The analysis of Holiday 2013 online order timing and delivery capacity is not yet complete, but the discussions about customer expectations for speed of delivery for Holiday 2014 have already begun.
This is interesting, since it is not clear that folks are correctly thinking about "speed." A common definition of speed includes velocity—the rate at which something travels, as in miles per hour. To evaluate this definition of speed, it is important to understand both the distance traveled and the velocity of travel. So, in order to increase the speed of delivery, one must either travel less far at the same velocity or travel the same distance at a higher velocity.
For 2014, it is not realistic to expect many online orders to travel at a higher velocity, but it is very realistic for us to expect that the distances traveled to be less. The reason we are going to see the distances traveled to be less for Holiday 2014 is because there will be more facilities where fulfillment will be done. I like to think of a distribution/fulfillment network where five levels of facilities work together to provide the right inventory closer to the customer's delivery promise.
• Level 1: National Distribution/Fulfillment Centers -- Where all inventory will be stored and distributed to local stores and regional distribution centers and fulfilled to local customers and regional fulfillment centers.
• Level 2: Regional Distribution/Fulfillment Centers -- Where most inventory will be stored and distributed to local stores and local distribution centers and fulfilled to local customers and local fulfillment centers.
• Level 3: Local Distribution/Fulfillment Centers -- Where some limited inventory will be stored and distributed to local stores and fulfilled to local customers and Level 4 and 5 fulfillment centers.
• Level 4: Lights Out Stores -- Where customers can collect their online orders and for fulfillment to local customers.
• Level 5: Retail Stores -- Where customers can collect their online orders and for fulfillment to local customers.
By properly planning the distribution/fulfillment network with the proper mix of all five levels of facilities, the distance traveled for fulfillment will be substantially reduced. This reduction in distance traveled will have a major impact on the transportation requirements for final delivery of online orders. In addition, a successful distribution/fulfillment network paves the way for a successful operational strategy and capabilities, which in turn ensures the fulfillment of the customer's delivery promise and creates an advantage against competitors.
The need for nationwide parcel delivery of online orders will be significantly reduced, and the need for regional and local parcel delivery for online orders will be significantly increased. The reduction in the distance traveled for final delivery by properly designing the distribution/fulfillment network will result not in the increased speed (as in velocity) of delivery, but rather speed of delivery as in the quickness of delivery.
Jim Tompkins is CEO of Tompkins International. He has written or contributed to more than 30 books, hosts the Global Supply Chain Podcast series, and writes the Supply Chain Excellence blog. Follow him on Twitter @jimtompkins or connect on LinkedIn. For more information, visit www.tompkinsinc.com or https://tompkinsventures.com/.
This is interesting, since it is not clear that folks are correctly thinking about "speed." A common definition of speed includes velocity—the rate at which something travels, as in miles per hour. To evaluate this definition of speed, it is important to understand both the distance traveled and the velocity of travel. So, in order to increase the speed of delivery, one must either travel less far at the same velocity or travel the same distance at a higher velocity.
For 2014, it is not realistic to expect many online orders to travel at a higher velocity, but it is very realistic for us to expect that the distances traveled to be less. The reason we are going to see the distances traveled to be less for Holiday 2014 is because there will be more facilities where fulfillment will be done. I like to think of a distribution/fulfillment network where five levels of facilities work together to provide the right inventory closer to the customer's delivery promise.
• Level 1: National Distribution/Fulfillment Centers -- Where all inventory will be stored and distributed to local stores and regional distribution centers and fulfilled to local customers and regional fulfillment centers.
• Level 2: Regional Distribution/Fulfillment Centers -- Where most inventory will be stored and distributed to local stores and local distribution centers and fulfilled to local customers and local fulfillment centers.
• Level 3: Local Distribution/Fulfillment Centers -- Where some limited inventory will be stored and distributed to local stores and fulfilled to local customers and Level 4 and 5 fulfillment centers.
• Level 4: Lights Out Stores -- Where customers can collect their online orders and for fulfillment to local customers.
• Level 5: Retail Stores -- Where customers can collect their online orders and for fulfillment to local customers.
By properly planning the distribution/fulfillment network with the proper mix of all five levels of facilities, the distance traveled for fulfillment will be substantially reduced. This reduction in distance traveled will have a major impact on the transportation requirements for final delivery of online orders. In addition, a successful distribution/fulfillment network paves the way for a successful operational strategy and capabilities, which in turn ensures the fulfillment of the customer's delivery promise and creates an advantage against competitors.
The need for nationwide parcel delivery of online orders will be significantly reduced, and the need for regional and local parcel delivery for online orders will be significantly increased. The reduction in the distance traveled for final delivery by properly designing the distribution/fulfillment network will result not in the increased speed (as in velocity) of delivery, but rather speed of delivery as in the quickness of delivery.
Jim Tompkins is CEO of Tompkins International. He has written or contributed to more than 30 books, hosts the Global Supply Chain Podcast series, and writes the Supply Chain Excellence blog. Follow him on Twitter @jimtompkins or connect on LinkedIn. For more information, visit www.tompkinsinc.com or https://tompkinsventures.com/.
