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McKinsey Report Reimagines the Role of Stores in Parcel Shipping and Distribution

A recent report from McKinsey & Company examines the current role of physical stores in omnichannel distribution and reimagines all they could be. Among the many interesting analyses, McKinsey talks at length about using stores as a hub for last-mile delivery, including:

“Target last-mile delivery speed: Maximum delivery speed depends on the proximity of stores to consumers and the availability of last-mile delivery infrastructure. Consumer expectations of delivery speed may vary by location, which will affect the optimal archetype of any store. In rural areas, for example, consumers may be more accustomed to waiting longer for deliveries and traveling to one central location to fulfill all their shopping needs. In this case, the ideal scenario may be an archetype 2 store in a shopping center with good traffic connections. This location creates a convenient and stress-free journey for consumers who want to shop in store while allowing the retailer to optimize parts of the store layout for order picking. In urban areas, where shoppers may expect delivery in less than 24 hours, it can be beneficial to choose an archetype 3 store optimized for fast order picking and dispatching. Understanding where speed matters will pave the way for a segmented approach regarding delivery-speed promises and solves the speed dilemma of ever-faster omnichannel order fulfillment.

Players can ask themselves the following questions about consumer journey and experience:

  • How can we keep omnichannel processes from disrupting the shopping experience for consumers in the store? Can it be done within the existing layout, or does there need to be a degree of physical separation?
  • What are the priorities of our online and offline consumers? Are they contradictory, or can we cater to both at the same time? How can we make the in-store experience feel like a continuation of online or mobile, and vice versa?
  • What are consumer expectations regarding last-mile delivery speed? Do they expect to receive their products immediately, or might they accept delivery times of more than a day? What role does delivery pricing play here, such as price differentiation between next-day and same-day delivery?”

We encourage you to read the full report to understand the store archetypes mentioned and learn more about the pros and cons of leaning on a retail footprint to improve last mile delivery and enable omnichannel fulfillment for customers. While concerns about the impact on in-store shoppers exist, the ability of retail stores to improve the e-commerce fulfillment process is undeniable. For the purposes of this blog post, let’s consider some of the other points and questions raised in the McKinsey report about last-mile delivery infrastructure and balancing results with consumer expectations.

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As the leading provider of cloud multi-carrier parcel shipping software for high-volume parcel shipping, Logistyx is keenly focused on last-mile delivery and omnichannel fulfillment. While there are myriad keys to success for both, putting the last mile first may be the most important. In an article for Supply & Demand Chain Executive, Logistyx President Ken Fleming argued shippers can reduce costs and meet customer expectations by making a few strategic decisions that keep the last mile first:

1. Utilize a cloud multicarrier network for parcel shipping

A cloud multi-carrier parcel shipping system seamlessly integrates with a retailer’s WMS, OMS, e-commerce, and ERP solutions to automate high volume, multi-carrier, omnichannel parcel shipping. Regardless of which delivery option a customer chooses, the system automatically selects the right carrier service for each order according to parcel origin, parcel destination, carrier contracts, and business rules; and creates or acquires the tracking, labels, and documents. Therefore, retailers can satisfy customers’ delivery requirements and drive down the cost of shipping while transforming logistics into a profit center within the business.

2. Reconsider inventory and fulfillment capabilities

Regional and national retailers with physical stores keep inventory on hand, often relying on warehouses to refill inventory at stores. For them, shipping from the store directly to a customer decreases the distance and, thus, shipping time and expense. They can also employ buy-online-pickup-in-store (BOPIS) or buy-online-pickup-curbside (BOPC) models, increasing fulfillment flexibility and reducing dependence on carrier services. But they must have a local carrier network for each retail location, increasingly including gig economy fulfillment carriers to meet fulfillment schedules. They must also determine which products need to be on hand at all locations versus which can be housed at specific locations and know which manufacturing location has the capacity to produce each item and quickly restock the relevant stores’ inventory directly.

3. Trust business intelligence and data

Sophisticated business intelligence technology can aggregate, normalize, and analyze all the data generated by a fulfillment operation, helping retailers identify opportunities to gain efficiencies in the fulfillment process. For example, in certain instances, ground shipping often reaches many destinations as quickly as two-day but for significantly less. Insights like this can pay dividends by meeting customer expectations for fast shipping while keeping costs low. Shippers can also use the data to verify carriers meet contracted service levels for each shipment, increasing leverage in rate negotiations and to determine which carriers are best suited for which deliveries based on performance metrics and existing business rules.

Logistyx TME can help retailers learn where they’re spending the most money in the transportation leg of fulfillment and whether it would be cheaper to transport from the store or from a pop-up distribution center. It can automatically select the best carrier and service for each shipment based on contracted rates and other business rules. It can easily integrate with other key retail systems to create a comprehensive fulfillment solution.

In short, Logistyx can help answer the questions raised by McKinsey and Company regarding last-mile delivery as part of omni-channel fulfillment.

Contact Logistyx today to better understand how stores can best support your last-mile delivery initiatives.