Spending time in the existing supply chain network, on-the-floor observing in existing distribution and fulfillment centers, interviewing key management and executives for their opinions on where the strategy should take the company, documenting existing inbound freight costs, \u201c4 wall\u201d distribution\/fulfillment center(s) operating expenses, outbound transportation and delivery costs, currently attained service levels, are all very important items to pin down to establish the \u201cCurrent State\u201d.\u202f It also is important to run this current state through the supply chain network optimization modeling tool you might be using, to validate that the model is producing results that look like the actual, current state results.\u202f We call this validation and it\u2019s as important to the retail distribution strategy process as considering \u201cFuture Options\u201d or \u201cScenarios\u201d to analyze!\u202f Don\u2019t skimp on this portion of the effort as a comparison to the \u201cCurrent State\u201d is critical in not only analyzing future options, but also helps define what future options to consider. <\/li>
  3. Carefully Develop \u201cFuture Options\u201d \u2013 <\/strong>this is the exciting part that everyone wants to talk about well before it should be talked about!\u202f As eluded in the introduction of this blog, we described the various methods of distribution strategies, it is critical to define future options with many of these components in mind.\u202f For example, If BOPIS or Micro-Fulfillment (fulfilling items from an automated MHE order picking system located in the back of a store) are going to be implemented or considered, then the future options have to be defined not only in terms of number of distribution or fulfillment centers, but these alternative approaches to fulfilling orders.\u202f A percent of orders, workloads and inventory must be estimated for these alternative approaches to ensure that the future state modeling takes this into account.\u202f Transportation, Operating Expenses, Capital Investment, MHE Technology assessments for Automation, Robotics and other MHE elements, and Space Requirements for these alternative approaches to fulfilling orders, must be merged with the traditional distribution and fulfillment center components to fully analyze such a future option.\u202f What may look intuitively smart at the beginning, may not be after fully vetting and analyzing these future options with lots of different types of distribution within them. \u202fWe use the word \u201ccarefully\u201d in the title of this section because you must be careful to clearly define the options, be practical about what\u2019s really feasible to consider, and ensure that agility and resilience (yes, those words again!) can be used as variable inputs in any strategic option. <\/li>
  4. Interpret the Results Carefully \u2013\u202f <\/strong>There\u2019s that word \u201ccarefully\u201d again!\u202f Just looking at the Net Present Value of a future option\u2019s costs doesn\u2019t give you the strategic answer for your retail distribution strategy.\u202f Service Level details must be provided (i.e. what percent of orders reach their customer within 2 days, 3 days, 4 days, etc.) in any future option evaluation.\u202f Gone are the days when operating costs ruled and service levels just rode along in your network!\u202f Other qualitative factors such as labor requirements and availability, network risk, information technology implications, network complexity to manage, MHE automation complexity, economic incentives, and other factors have to be considered.\u202f A decision support scoring matrix must be constructed and weighted by all of these factors (including costs), to help identify a winning option. <\/li><\/ol>\n\n\n\n

    While there are other items that can go deeper into choosing a strategy, if you take the requisite time and effort to execute the constructs detailed above, you will find your way much better through the \u201cmurkiness\u201d of choosing a retail distribution strategy. <\/p>\n\n\n\n

    Contact a consultant<\/a> <\/strong>today to jumpstart your Retail Distribution Strategy!<\/p>\n","protected":false},"excerpt":{"rendered":"

    Omnichannel, Brick & Mortar Stores, Digital eCommerce, Distribution, Fulfillment, Dark Stores, Micro-Fulfillment, BOPIS (Buy Online, Pickup in Store), DriveUp, Delivery, Warehousing, Logistics, Supply Chain, Agility, Resilience\u2026\u2026.    The above are terms and buzzwords that fly around today\u2019s world of choosing a retail distribution strategy.\u202f Some of these processes and approaches are tried and proven, some were tested and […]<\/p>\n","protected":false},"featured_media":29573,"template":"","solution":[163,164],"media-type":[138],"industry":[41],"front-end-solution":[170],"class_list":["post-29570","resources","type-resources","status-publish","has-post-thumbnail","hentry","solution-warehouse-process-improvements","solution-warehouse-process-optimization","media-type-blog","industry-retail","front-end-solution-consulting","entry","has-media"],"acf":[],"_links":{"self":[{"href":"https:\/\/hy-tek.com\/wp-json\/wp\/v2\/resources\/29570","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/hy-tek.com\/wp-json\/wp\/v2\/resources"}],"about":[{"href":"https:\/\/hy-tek.com\/wp-json\/wp\/v2\/types\/resources"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/hy-tek.com\/wp-json\/wp\/v2\/media\/29573"}],"wp:attachment":[{"href":"https:\/\/hy-tek.com\/wp-json\/wp\/v2\/media?parent=29570"}],"wp:term":[{"taxonomy":"solution","embeddable":true,"href":"https:\/\/hy-tek.com\/wp-json\/wp\/v2\/solution?post=29570"},{"taxonomy":"media-type","embeddable":true,"href":"https:\/\/hy-tek.com\/wp-json\/wp\/v2\/media-type?post=29570"},{"taxonomy":"industry","embeddable":true,"href":"https:\/\/hy-tek.com\/wp-json\/wp\/v2\/industry?post=29570"},{"taxonomy":"front-end-solution","embeddable":true,"href":"https:\/\/hy-tek.com\/wp-json\/wp\/v2\/front-end-solution?post=29570"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}