Having logistics personnel work in stores is rare, but there are good arguments for this.
For many years when it comes to supply and demand, retailers have applied traditional approaches to improve customer service and cut costs. In a survey, last year 36 percent of respondents noted they were directly focused on supply chain cost control, while this year 42 percent said they were focused on balancing cost and service requirements, along with a heightened focus on store support. And the difference is not in cost containment but in innovation and value creation.
A potential customer who walks into a store and can’t find what they want may never return, whereas a satisfied customer may become a valuable advocate. Applying logistics best practices into the retail store environment helps to maximize the inventory on display. The in-store logistics professionals can contribute to re-engineer traditional retail supply chains to consumer-driven supply chain networks. Various methods can be proposed in order to improve the shelf-replenishment process and inventory accuracy, including redesign of packaging and the use of more effective planograms. Solutions that would also liberate sales staff from the back office, so they can spend more valuable time with customers.
Zara’s business model, for example, relies on experienced store employees. In keeping with the logistics excellence of the company, much of sales associates’ time is devoted to in-store logistics activities and specifically, delivery processing, backroom replenishment, display area management and physical audits.
At least twice a week, store receives deliveries from third party-logistics companies. Before the opening time, the managers and associates check the delivery for accuracy against the list provided by headquarters, and move the necessary items onto the selling floor. For the floor replenishment process, every hour, a women’s section and a men’s section sales associate gather sales data from the cashier and replenish accordingly from the backroom. While Inditex’s policy (the clothing company that manages Zara’ shops) is to have a big store and a small backroom, local constraints on store size or cost can make that difficult.
Some of the Zara’s specific practices may be directly applicable only in industries where products life cycles are very short. But Zara’s simple philosophy of reaping bottom-line profits through end-to-end control of the supply chain can be applied to any industry.
IKEA’s stores are also warehouses. On the first floor, the products selected by customers are picked off a floor pallet location racking as high as the typical person could reach. Additional product is stored in reserve racks above these locations. Inventory is let down to the lower slots at night (forklifts and pallet jacks are not used during store hours for safety reasons). About one third of the lower level is comprised of a warehouse off limits to customers. This space contains items too bulky for customers to load without help. Since IKEA wants as much self service as possible, it works to minimize the number of items in this bulk storage area.
IKEA employs logistics personnel at its stores. There is an in-store logistics manager responsible for the ordering process and a store goods manager responsible for material handling logistics. The in-store logistics manager uses a proprietary system developed by IKEA to set and respond to store-level inventory reorder points (min and max settings), which is also fairly unique.
Most retailers forecast at the distribution center (DC) level and inventory replenishment logic (e.g., minimum order quantity before reordering, maximum amount of a particular product to reorder at any one time) also resides at the DC level. By hiring talented people in their stores, IKEA is showing that logistics is not just managing activities within the four walls of the distribution center.