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11/18/2021

Exclusive Q&A: Dark stores are one element of rapid delivery strategy

Dan Berthiaume
Senior Editor, Technology
Dan Berthiaume profile picture
Nitin D'Souza
Nitin D’Souza, supply chain and transformation lead at Publicis Sapient

Retailers need to take a multi-pronged approach to ensuring they can quickly fulfill customer demand.

Chain Store Age recently spoke with Nitin D’Souza, supply chain and transformation lead at digital consulting firm Publicis Sapient, about the need to provide customers with fast, frictionless access to desired products. D’Souza discussed the hot topic of dark stores, as well as other solutions and strategies that enable timely movement of products through the supply chain.

How can dark stores help retailers rapidly get products to customers?
Quick commerce companies have set the bar high for rapid delivery. We’re seeing quick commerce companies pick, pack, ship, and deliver in as little as eight minutes. Manual dark stores are used because they are the easiest to set up, do not require a large space, and can be ready in as little as two weeks.

However, manual dark stores are just the first step. As volumes, density, and basket sizes increase, automation and robotization of warehouses are used to drive speed and efficiencies.

[Read more: Three Elements of Future Stores: Customer Experience, Self-Service, Dark Store]

Beyond dark stores, how can retailers optimize inventory placement and availability for rapid fulfillment?
Rapid delivery models are evolving every day. We have seen models that range from only the transport of goods to those that have their own stock. Retailers using rapid delivery services, with 10-minute or same-hour delivery times, have the complexity of managing stocks for their walk-in customers, click-and-collect customers, and home delivery. 

This creates a huge challenge in keeping the optimal stock. Some categories have presentation stock in-store that works as a safety stock. However, for other categories where such buffers do not exist, inventory needs to be dynamically allocated to different delivery channels based on historical demand at a point in the day, using data on items from search, browse, cartfootfall and heat maps, and in-store sales.

For next-day delivery or same-day (within four hours) delivery, large customer fulfillment centers are used as the source warehouse and then smaller cross docks are used to drive speed. For online grocery specificallymany retailers use in-store picking and back-of-store picking.

The use of order management – solutions that consolidate, split orders, and translate the order to be sent to a warehouse and then to the picking / drop off location – allow for the basket to be filled from the site where it can be filled in full and in time. Order management solutions could also be used for same-hour delivery, depending on how close the picking locations are.

What advantages does real-time inventory visibility provide rapid fulfillment benefits?
Retailers focus on the perfect order metric, which means that all items ordered are delivered without substitutions or missing items. There is a strong correlation between perfect order, customer satisfaction, and loyalty. Real-time inventory visibility during the consumer purchase journey, alongside the use of an availability to promise engine – a system that calculates if the item that was available a second ago is available now, given that many people may be buying at the same moment – with sub-second response times enables companies to allow customers to purchase the items that are available.

More importantly, real-time inventory visibility then allows the companies to set up the picking of the item and fulfill it rapidly, knowing that it is actually on the shelf. Lack of real-time visibility creates issues in order promise, over ordering/under ordering, creates additional costs in substitution, returns of substituted items, and refunds.

What other strategies would you recommend?
One recommended strategy is using clickstream, cart, and basket data to predict inventory requirements so that retailers can have the optimal inventory to enable rapid fulfillment. In addition, alternate engines (algorithms) can be used to recommend alternatives to the customer if a certain item is not availableThe same alternate engines could be used to substitute items that are not on the shelf during picking. Another recommended strategy is the use of real-time availability to promise engines that can provide only the items that are available.

Due to the real-time nature of data flows, there are many instances when there is a mismatch in timings of inventory updates, which presents a false view of the physical inventory levels at the store or warehouse. We’re seeing many retailers use inventory reconciliation engines to capture real-time inventory snapshots across commerce solution, available to promise solution, order management solution, and/or warehouse management solution, so they can identify key gaps in inventory information flows.