Designing an eCommerce fulfillment operation

Challenge

A major apparel and general merchandise retailer planned an initial launch of a new eCommerce selling channel, but believed that its distribution network which had been designed and optimized for its bricks & mortar store network was not suited to deliver the cost and service performance demanded by the online customer. Hence, this project focused on designing and establishing a dedicated facility for the retailer’s new eCommerce business.

Approach

• Facility Location: Prior work by the client established the general region for the center, but additional modeling work was required to pin-point the best location and real estate solution considering local transport, labor and infrastructure conditions.
• Operating model analysis: In a planning environment characterized by high-uncertainty about the customer adoption rate and the merchandise rollout schedules, a scenario-based approach was taken and high-focus was put on the flexibility of the physical design to accommodate a range of potential outcomes and management decisions about growth and merchandise to promote via the online channel.
• Recommendations and acceptance: Working with both operating, merchandising, financial, and senior management client personnel, the design and implementation plan was approved.

Results

• The eCommerce fulfillment center was launched on schedule and on-budget.
• Over the first year, the operating performance exceeded expectations and built-in options to expand the facility’s capacity were put into action and this expansion was successfully implemented.