As e-commerce titans like Amazon continue to re-shape the retail landscape, traditional brick-and-mortar retailers turn to omnichannel strategies to find a competitive advantage and increase operational efficiency. This includes running e-commerce fulfillment and retail replenishment from the same facility and leveraging stores for near-immediate fulfillment. As this line between physical retail and digital commerce continues to blur, delivering a convenient, consistent and compelling customer experience across all channels becomes paramount.
This final segment of our three-part blog series on zone skipping looks at its impact on omnichannel retail. For a refresher, check out part one on the basics of zone skipping and part two for tips to ensure a proper implementation.
It's an omnichannel world
Competition in modern retail means meeting consumer preferences to research, buy and receive merchandise in the manner of their choosing, whether in store or via direct delivery. These choices have serious consequences for logistics operations, challenging retailers to make the most efficient use of existing inventory and delivery capacity.
From brick-and-mortar to shared quarters
Consolidating supply chain operations to run retail replenishment and e-commerce fulfillment from the same facility is a proven solution to root out redundancy and reduce supply chain costs. And while this approach does present challenges to make the most of warehouse space, increase throughput volume and handle greater complexity, it also provides opportunities to find extra value from retail delivery routes.
Enter zone skipping
Retailers already have trucks running regular deliveries to replenish inventory at brick-and-mortar retail locations. They also have e-commerce orders destined for the same regions. Zone skipping in these omnichannel operations involves sorting e-commerce orders according to region and loading them into gaylords, accompanying existing retail deliveries headed for the same area. This allows retailers to take advantage of latent delivery capacity and avoid redundant shipping costs.
Retail replenishment trucks can deliver pre-sorted e-commerce orders to regional carrier facilities located near the final destination. This reduces the sorting and shipping done by parcel carriers and improves delivery time by getting items as close to the final delivery location as quickly as possible.
Zone skipping can save up to 75 percent per parcel by reducing reliance on parcel carriers for both sortation and transportation. These savings are more crucial than ever, as operations face dimensional weight pricing (DIM) and other pricing pressures from parcel carriers. Assuming a conservative savings estimate of $0.20 per item in shipping costs, multiplied by 200,000 to 500,000 orders per week, operations can generate $40,000 to $100,000 in weekly savings from zone skipping.
In addition to improving profitability, these reduced shipping costs are passed on to consumers, providing a real competitive advantage and potential sales boost. According to the 2016 UPS Pulse of the Online Shopper study, of the more than 90 percent of buyers who reported abandoning shopping carts, at least half cited unexpectedly high shipping costs as the reason for doing so.
This concludes our blog series on zone skipping. For further information on the advantages of zone skipping and how it can benefit your operation, read the Honeywell Intelligrated white paper, Zone skipping strategies to reduce e-commerce shipping costs or contact us.