Solutions for logistics issues such as picking, packing and delivering product will play a major role in home-shopping services' ability to achieve dramatic success and profitability.
With home shopping currently accounting for less than 5% of shopping volume, sources told SN it is crucial to keep costs low while adding customers in order to fuel long-term success.
Dedicated fulfillment centers with well-organized selections enhance efficiency. For those retailers and third-party companies that pick product from store shelves, sequencing orders by aisles helps, as do wearable scanning devices that reduce mispicks and increase accuracy.
Peapod, Evanston, Ill., for example, is testing a customized wearable scanning device to facilitate pick-and-pack operations and reduce handling costs at Jewel Food Stores, Melrose Park, Ill., a subsidiary of American Stores Co., Salt Lake City.
The unit will be used nationwide next year, said John Furton, senior vice president at Peapod, which also operates home-shopping programs with the Columbus, Ohio, division of Kroger Co., Cincinnati; Randalls Food Markets, Houston; Safeway, Pleasanton, Calif.; and Stop & Shop Cos., Quincy, Mass., among others.
Special features of the device include its ability to transmit customer comments and product substitution information to pickers. The unit is connected directly with Peapod's on-line service at www.peapod.com.
One logistics issue that adds cost to the supply chain is mispicks.
"If someone wants a 20-ounce bottle of Ragu spaghetti sauce, a personal shopper might pick up a 16-ounce bottle of Ragu or a 20-ounce bottle of Prego by mistake," said Mike Gardner, in-house home-delivery consultant to Bashas' Markets, Chandler, Ariz. "Then we have customer dissatisfaction and have to redeliver it."
Gardner said he is exploring scanners that check the item picked against the item ordered to prevent this problem.
Another logistics issue is picking in a store vs. investing in a dedicated fulfillment center. Both Hannaford and Streamline, Westwood, Mass., a consumer-direct marketer, began with in-store picking, but moved to fulfillment centers as their home-shopping volume increased.
Tom Furber; vice president at Hannaford, said the retailer learned very early on in its pilot the problems associated with in-store picking, which it did for four months in 1996 when Hannaford began offering home shopping. Today, the retailer's home-shopping orders are picked at a 55,000-square-foot fulfillment center in Auburndale, Mass.
"In our warehouse, products are not organized like a store," Furber said. "They are organized for efficiency, which means accuracy and speed of selection." He added that employees use wearable scanners to facilitate picking.
Dave Blakelock, vice president of operations for Streamline, said the company picks more than 500 orders per week at its 56,000-square-foot fulfillment center in Westwood.
"We are not merchandising product, so we're never going through and trying to face forward the product," Blakelock said. "We're just cutting a case open and sticking it on a shelf or in a floor device, which allows people to pick four orders at once."
When Streamline picked out of a store during its initial tests a couple of years ago, pickers "would go to the shelf and think they were grabbing cream of mushroom soup, but actually grabbed cream of broccoli soup. The cans looked alike, or maybe one was hidden behind another."
Peapod primarily picks orders in designated stores of its retail partners, which are chains in major metropolitan areas. However, Peapod is in the process of moving to dedicated fulfillment facilities in most of its markets, Furton said. Stop & Shop, a Peapod retail partner, added a fulfillment center to an existing store in July.
Many retailers use third-party providers to pick and/or deliver orders.
Schnuck Markets, St. Louis, uses St. Louis Grocery Express, St. Louis, to pick and deliver orders. Bob Drury, vice president of management information systems at Schnuck, said the retailer has procedures in place to improve the third-party company's ability to pick groceries.
"When we take an Internet order, we automatically sequence the picking slip so that it takes the picker through the store in the optimal fashion," Drury said. For example, items in aisle one are followed by those in aisle two and so on.
Quality Food Centers, Bellevue, Wash., is working with Shoppers Express, Chicago, a third-party company that provides telemarketing, ordering and processing, as well as delivery. QFC associates pick orders at nine of its 68 stores.
Consumers have a choice of more than 30,000 items and place 200-plus orders a week, according to Dana Hylton, general manager, Seattle market for Shoppers Express.
When a consumer places an order, the Shoppers Express order system separates out items such as dry goods, perishables by dairy or meat, and frozens, and then sequences the products by aisle for the picker. Using this method, a 100-item order can be picked from the store shelves in 20 to 25 minutes or less, according to Hylton.
Once the order is picked, Shoppers Express is notified and drivers are dispatched for pick up and delivery. Shoppers Express stays in communication with its seven drivers in this market area via pagers, and is exploring other communication systems, such as radios and cellular phones.
Hannaford uses radios in its 30 vans and continues to refine communication methods. Peapod uses satellite guidance systems in its delivery vans to guide the drivers.
Bashas' said that while its delivery is handled by Shoppers Express, the retailer makes sure the eight stores that serve as fulfillment centers are in locations that lessen drive time and increase delivery efficiency. Gardner noted the locations also have easy freeway access.
"It can be as hot as 115 degrees" in Arizona, said Gardner. "We want to make sure meat gets to customers cold and ice cream gets to them frozen."
Streamline's Blakelock noted that the company's ability to track orders from the fulfillment center to consumers' front door adds efficiency to its delivery model.
"The bins are all bar-coded, so we scan the products into the bin, then we scan the bins onto the truck and then we scan the bins into the home," Blakelock explained.