Getting fulfillment right is much more mission-critical in a multichannel setting compared to a traditional brick and mortar setting
Despite the promise of strategic partnerships, many organizations fail to leverage them optimally. In one example, a U.S. specialty retailer was overly focused on using the vendor-direct-ship channel to generate profitable sales for glassware products while minimizing the cost of holding inventory in its own network. In pursuit of low-cost supplier-direct shipping, the retailer failed to take into account the more holistic nature of related demand. Indeed, a significant portion of sales was represented by wedding orders with a high basket affinity (such as glassware with accompanying china or utensil sets since customers tended to order these products together). While relying on supplier-direct shipping, the retailer was forced to fulfill a portion of orders through its internal network. Splitting the order doubled the outbound shipping cost and forced customers to wait for separate deliveries. Furthermore, the majority of orders were non-seasonal, so the retailer would have been able to amortize its owned network’s fixed costs better by just using its internal system. In short, the retailer left significant value on the table by failing to understand the complete demand picture.
Reprint from Ivey Business Journal
Reprint from Ivey Business Journal
[© Reprinted and used by permission of the Ivey Business School]