Advanced Omni-Channel: Hub and Spoke
Tuesday, April 10, 2018

Advanced Omni-Channel: Hub and Spoke

Ok, you have your omni-channel retail systems running. As a matter of fact, you have full and detailed inventory visibility online, right down to the store and shelf level. Your pickup in-store is driving store traffic by the minute. Furthermore, ship-from-store is up and running. Your work is done, right? Yes … … … maybe. These are the basics, and it is great that you have them working. In fact, if you have them all aligned, you are ahead of the pack. But, you now need to think about more advanced omni-channel options – to make your retail business truly effective. For example, have you started thinking about an advanced hub and spoke model for your operation?

We cannot just hope that omni-channel will miraculously save retail. It is about setting the right strategy.

Omni-Channel Alone Is Not A Panacea

Some recent opinions claim that omni-channel is not the panacea the industry originally thought. It is not the cure-all that will fix all ailments. In fact, some retailers are finding omni-channel to be a difficult strategy to get right.

Remember the phrase “hope is not a strategy”? We cannot just hope that omni-channel will miraculously save retail. It is about setting the right strategy, then evolving to figure out what works well.

Does Ship-From-Store Work at All?

One complaint about omni-channel retail is that trying to do ship-from-store can be difficult. We already know it can be is less efficient than fulfilling orders from a factory-like distribution center (DC). Therefore, how could omni-channel possibly be profitable?

 

Retail Order Consolidation Brief

 

Full-Force or Half Hearted?

First of all doing a half hearted job of anything, can make even the easiest path to success, arduous. Proof points are the many retailers testing smaller footprint stores, and the popup store model. These are brilliant and can save considerable costs. This while expanding the brand and store presence. However, trying to force-fit a ship-from-store model over this can certainly lead to disasterous consequences. Small format stores are just not all conducive to a ship-from-store strategy. That’s where order consolidation and hub and spoke omni-channel becomes a saving grace.

Hub and Spoke Omni-Channel

Omnichannel Retail Hub and Spoke model with shopping bags

The hub and spoke model in omni-channel means smaller format and popup stores are feeder locations to hub stores. A larger store has the space to designate pick-pack and hold zones. There is more inventory available to customers, and for order fulfillment purposes. However, if some inventory is missing, you want the option to consolidate all the items on an order into one box, and one shipment. This means bringing in merchandise from other locations. It may take a bit longer to get the order fulfilled, but most shoppers will appreciate receiving their entire order in one package. Using this smart strategy leverages both your large and small stores, and gives the customer what they really want – their full request at once. Best of all less waste, and fewer last-mile shipping charges.

Intelligent Hub Store Operations

Leveraging a hub and spoke retailing model means using store resources intelligently. Run ship-from-store from those locations that have the room to do it well. Hub stores also mean the retailer can have specialized staff at each location who are good at picking and packing. Certainly, it is not as efficient as the work done in a modern DC with robotic picking. But, a hub and spoke model that lets your chain put more merchandise in the field, close to customers, can make an impact on your top and bottom line.

Order Consolidations

When setting up this model, think about order management technology that gives you advanced capabilities like order consolidation. You may not want to use this for all scenarios, but it is a great feature to switch on and off as the need arises. Using hub and spoke retailing in this manner lets you maximize your inventory outlay to customers, which is still be best option for driving sales.

Key Learnings

Hub and spoke means more of your inventory is visible to customers, while staying available for all order fulfillments

As you develop or evolve your omni-channel strategies, you need to consider advanced omni-channel methods. To improve your overall efficiency in omni-channel, consider using a hub and spoke model for ship-from-store capabilities. It increases your overall efficiency, while reducing last mile shipping costs, and improving customer satisfaction. That means you deliver on the brand promise, improving customer loyalty, and helping maintain gross margins, at the same time.

Realize that light order management systems do not have order consolidation capabilities. Ask your order management provider about this new technology. All in all, it can make a dramatic impact on your bottom line, and opens the door to more to omni-channel strategies that will help your operation stay ahead of your competitors.

Author:

Charles Dimov - Director Marketing OrderDynamicsCharles Dimov is Director of Marketing at OrderDynamics. Charles has 21+ years experience in Marketing, Sales and Management across various IT and Technology businesses. Previous roles include Chief of Staff, Director Product Marketing, and Director Sales. Charles has held roles in brand name firms like IBM, Ericsson, HP, ADP, and OrderDynamics

 

 

 

Related:

Advanced Order Management, What is it Truly?

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