Ship From Store: Meet Delivery Speed Expectations while Managing Cost

In 2023, Amazon delivered more than 4 billion packages either same-day or next day. During that same time, Walmart delivered 4.4 billion packages same-day or next day, with 20% of those packages delivered in less than three hours.

As Amazon and Walmart continue to push the bounds of delivery speed, many companies are left wondering how to best position their delivery options to meet consumer expectations.

In this article, we'll examine how traditional fulfillment center placement strategies and modern ship-from-store methods impact both delivery speed and cost. By combining modern and traditional approaches, your company can enhance delivery speeds while lowering capital investment. 

Consumers expect 3 day delivery or less

Before considering strategies to compete with the market leaders, companies need to understand customer expectations on delivery speed. Pitney’s “2024 consumer’s definition of fast shipping” provides critical insights into how customers think about delivery speeds across different product types. 

The study showed that outside of grocery, consumers' definition of “fast shipping” across product families has stabilized at ~3.1 days. 

In order to meet these evolving customer expectations, enterprises need to think creatively about both the current supply chain and existing asset capabilities. 

Maximizing reach with fulfillment center placement:

A traditional approach to improving delivery speed would focus directly on fulfillment center locations and shipping times. For example, UPS’ ground map shows three well-placed fulfillment centers in San Francisco, Dallas, and Newark, which enable two-day shipping coverage of the lower 48 states. With same-day pick-and-pack, next-day pick-up, and UPS ground shipment, your package easily lands on the customer's doorstep within three days. 

Amazon and Walmart are both successfully employing fulfillment center optimization strategies. In April 2023, Amazon announced a pivot from a national operation model to a regional model that features eight zones operating largely independently. Their fulfillment center placement strategy enables Amazon to deliver nearly 60% of Prime member orders the same day or next day.

 
Similarly, Walmart is in the process of opening up five next generation fulfillment centers that can provide 75% of the U.S. population with next- or two-day shipping on millions of items. Combined with their traditional Fulfillment Centers, Walmart plans to be able to provide 95% of the U.S. population with next- or two-day shipping, and 80% of the U.S. population with same-day delivery options. 

Ship from store, how Target tackled the fulfillment challenge:

Unfortunately, companies with capital constraints and existing distribution networks need to balance the implications of network expansion and the impact multiple facilities have on inventory levels and operational complexities. In these cases, companies can look to Target’s recent stores-as-hubs initiative for strategic alternatives on how to meet delivery speed expectations by leveraging their existing storefront network. 

In 2017, Target announced a three-year growth initiative. As part of that initiative, Target enabled ship-from-store to utilize excess capacity in low- and medium-volume stores. Gretchen McCarthy, Executive Vice President and Chief Supply Chain and Logistics, cites two key enablers to Target’s ship-from-store program: 

• Dedicated backroom space to create mini fulfillment centers. There are dedicated stations where team members are able to take the handoff from a picker, pack the product, create a label, and set it aside for delivery (sortation, shipping, or direct to the guest). These mini fulfillment centers are particularly valuable in low traffic stores to take advantage of the excess capacity and increase the aggregate product volume
• Strategic inventory management software to create one inventory for in-store and digital sales. A single universal inventory simplifies the fulfillment models for both digital and in-store orders

While Target’s mini fulfillment centers may be less efficient than automated warehouses, when considering the total economics of store-to-customer delivery, the store as hub cost savings are significant. According to John Mulligan, Executive Vice President and Chief Operating Officer, “When [Target] ships from a store, from our perspective, it's 40% cheaper than shipping from a fulfillment center that is much further away.”

Blending modern and traditional approaches to optimize operations

Before committing to a single shipping strategy, it’s important to recognize no single solution addresses all challenges. For example, while Target has invested heavily in ship-from-store capabilities, it has also expanded sortation centers, which retrieve packages from a range of 30 to 40 local stores. By batching and routing orders from local stores, Target improves final mile delivery density, helping lower costs and creating supply chain efficiencies while increasing delivery speeds. 

Similarly, while Walmart has committed significant resources to next-generation fulfillment centers, it is also developing ship-from-store alternatives with their Market Fulfillment Centers (MFC) and parcel station integration. A Market Fulfillment Center is a small, automated warehouse attached to a traditional Walmart store that houses thousands of frequently purchased SKUs. By combining multiple strategies, companies can optimize their delivery strategy to play to their key competitive strengths. 

Getting Started

A low-risk test, learn, and iterate environment is a key enabler for your team to explore new forward dispatch strategies. Delivery Solutions has a suite of products that can enable customers to quickly and easily explore forward dispatch configurations. We’ll explore two scenarios companies using their stores as fulfillment centers are likely to encounter:

• Same-Day Delivery
• Single Store

Getting Started with Same-Day Delivery

Companies are likely to start their journey with a single store leveraging existing “gig” providers such as Door Dash or Uber. After inputting the store location to the Delivery Solutions platform, a user can set specific rules associated with their store location and how they want to engage with these delivery service providers. For example, rules can be based on:

• Geography— End consumers location must be within a defined boundary (e.g. 20 miles)
• Product attributes— Size, weight, or handling requirements (e.g. cold chain)
• Protection rules— Signature or product insurance required due to delivery location
• Dispatching— Defining "Immediate", "Manual", or "Scheduled" pick up times

To get started, Delivery Solutions provides options to use a pre-defined list of same-day delivery service providers with pre-negotiated rates. Companies can use the pre-populated service provider list to easily test both same-day providers and their business rule configurations.

(The Delivery Solutions expanded coverage offers an ever-growing network to allow merchants the flexibility to select or introduce new carriers)

(Guide orders through stages, allowing for a cost and time comparison among providers in our interactive tour, creating orchestration rules)

Forward Orchestration with a Single Store

As your company gains comfort with the ship-from-store idea, two areas are critical to solidify before investing in inventory management integration and store expansion: fulfillment processes and multi-shipping service optimization.

The fulfillment process focuses on integrating pick and pack into store associate’s day-to-day SOPs. To start, these processes can simply be added as part of the associate’s store closing procedures. As the ship-from-store volume increases, the pick-and-pack responsibilities need to be assigned to dedicated associates or clearly allocated across restocking and floor support. 

To quantify the delivery speed and financial impacts of your fulfill-from-store strategy, it’s important to spend time monitoring and optimizing the base business rules to align with your business’ delivery goals. The optimization effort can take a variety of paths. 

Below is a potential outline companies can use to think through their single-store optimization strategy:

• Explore relationships between geographic boundaries, speed, and cost of delivery with multiple delivery service providers
• Incorporate ship-from-store to balance the more costly same-day service 
  Enter into direct discussions with delivery service providers and carriers to understand volume discount opportunities
• Explore the full business rule set based on expected delivery time, cost, carrier preference, and service preference

Once comfortable with the orchestration rules associated with a ship-from-store strategy, your company can consider expanding to multiple locations and integrating these store fulfillment rules with your inventory management system. Store expansion and inventory management integration both require dedicated leadership support so it’s important to spend time optimizing a single location to clearly demonstrate the benefits of the program. 

Leveraging technology and assets creatively will help meet delivery expectations while managing costs:

Consumers will continue to expect faster delivery speeds with lower costs. To meet these expectations, companies need to rethink how to leverage existing assets to improve delivery speed while managing their cost structure. Target and Walmart are breaking new ground with their fulfill-from-store strategies and demonstrating innovative ways companies can rethink how existing assets can support new delivery strategies.  

Leveraging Delivery Solutions technology, your company can quickly explore different strategies to determine what is right for your business. Take a look at the demo center for more examples or feel free to reach out today!