Susan Lacefield has been working for supply chain publications since 1999. Before joining DC VELOCITY, she was an associate editor for Supply Chain Management Review and wrote for Logistics Management magazine. She holds a master's degree in English.
The well-known supply chain consultant Jim Tompkins has an analogy for the typical retail store backroom. These backrooms, he says, look like many people's garages, serving as an unorganized storage space, with items and boxes stuffed and precariously stacked in every odd corner.
However, as more and more retailers experiment with fulfilling online orders from their brick-and-mortar stores, backrooms can no longer function this way. In a recent white paper, "Retail Backrooms: A Revolution in Roles and Business Value," Tompkins' consulting company, Tompkins International, argues that the backroom must evolve into a place for picking, packing, and possibly shipping orders. But accomplishing that will require greater organization, more attention to processes, and possibly automation.
In short, backrooms will need to look less like a hoarder's garage and more like a mini-distribution center. As these storerooms start to undergo this transformation, retailers will have to ask themselves the following key questions.
1. WHO OWNS THE BACKROOM?
For a long time, the backroom has been the province of store operations or merchandising; logistics and warehousing folk typically had no visibility into what was taking place inside it. But as the backroom's role expands to include more order fulfillment responsibilities, companies should re-evaluate whether that old organization model still makes sense.
"What do merchants do well? Merchants understand the customer and how to sell product," says Tompkins. "What does the supply chain do well? Supply chains understand efficiency, product flow, and having reliable information. If the backroom needs to focus on the efficiency of product flow, then it makes sense for the supply chain to own it."
Indeed, some leading players are already moving in this direction. Last year, for example, Wal-Mart Stores Inc. shifted reporting responsibility of its 3,288 U.S. "supercenter" backrooms to its logistics division. Those backrooms had previously reported to store management.
2. WHERE SHOULD PICKING TAKE PLACE?
Currently, a little more than a third of companies are fulfilling e-commerce orders from the store, according to a survey conducted by DC Velocity in conjunction with ARC Advisory Group (see "Study: To excel at omnichannel distribution, you need the right stuff," November 2014). Chances are, the numbers will only increase. But where exactly in the store should order picking take place?
Tompkins argues that online customer-direct orders should be fulfilled from the backroom, not from the store floor. That's partly because store floor inventory information is often inaccurate, he says. But it's also because he believes picking from the backroom leads to a more efficient picking/packing process since companies can set up packing workstations in their stockrooms that are dedicated to customer-direct orders.
Luther Webb sees it differently, however. Webb, who is director of operations and solutions consulting for the systems integrator Intelligrated, believes that picking should take place on the floor. "I don't think we'll see backrooms keeping inventory because the whole premise of fulfilling online orders from the stores is taking advantage of inventory the stores already have," he says. "To be honest, most retail stores don't have much of a backroom, because with the just-in-time push that occurred during the recent history of the supply chain, the backroom got very small."
Instead, Webb sees backrooms focusing on steps that come later in the process, such as packing and shipping.
3. HOW ARE YOU GOING TO MANAGE INVENTORY?
When it comes to keeping close tabs on inventory, retail stores still have a long way to go, according to Kim Baudry, market development director for Dematic, a supplier of automated material handling and logistics systems. Most stores don't know where a product is in the store or backroom, or exactly how much they have in stock, she says. That can create difficulties when they go to fill online orders.
In most of these cases, the solution lies in software, says Baudry. "It's similar to what we tell our distribution center customers," she says. "You have to have that basic foundation in place, which in the case of a DC is a WMS [warehouse management system] or inventory control system, so that you know what you've received, where you've put it, when you've picked it, and where you are shipping it to. It's the same thing for the backroom."
The Tompkins report recommends using a location-based inventory management solution for the backroom, coupled with a distributed order management (DOM) solution. DOM software helps companies manage, monitor, and optimize orders across all of their sales channels. It provides a real-time view of inventory and order status, and can help companies decide which store or distribution center to ship the order from.
Intelligrated's Webb agrees that retailers will need two types of solutions, although his recommendations vary somewhat from Tompkins'. First, Webb says, they'll need an enterprise solution that can "look" across the network and determine where to locate inventory based on both financials and customer service considerations. Second, they'll need a DOM solution to help with fulfillment decisions for individual orders.
4. DO YOU NEED MORE TECHNOLOGY?
Right now, the most sophisticated piece of material handling equipment in most backrooms is a hand truck or a shopping cart that's used to move merchandise around, according to Tompkins. However, as stores take on a larger order fulfillment role, they might benefit from incorporating some of the same kinds of technology and equipment typically found in warehouses and DCs, he says.
For example, according to DC Velocity's recent omnichannel distribution study, 71 percent of companies that fill orders from their stores are using a paper-based method to select items. While this may work initially, paper-based selection will not be sustainable as store-based e-fulfillment activity ramps up. Eventually, experts say, retailers will likely have to upgrade to voice or radio-frequency identification technology to direct picking activities.
As volumes swell and stores take on increasingly complicated fulfillment tasks, Webb predicts that some retailers will install small-item sorters in the backroom. If the rooms are large enough, some might even install vertical lift modules or horizontal or vertical carousels to store items being collected for an order or outbound cartons awaiting pickup by a parcel carrier.
Taking this a step further, Webb foresees a day when the customers themselves will interact with this sort of automation in an ATM-like experience. For example, say a customer has purchased something online for in-store pickup. Upon arrival at the store, the customer would swipe his or her card, and the carousel would spin around and present the customer with the item.
Actually, that day may be closer than you think. Baudry reports that Dematic has some grocery industry customers in Europe that have installed fully automated storage and retrieval systems in their stores that allow consumers to come in and collect orders placed online.
5. HOW WILL THESE CHANGES AFFECT THE DC?
As more companies look to increase the efficiency of store employees, Baudry believes the trend toward store-based order fulfillment will only accelerate. And there's no doubt that changes at the store will affect operations further back in the supply chain, like those taking place at the warehouse and distribution center. For DC operations, one of the likely consequences will be a push toward smaller but more frequent shipments to the store.
CHASING THE OMNICHANNEL PROMISE
While the use of stores as fulfillment nodes may be gaining popularity, the trend is still in its nascent stages. According to Tompkins, only a small percentage of retailers are actively using their storeroom as an asset; most haven't even started to think about it.
Indeed, omnichannel retailing is so new that retailers are navigating essentially uncharted waters. No one has figured out a single right way to address the challenge of omnichannel fulfillment or can offer basic guidelines for success. Retailers have been left to answer these questions alone on a case-by-case basis.
"I don't think there have been any best practices established yet," Baudry says. "Instead, as the front end of the business is recognizing the importance of omnichannel, the supply chain is just trying to catch up."
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
Serious inland flooding and widespread power outages are likely to sweep across Florida and other Southeast states in coming days with the arrival of Hurricane Helene, which is now predicted to make landfall Thursday evening along Florida’s northwest coast as a major hurricane, according to the National Oceanic and Atmospheric Administration (NOAA).
While the most catastrophic landfall impact is expected in the sparsely-population Big Bend area of Florida, it’s not only sea-front cities that are at risk. Since Helene is an “unusually large storm,” its flooding, rainfall, and high winds won’t be limited only to the Gulf Coast, but are expected to travel hundreds of miles inland, the weather service said. Heavy rainfall is expected to begin in the region even before the storm comes ashore, and the wet conditions will continue to move northward into the southern Appalachians region through Friday, dumping storm total rainfall amounts of up to 18 inches. Specifically, the major flood risk includes the urban areas around Tallahassee, metro Atlanta, and western North Carolina.
In addition to its human toll, the storm could exert serious business impacts, according to the supply chain mapping and monitoring firm Resilinc. Those will be largely triggered by significant flooding, which could halt oil operations, force mandatory evacuations, restrict ports, and disrupt air traffic.
While the storm’s track is currently forecast to miss the critical ports of Miami and New Orleans, it could still hurt operations throughout the Southeast agricultural belt, which produces products like soybeans, cotton, peanuts, corn, and tobacco, according to Everstream Analytics.
That widespread footprint could also hinder supply chain and logistics flows along stretches of interstate highways I-10 and I-75 and on regional rail lines operated by Norfolk Southern and CSX. And Hurricane Helene could also likely impact business operations by unleashing power outages, deep flooding, and wind damage in northern Florida portions of Georgia, Everstream Analytics said.
Before the storm had even touched Florida soil, recovery efforts were already being launched by humanitarian aid group the American Logistics Aid Network (ALAN). In a statement on Wednesday, the group said it is urging residents in the storm's path across the Southeast to heed evacuation notices and safety advisories, and reminding members of the logistics community that their post-storm help could be needed soon. The group will continue to update its Disaster Micro-Site with Hurricane Helene resources and with requests for donated logistics assistance, most of which will start arriving within 24 to 72 hours after the storm’s initial landfall, ALAN said.