Omni-channel’s Impact on Logistics
Sears plays it cool
While major Big Box retailers have struggled to keep pace with
consumer-driven demands for instant gratification, Sears Holdings
has come up with new innovations to anticipate and serve shoppers
with a new one-day ground delivery service supported by a dynamic
BY PATRICK BURNSON, EXECUTIVE EDITOR
or generations of Americans, Sears has been an
iconic symbol of product reliability and customer
service. But huge disruptive forces in information
technology and buying habits have put the retailer
back on its heels over the last few years. Faced with
unforeseen challenges posed by online shopping and sameday delivery demands, Sears needed a makeover—and it
needed it fast.
According to analysts at The Stevenson Company, a market research firm that’s been following the retailer, Sears
Holdings had lost considerable market share of home appliance sales—a key part of its business model—to Lowe’s and
Home Depot, while watching its total revenue continue to
Sears Holdings is a retailer with approximately 1,980 fullline and specialty retail stores in the U.S. operating through
Kmart and Sears and 449 full-line and specialty retail stores
in Canada operating through Sears Canada, Inc., a 51 percent owned subsidiary. But the value of this massive brickand-mortar network has been brought into question by even
the most bullish of business leaders.
More importantly, however, executive leadership within
the Sears Holdings family itself became urgently aware that
change management was not a choice, but an imperative.
Having clearly recognized the significant shifts on the
retail landscape, Sears set to work last year in launching
an omni-channel fulfillment strategy designed to stem the
bleeding and rebuild its storied brand.
This initiative comprises a new, one-day ground delivery
service called “Sears cheetah” and “Kmart cheetah” that
works in conjunction with “roadrunner,” the store-facing
DC network that can expand dynamically to keep pace with
local customer demand and support on-line customer fulfillment. The move, says analysts, puts Sears in a position to
keep pace with new customer expectations.
L OG I ST I CS M AN AG EM EN T | FEBRUARY 2015
Recognizing nascent trends
Investment analysts agree that omni-channel retailing may
play a significant role in reviving profitability for Sears as it
begins to shrink its store base while boosting sales online
and through its shopper-loyalty program. Sears’ executives
say it may also raise money by selling and leasing back as
many as 300 stores.
“Managing retail today is fundamentally different than
it was just three years ago,” observes Bill Hutchison, chief
supply chain officer and senior vice president for Sears
Holdings, noting that self-contained markets are confronted
with competition from unexpected players.
Supply chain visibility, mobile solutions, Big Data, and
predictive analytics make up what Hutchison describes as
“nascent considerations” these days. “It’s an omni-channel
world after all,” he says, observing that half of all Sears purchases have been influenced online.
Hutchison came to Sears Holdings just last April, having served as vice president of global fulfillment and logistics for Dell, Inc. He spent seven years with the computer
maker in logistics roles of increasing responsibility. Today,
he’s responsible for all aspects of Sears Holdings’ supply
chain, including distribution, transportation, customs compliance, and global sourcing.
“The great majority of our customers shop online before
coming into our stores,” Hutchison says. “The same number,
80 percent, rely on their social networks when researching
new products, and 70 percent use their smartphones for
shopping in the store. Another ‘nascent’ trend is that most
shoppers would prefer to use their phones rather than simply asking a store employee for information.”
And who can blame them? After all, shoppers literally have
the entire mall in their hands, says Hutchinson. They now
use finger or keystrokes rather than footsteps and get better
product information on demand through social networking.
Bill Hutchison (R), chief
supply chain officer and
senior vice president and
Jeff Starecheski, vice
president, logistics services,
PETER WYNN THOMPSON/GETTY IMAGES
Furthermore, this represents a storefront multiplier for Sears.
“Shoppers pick a store based on
experience, price, services, assortment, and location,” says Hutchinson.
“The ‘final mile’ of delivery is key.”
Playing to its strengths
Sears Holdings’ launch of its omni-channel fulfillment strategy was designed
around the customer. Market research
indicated that today’s shoppers want fulfillment on their terms, so it was imperative for Sears to be more agile.
“When we first recognized this challenge, we only had two DCs near Chicago to meet these new customer experience expectations,” says Hutchinson.
“That’s when we decided to open up
our entire network of stores and to
unlock the supply chain for shipping
any available product.”
Hutchinson admits that the “Amazon Factor” represented a force that
unleashed this strategy. “E-tail competitors have a low barrier to entry,
and can move very quickly to reset
customer expectations and fulfillment
requirements.” However, he adds that
traditional retailers have a natural
advantage with the proximity of their
store base if they’re utilized as another
node in the supply chain.
With this infrastructure in place,
Sears countered by installing a paperless picking system in all its stores and
worked with UPS to systemically select
optimal store fulfillment locations. If one
Sears store did not have a specific product for immediate delivery, the system
can now pull from another store’s inventory to ensure consistent service. “All of
this had to be done so that it was invisible to the customer. It had to appear
seamless and simple,” says Hutchinson.
Of course, it was anything but simple. “One of the big hurdles we faced
was getting our people across all disciplines trained and measured by a new
set of weekly metrics,” says Hutchinson. “This brought into play a whole
dimension of accountability.”
“A robust change management was
instituted for our roadrunner DCs as
well,” says Jeff Starecheski, vice president of logistics services for Sears.
Starecheski has been with Sears since
1997, and has climbed the career ladder to manage a diverse range of duties
in that time. Today, he is responsible
for supply chain strategy, business
integration, planning, solutions mar-
keting, and reverse logistics.
So far, says Starecheski, his team has
been able to support dynamic growth,
with minimal capital investment.
“Given the urgency of addressing fulfillment concerns, we put roadrunner high
on our radar screen. If the customer
wanted it shipped that day, or would
prefer to pick it up in one of our parking
lots, the service had to be flawless.”
The trial by fire, say both executives,
came this past holiday season when
Sears satisfied shoppers on both ends
of the supply chain loop. According to
StellaService, a company that measures
and rates customer service performance
for online retailers in a process audited
by auditing firm KPMG, Sears was able
to offer a Monday, pre-Christmas order
cutoff for online purchases. “It’s all
about leverage,” says Starecheski. “With
our dominant position in appliances
and other ‘white goods’ delivery, we can
utilize our 106 cross-docking facilities
to move any Sears product on demand.”
Sears Holdings’ omni-channel network also flexed up by 60 percent and
improved velocity for the holiday peak by
adding store nodes across the country.
FEBRUARY 2015 | LOG I ST I C S M ANAG EM ENT
EXCLUSIVE: Omni-Channel Distribution
“We can now ramp that up or down
depending on the seasonal volume,”
explains Hutchinson. “Our technology-based platform drives optimization
the way store associates pick, pack,
and ship products. Our standardization drives productivity.”
To that end, Sears Holdings implemented a “pilot, test, and learn” mission across its entire network. Today,
stores can be added dynamically, as
seasonal needs intensify from Black
Friday to Cyber Monday through the
Christmas season. Furthermore, the
retailer can add proximity to further
reduce cycle time for delivery.
“As we designed the network, we
found a tipping point to balance with
store-facing DCs that we can turn on
during this program,” says Hutchison.
“This gives us coverage that is appropriate relative to the customer mix across
He also notes that 90 percent of global
trade still goes through some type of traditional retail outlet. For Sears Holdings,
the key is “to lean into and embrace that
footprint,” thereby enabling tailored
solutions to meet customer needs.
None of this would be possible, says
Starecheski, without the complete
buy-in of Sears Holdings personnel at
every level. Omni-channel fulfillment,
he says, involves everyone across the
“One of the critical factors is the
establishment of cross-functional
teams with the appropriate levels of
incentive and accountability, leveraging not just supply chain team, but the
store operations team, on-line business
unit, as well resources in marketing,
merchandising and IT.”
This is especially true when it comes
to implementing the Cheetah network,
which can service 81 percent of the
U.S. population with 1-day ground service. It’s composed of dedicated store
teams working with full-store assortments and scheduled UPS pick-ups.
“With the alignment of responsibilities comes the alignment of incentives,”
says Starecheski. “If one Cheetah store
can’t measure up to our shared mission, we can easily find another store
that can. Our focus to drive accurate
promises to our customers should be
Keeping faith with Sears and
Kmart shoppers has led Starecheski
to coin the acronym “COOL” for Customer Order Orchestration Layer.
He says it will be essential for omnichannel fulfillment in the future.
“With ‘COOL,’ we can manage fulfillment promises at the customer level and
optimize the fulfillment location of every
order for speed or cost, whether from a
store of a DC,” says Starecheski. “We can
save every sale…and prevent customers
from abandoning the cart or going to a
competitor’s site. Ultimately we’re reducing the chain safety stock and improving
product availability for our customers.”
Customer expectations are evolving
to reflect the 24/7 digital world, adds
Starecheski. He says that this requires
what he refers to as an “always on network” that will enable Sears to ship every
day of the week, mirroring shoppers buying routines. “We are not there yet,” he
says, “but our goal is to have friction-free
transactions that engage shoppers.”
Patrick Burnson is Executive Editor of
Sears’ “Cheetah Network”
• Full store
Sears can service 81% of the population within 1-day ground transit
• Full in-store
L OG I ST I CS M AN AG EM EN T | FEBRUARY 2015
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