Retail supply chain for Store of Tomorrow

In the fifth of our articles on the Store of Tomorrow, we explore how this model allows retailers to optimize the retail supply chain for resilience and responsibility, as well as cost and service, at the local level. And how it can also radically improve channel productivity and profitability.

A Store of Tomorrow model that leverages modern cloud technologies, improved data analytics, and artificial intelligence and machine learning can enable greater automation and transform operational efficiency.

By integrating offline and online channels once and for all, retailers can develop a portfolio of stores and fulfillment services that are not only radically more efficient, but also far more attuned with the needs and expectations of shoppers in each local market.

With supply chains now a key differentiator and revenue driver for retailers, an integrated model with a shift from a global to a local view ultimately drives more value for customers—and profitability for the business.

But what does that look like? Here are three considerations:

A crucial point about the Store of Tomorrow is that both traditional stores and dark/grey stores become key nodes in the wider fulfillment network. It’s how a retailer can provide shopping experiences that go beyond just in-store purchase—BOPIS (buy online pickup in store), pickup lockers, home delivery from the store, and so on.

A retailer therefore needs to think holistically. That means having a clear strategy for using stores to drive up both the efficiency and the responsiveness of the entire network, whether by rationalizing sites or supporting local fulfillment via same-day/next-day last mile delivery.

Where it gets really interesting is if you combine this kind of fulfillment network analysis with a shape-of-chain analysis across the store estate. This combination can be a powerful way of transforming physical storefronts into strategic nodes for omnichannel fulfillment, faster deliveries, reverse logistics, higher efficiency, and more.

Once the store becomes a node within the fulfilment network, the demands placed on it are very different to those in the traditional retail setup.

Clearly, physical store layouts have to be fundamentally rethought. How much of the footprint should be customer-facing? How much given over to the dark store? Which stores could even become 100% dark stores?

There are also implications for people, processes and technology. The retail workforce is critical to the Store of Tomorrow. But the skills needed to run the dark store are not the same as those needed front of house. New workforce management capabilities may also be required.

Additionally, operational processes and warehouse management systems may need to be refreshed with effective integration of hyper-efficient automation (such as via mobile robots, updated goods-to-person solutions, and overall product flow). And there is appetite for these from retail executives—in a recent Accenture survey, retail leaders said they were considering different areas of in-store automation:

When stores are operating as nodes in the fulfilment network, inventory visibility and placement is both more critical and more complex. The flow of orders through the OMS, inventory placement analytics, and smart predictive demand analytics at a really local level—all of these become important capabilities.

Linked to this is the ability to perform picking and transportation cost simulations. The retailer needs to be able to understand how to optimize the cost to serve in this new network. This then opens up opportunities for individual customer personalization, such as offering faster fulfilment for higher-value customers.

To deliver better, more integrated shopping experiences that meet all customer journey requirements, retailers need to optimize their supply chains and fulfilment services—and drive profitability. Welcome to the Store of Tomorrow. Read full report.

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