Ecommerce fulfillment flexibility drives growth for national pet retailer

Step by step

Just before COVID-19, the retailer engaged NTT DATA to evaluate the configuration of its distribution center-to-store network. The store delivery study analyzed the assignment, location, mission and size of the distribution centers (DCs). It identified several near-term and long-term opportunities including changing store delivery modes in some markets, altering store location assignments in others, right-sizing several existing distribution centers and changing the mission of a distribution center in northeastern Texas.

As a byproduct of the store delivery analysis, the client could determine the landed cost-to-serve of each of its 1,000-plus stores across the United States. In the following ecommerce study, this knowledge aided in isolating the costs of meeting ecommerce demand from stores vs. distribution centers. The team then went further, developing an awareness of daily demand variability and the mix of ecommerce, omni and ecommerce and omni orders. With this understanding, the team figured out how to represent time and demand in the planning models, leading to increased confidence in the model’s recommendations, as demand and fulfillment capacity were now represented in common units of time.

Next, NTT DATA and the client carried out an omnichannel study. A subset of distribution centers stocked omnichannel and ecommerce SKUs, but not all stores fulfilled omnichannel orders. The client wanted to understand if the right DCs were performing ecommerce fulfillment and if the right stores were performing ship-from-store fulfillment. The analysis helped the client rationalize the configurations of the ship-from-store network — such as balancing flows between stores and distribution centers — and building greater ‌confidence in both the network planning process and the structure of the actual physical network.

Improving the network with precisely located micro fulfillment centers

Next, an additional examination of micro fulfillment centers (MFCs) examined the potential advantages of adding more MFCs to the distribution network. In support of the MFC study, the team sought to comprehend how lucrative each ecommerce market within the United States was, and the benefits of establishing an MFC based on observed ecommerce demand density and the capacity of existing fulfillment nodes. The understanding focused network modeling efforts on the most attractive opportunities.

The study identified potential opportunities for adding freestanding MFCs or embedding them within existing distribution centers. The additional potential capacity either improved delivery service levels, reduced cost or some combination of the two. Remaining markets continue to leverage a mix of store ecommerce fulfillment capabilities and DC ecommerce fulfillment.