Imagine customers walking into their favorite retail store, scanning product barcodes with a mobile app, instantly comparing prices across platforms, placing orders with one click, and receiving their purchases the next day—all without waiting in checkout lines. This has become the new retail normal. The convergence of mobile technology, wireless networks, and e-commerce has created unprecedented shopping experiences while presenting monumental challenges for traditional retail supply chains.
The Omnichannel Imperative
In today's omnichannel retail environment, consumers expect to purchase goods anytime, anywhere, through any medium. Albert Avalos, Global Vice President at Fortna, observes: "Consumers want to order anything from anywhere. If the experience falls short, they immediately voice their dissatisfaction through social networks."
Bob Silverman, Senior Vice President of Supply Chain and Logistics Solutions at Jones Lang LaSalle, notes: "As e-commerce accounts for an increasing share of total shipments, its operational design becomes more critical. More facilities will support multi-channel operations with separate picking processes replenished from unified inventory."
Kevin Hume of Tompkins International has witnessed this transformation firsthand: "There was a time when people predicted the death of physical stores. Now we have technology enabling stores to fulfill e-commerce orders." By transforming stores into nationwide mini-fulfillment centers, retailers can support next-day delivery more cost-effectively.
Strategic Crossroads: In-House or Outsourced?
For traditional distribution centers serving only physical stores, integrating e-commerce operations presents significant challenges. Some businesses may require external support.
Silverman suggests the outsourcing decision depends on order volume: "At lower volumes, maintaining internal operations makes sense—unified inventory reduces costs." However, as order volumes grow, third-party logistics (3PL) providers become more attractive.
"E-commerce picking differs dramatically. Systems designed for large store replenishment prove inefficient for online orders. Specialized 3PLs typically possess the material handling equipment, systems, and expertise to process e-commerce orders more efficiently than most clients," Silverman explains.
As throughput increases, the costs of split inventory allocation to 3PLs may necessitate operational redesign with multiple picking options to optimize both store and online fulfillment. At higher volumes, single facilities may become unwieldy. "Independent facilities with location optimized for different channel logistics may become necessary," Silverman adds.
Picking Strategies: Efficiency in Execution
For most omnichannel distribution centers, picking presents the primary challenge. Many traditional operations struggle with diverse order profiles varying in unit and line item quantities. "Picking labor typically represents the largest warehouse cost center. Inefficient picking systems dramatically impact operational expenses," Silverman cautions.
Traditional store replenishment often follows a "pull" model based on point-of-sale data. Avalos explains: "This typically involves picking to carts or voice/light-directed totes, which are then consolidated and packed for store shipments." Conversely, retail distribution for new store openings or promotions typically follows a "push" model using "sort-to-store" or "pick-and-pack" approaches.
E-commerce orders differ fundamentally. Hume notes: "Online orders average 1.2 line items, with 30% to 60% being single-line orders." These typically employ cart-based zone picking or batch picking methods. Single-line or single-unit orders often process through dedicated high-speed packing operations for efficiency.
Store Fulfillment: The Emerging Frontier
Fulfilling e-commerce orders from physical stores represents an increasingly attractive strategy for many retailers. The rationale is simple: processing and shipping from locations nearest to customers offers the most cost-effective path to next-day delivery.
"Most major retailers we work with will fulfill from stores during peak seasons," Hume states. Implementation varies by retailer. Some designate high-inventory "key stores" for specific high-volume SKUs, essentially creating forward-deployed fulfillment systems with complete warehouse management capabilities.
Store fulfillment approaches may range from low-tech operations handling 10-15 daily orders to large stores functioning as mini-fulfillment centers processing hundreds of orders. Avalos cautions about challenges: "Deploying warehouse and transportation management systems in stores may encounter licensing issues. Some locations lack adequate space or labor, while real-time inventory visibility remains essential."
System Selection: Optimizing the Technology Stack
For omnichannel retailers, success hinges on warehouse management systems (WMS) and supporting technologies. Inventory management systems providing supply chain-wide visibility can prevent lost sales—equipping staff with mobile devices to locate out-of-stock items elsewhere. Some stores feature self-service kiosks for inventory checks and home delivery purchases.
Distributed Order Management (DOM) systems form another critical component, enabling retailers to apply rulesets determining the most cost-effective fulfillment locations while meeting service commitments. "DOM can route orders to distribution centers, e-commerce fulfillment centers, or individual stores," Hume explains.
However, DOM configuration grows complex when inventory is scarce and shared across channels. Avalos notes the challenges: "Who gets priority? How is inventory allocated per channel? Should orders route to stores, distribution centers, or split across multiple facilities?"
Within WMS, picking and wave logic must accommodate both large retail orders and smaller e-commerce batches. Avalos emphasizes: "This extends beyond standard pick/pack/ship logic to include zone batch picking, multi-order picking, pick-and-pass, prioritization, and multi-carton handling."
Advanced packing logic incorporating accurate weight and dimensions can minimize carton usage and shipping costs. Transportation management systems must handle service/cost tradeoffs beyond simple residential/commercial distinctions. Real-time data exchange between WMS and digital platforms becomes mandatory rather than optional. "In omnichannel systems, real-time status updates are crucial," Avalos stresses.
In integrated omnichannel facilities, warehouse control systems (WCS) may now oversee broader material handling operations. "WMS/WCS integration grows more important," Silverman observes. "With tight windows between order release and shipping deadlines, precisely tracking order location—especially on conveyors—becomes essential."
Avalos adds: "When WMS lacks required complexity, WCS often fills the gap." Some distribution centers use WMS for store orders while WCS handles e-commerce fulfillment requiring specialized processes. "This isn't always ideal, but often represents the pragmatic solution."
While next-day delivery currently dominates discussions, industry attention is shifting toward same-day service. Hume concludes: "Achieving same-day delivery requires geographic proximity to customers plus robust systems coordinating all fulfillment points—including store-based shipping—to identify the most cost-effective locations meeting service levels."