Will You Need to Ship Same Day?

Amazon is renting locker storage in physical storage locations across the country and dramatically broadening its DC footprint so that it can launch a same-day delivery service. Wal-mart Stores and e-Bay are testing same day delivery in multiple locations. And now the cash-strapped USPS is turning to same-day delivery. So are you going to have to ship same-day?

If you’re a retailer that makes money on impulse purchases, most likely (or lose a chunk of your market share). So what about if you’re a manufacturer that supplies a retailer that does same day delivery? Probably not, but it’s quite likely that you are going to have to ship more often and deal with less lead-times.

If a retailer is shipping same day, it is going to need to not only be updating its inventory daily, but it’s inventory turn-over projections daily, and (re)ordering as soon as it detects that waiting longer will risk a stock-out given the minimum lead-time required by the manufacturer. At some point, it’s going to be ordering too often, shipment volumes are going to be too low, and it’s going to need to re-adjust it’s ordering strategy to keep costs down. So it’s going to adjust it’s algorithms to calculate with respect to a specific, regular, order day, and then realize it needs to order early. Then it’s going to realize that inventory levels for some items will need to be relatively high due to long lead times. And it’s going to ask you to reduce your minimum lead times and distribution efficiency so that it can optimize it’s re-order times and respond to unplanned demand surges in the supply chain.

Net effect: you’re probably not going to have to ship same day as a manufacturer, but you’re going to be asked to reduce your lead times and increase your distribution efficiency.

Anyone disagree?