Advanced Omni-Channel: Reducing a DC
Thursday, May 10, 2018

Categories: In-Store, Inventory

Advanced Omni-Channel: Reducing a DC

A significant advantage of omni-channel retail is the ability to leverage in-store inventory for order fulfillment. In fact, companies like McLendon, Princess Auto, and Defacto have already been applying strategies that balance out fulfillment from distribution center (DC) to store centric approaches.

Omni-channel retail lets retailers bring more inventory into the field. After all, that is where the customers are found. Ideally retailers want to place merchandise as close to the customer as possible. It gets their interest. It lets them buy without added shipping costs. It leads to more sales – both on intentional and impulse purchases. Bringing more inventory into the store takes some of the order fulfillment pressure off the warehouse. But can all retailers pull off reducing a DC?

DC Reduction Cons

A significant advantage of omnichannel retail is the opportunity to leverage in-store inventory for order fulfillment.

Distribution centers are very large warehouses. They have very efficient processes for picking, packing and shipping orders. To consider reducing a DC, you need to realize you give up some efficiency. This happens when shifting more fulfillment to a ship-from-store strategy. It takes you a step away from the automation and robotic efficiency of a factory. Also, as highly efficient centers, they are ideal for high volume order fulfillment capacity.

DC Reduction Pros

The trend of reducing the onus on DC’s is irrefutable. Costs associated with running a DC are enormous. The facility size, inventory volume stores, expensive specialized automation equipment, and non-customer facing personnel, all add up. DC’s are highly efficient but very costly to run.

Some argue that running a less efficient ship-from-store program kills any advantage that omni-channel might have. But, this does not consider the huge cost savings of consolidating a DC or two. Nor does it consider a mid-point option of the hub and the spoke advanced omni-channel model.


Retail Order Routing


Big Box Warehouses

For big box retailers like McLendon and Princess Auto, and large department stores like Kohl’s, Walmart, and Defacto, the store is the warehouse. Using the power of an advanced order management system, retailers can better use their in-store inventory. It reduce the complete dependence on a distant DC. It also keeps the inventory close to the customer, reduces costs of shipping (think proximity to the customer, again), and achieves both needs in one location.

DCs Are Important, But…

There is no doubt that DC’s are important. However, the trend is that more and more retailers are want to minimize this costly asset. Getting goods in field, and closer to the customer are important steps. It provides the option of consolidating one DC by doing the work in-store and balancing the load with the remaining DC’s. That is a major step forward for any retailer.

What do I Need to Get Started?

An advanced order management system keeps the inventory close to the customer, reduces costs of shipping, & achieves both needs in one location.

How do you get this benefit? How can you pull out the cost of a DC from your balance sheet? To get started you need a powerful advanced OMS to support your retail services.

Specifically, what you want is a specialized, best-of-breed, advanced and scalable solution. To put your mind at ease, you want a field tested system, built to handle high order volumes. Don’t be shy about asking your OMS vendor for their load test capacities. Remember, the least you need to ask for is the ability to handle your maximum order volume on key days like Black Friday, Boxing Day, Cyber Monday, Singles Day, Mothers day, and such.

Find key questions you can discuss with your order management vendor in “Will the REAL OMS Please Standup?” whitepaper. There is a helpful set of vendor questions at the end of the report, to start your conversation.



Charles Dimov - Director Marketing OrderDynamicsCharles Dimov is Vice President 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





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