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Evaluation of Order Fulfillment Options in Retail Supply Chains
Author(s) -
Ishfaq Rafay,
Raja Uzma
Publication year - 2018
Publication title -
decision sciences
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.238
H-Index - 108
eISSN - 1540-5915
pISSN - 0011-7315
DOI - 10.1111/deci.12277
Subject(s) - order fulfillment , order (exchange) , supply chain , business , leverage (statistics) , context (archaeology) , order processing , process (computing) , supply chain management , operational efficiency , computer science , risk analysis (engineering) , marketing , finance , paleontology , machine learning , biology , operating system
Retailers face a major operational challenge in fulfilling online orders while managing their traditional store‐based distribution processes. In this context, the following order fulfillment options available to retailers are considered: store‐facing distribution centers (DCs), dedicated order fulfillment facilities (DTC), retail stores, and direct‐fill by vendors. A framework for the online order fulfillment process is developed to evaluate these options using operational and financial measures collected from a large U.S. retailer. The study presents managerial insights regarding each fulfillment option and identifies operational and cost thresholds where a particular fulfillment option would be preferred. The results show that due to better order fulfillment efficiency, distribution facilities (DC and DTC) out‐perform fulfillment from stores and vendors. However, retailers can leverage their network of stores to overcome the shortfall in store‐based fulfillment costs by focusing on the order delivery process. The analysis presented in this article is useful for practice as it helps retailers identify options that best suit their order fulfillment strategy.