Designing a network to support an omni-channel fulfillment strategy case study

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Courtesy of LLamasoft, Inc.

Challenge
With significant growth expected in the coming years from online channels, a large department store chain wanted to design an effective fulfillment network for this burgeoning market. The plan was to develop a roadmap for the next decade to support online growth, increased SKU count, and higher consumer service expectations. The roadmap would include determining the optimal number, location and size for fulfillment centers as well as best way to flow merchandise through the network to customers.

Solution
Utilizing network optimization and greenfield analysis, the company built a plan for the next decade to expand capacity by establishing new facilities and incrementally increasing existing capacity as needed. The analysis considered costs and service times of parcel standard service, next day service and second day service. Because the company intended to execute immediately based on results, over 100 different scenarios were run with varying service requirements and fulfilment center locations and the details critically evaluated for the best fit solution.

The project also analyzed potential regional store fulfillment options which would enhance store fulfillment efficiencies.

Results
The result of the initiative was an actionable roadmap for the next decade outlining when and to what capacity to build each distribution center. The plan leveraged retail stores to meet peak season demand and as a method of satisfying local market demands where fulfillment center delivery time and/or total network costs may exceed local fulfillment costs.

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