industries, it is not uncommon for a customer to order the same
product from more than one company, with the intention of keeping the first one delivered and returning any later arrivals.
Later cut-off times combined with same-day fulfillment can be a
differentiator that leads to larger orders. By extending its customer service cut-off times to 8 pm, the latest cut-off times in its industry, MSC Industrial Supply Company found that customers place
larger orders. Knowing that MSC also backs its next-day delivery
promise with a financial guarantee, provides its customers confidence that they can hold orders until late in the day and still get
next-day delivery. MSC’s service promise is unique in its industry
and has become a competitive advantage for the company.
Lower inventory costs. Companies benefit from lower inventory
costs when they allow stores to offer a broader inventory assortment without carrying as much safety stock.
Companies that consistently deliver on the promise of same-day
fulfillment can eliminate excess safety stock, which reduces capital
expense. A distribution network that can deliver any SKU any day
to the retail store frees its stores from the burden of keeping high
levels of inventory as a buffer against the slow replenishment of
out of stocks by the DC.
And if stores can rely on the DC to fulfill orders the same day,
eliminating safety stock and freeing up space in the stores — re-
tailers can potentially offer a broader array of SKUs in the same
retail space. Greater breadth of inventory without deep safety
stock requirements equals more sales opportunity.
Higher margins. Time-sensitivity can mean less price-sensitivity.
Simply put, when a customer is in a hurry and needs something
delivered the next day, they are less sensitive to cost. One industri-
al parts distributor earns better margins on unplanned purchases
(such as critical parts needed for repairs) than on planned purchas-
es (work gloves) because its fulfillment network supports same-
day fulfillment and next-day delivery.
Lower shipping costs. Less reliance on expedited shipping opens
the possibility of less expensive shipping options.
Distributors that fulfill orders quickly increase their transit time
window and can therefore use less expensive shipment options
to meet their committed delivery dates. In addition, when orders
can consistently be fulfilled same-day, it eliminates the need for
expedited shipping costs to meet service requirements.
Same-Day Fulfillment: Consider the Costs
While the benefits of enabling same-day fulfillment are sound,
companies need to consider the costs. For most companies, it
comes down to choosing an order cut-off-time that balances
potential revenue gain or service level improvement with incre-
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