Document Type

Research Paper

Publication Date

Summer 6-23-2023

Abstract

Buy-Online-Pickup-In-Store (BOPIS), also known as Click-and-Collect, are services where customers place their orders online and then travel to pick up their requested items at a pre-determined local location. This provides convenience to shoppers and eliminates the retailer’s last-mile delivery costs associated with home delivery. Yet, such omnichannel services shift the responsibility for the order fulfillment process to the retailer, whereas with in-store shoppers, the order fulfillment task is completed by shoppers themselves. Further, because of customers’ short response time expectations, it is typically infeasible for a retailer to conduct this order fulfillment process for click-and-collect orders at distribution centers located far from customers. This has led companies to deploy different distribution strategies to support such omnichannel services, yet many are struggling to find a cost-effective solution. This research quantifies and explores why omnichannel supply chains are expensive. We adopt the Distribution Center Reference Model (DCRM) to systematically identify differences in the type of processes between the in-store customer model and the micro-fulfillment model for click-and-collect online customers. To quantify the material handling cost of fulfilling a customer’s request, we build analytical models that capture the interactions among different DCRM process steps and the different supporting supply chain facilities. Using benchmark data collected from operating warehouses to estimate the average cost per process activity, we quantify where the material handling costs vary for in-store versus click-and-collect customers. We observe that click-and-collect online orders are much more costly than supporting in-store shoppers: even without last-mile transportation costs, the average per unit cost of fulfilling a clock-and-collect request, rather than having shoppers shop, is 0.52 euros more per unit. Thus, from a material handling perspective, retailers should let shoppers shop. Then we analyze the benefit of replacing a company’s central distribution center with a crossdock and decentralizing the storage function, in addition to the fulfillment function, and discuss in what scenarios this could be a useful strategy.

Publication Title

Progress in Material Handling Research

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