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OM in the News: Retailers Scramble to Ship From Stores As Web Sales Soar

December 9, 2016


A Black Friday shopper at Toys R Us in Fairfax,VA

A Black Friday shopper at Toys ‘R’ Us in Fairfax, VA

I was meandering the aisles of our local Toys ‘R’ Us store yesterday, and I noticed that not only were the shelves full, but the aisles were stacked with toys as well. Why? It turns out they are trying to avoid a repeat of last Xmas, when online promotions fueled a surge of web orders twice the company’s forecast and beyond what its e-commerce fulfillment centers could handle. Afraid that items wouldn’t arrive by Xmas, management halted some online deals to deter shoppers—a drastic measure during that peak sales period.

To address the issue this year, the company has prepared nearly its entire chain of 870 stores to help ship web orders during the holidays, reports The Wall Street Journal (Dec. 1, 2016). It started cramming its stores with as many goods as possible weeks earlier than last year, and is offering bonuses and better wages to recruit seasonal warehouse workers. Larger items also were shipped to stores earlier to free up its supply chain so it has maximum flexibility during peak times. The $11.8 billion company says it has built in capacity to ship twice as many units from its stores this holiday season, while transporting nearly 25% more from fulfillment centers.

Two decades after was founded, traditional retailers are still struggling to manage hundreds of brick-and-mortar stores, while trying to maximize online sales. The difficulty is amplified during the holidays because online sales spike to 4 times normal volume at peak times.

Across the industry, traditional retailers are taking similar steps. Kohl’s is raising wages and offering bonuses to ensure fulfillment-center employees stick around. Target has more than doubled the number of stores shipping online orders this year to 1,000. Target said enlisting its brick-and-mortar footprint allows inventory in stores to be used for web orders, freeing up online distribution centers to focus on shipping products that stores don’t carry.

Classroom discussion questions:

  1. What OM issues are being addressed by Toys ‘R’ Us and others this season?
  2. How does Amazon differ from traditional stores with regard to distribution?
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