Flow Thru Distribution Process| Standard Retail Outbound Needs | Approach to D365 for Commerce with Adv WH Mgmt

Hi Guys, Hope you have read my previous post where we discussed about the Store and Shipping staging locations. In this blog, we are going to discuss about a very unique Retail Warehousing concept called flow through distribution or case flow through.

As you can see on the process flowchart here, cartons that come in for seasonal starts will go through this process and come straight from the receiving dock over to the store staging area.

Let us go ahead and dig into the details here.

The Seasonal Nature of Retail

As we have seen in my earlier post about Seasonality, we have learned that Retail is a seasonal business. Regardless of whether you’re in apparel or you’re in crafts, there’s different seasons that come and go throughout the year.

Some of these are calendar based, some of them are just merchandising based. But they’re seasons that you have to contend with. And what a store looks like today, six to nine weeks later it can look very different because the product that’s in that store will be changed out at the start of a new season.

And then we also talked about how the seasonal changes create this cycle inside of the Retail Warehouse to support the stores where you’ll see a very large push at the beginning of a season that will get all this new merchandise into the stores, and then once it starts selling, the stores will start placing orders for replenishments to restock the things that they’ve sold so that they can keep selling more. How the warehouse works in these two different stages of the retail cycle can be quite different. The concept of retail flow-thru, however, is really aimed at working or supporting these seasonal starts. So let us look at where exactly the flow-thru distribution concept came from and why it’s so valuable to brick-and-mortar retailers.

Store Orders at the Start of the Season

At the start of a season, a store needs to get a little bit of every single SKU that’s going to be offered during that season. And if you look across stores, you see that pretty much every store is going to need to get the same SKUs and quantities as every other store.

Prior to 1995, the process for getting the stores this merchandise involved the warehouse receiving a bunch of solid SKU cases, and those cases were received, put away, replenished, and then picked. And the pickers inside of the Retail Warehouse would put the various styles, sizes, and colors into the boxes going to the store.

And every store pretty much got the exact same type of shipment. There might have been some variations based on the store size, but more or less there weren’t that many different variations for what they got at the start of the season. But as the West started pushing more manufacturing off to Asia, this changed the game somewhat and opened up a new opportunity for sending product into the stores at the start of a season.

Introducing the Prepack

It didn’t take very long once the West started moving manufacturing offshore for the finance people in these companies to start seeing the benefits from the lower labor costs in Asia. And I suspect someplace somewhere some finance person said, you know, we’re getting all these benefits from reducing the costs of labor from manufacturing, what can be done for distribution? And when you start looking at these seasonal starts, it seems like a fairly straightforward question to ask. We know in advance what needs to go into these boxes. Who should put them in this box? Does it make sense really to send these boxes, say, Columbus, Ohio, and pay somebody $13 an hour to build the boxes or put the stuff in the box, or should we really be doing it back there where it’s manufactured in India, where we only have to pay somebody a dollar an hour to put them into the box. Well, you can imagine who ended up winning that question. And as a result, they actually gave a name to this process that they now call prepacks.

It started in apparel, but it’s really gravitated into almost any industry that buys from overseas and has some type of seasonal business to it. In the footwear business it’s called a musical run. And in D365 FO we refer to these predetermined cartons of multiple SKUs as packages. It’s important to dig into this a little bit further and understand where the benefits are because truly this is something that’s unique that D365 FO supports. So it’s important that you understand where the benefits are so that you can explain that to a prospect or a company that you’re installing the software for in the retail space.

Understanding the Labor Savings of Flow Thru

It’s important to realize with the flow through process you save more than just the cost of picking this merchandise. Because the cartons come in prelabeled, destined for specific stores, you can cut out the whole process of putaway and replenishment as well. So the cartons literally just come in on the receiving dock, somebody scans them, it tells the person where and what store this is going to, it may even already have a label on it that’s supplied by the vendor that indicates what store it needs to go to. And so they can just shuttle it straight over to that store staging area and put it on a pallet going to that particular store.

So you can save a good bit of labor with this process if you’re not doing it today. And to be honest with you, not every retailer that has brick-and-mortar stores is taking advantage of this because it requires some complicated functionality in order to execute it properly. But the good news is this is one of those areas that D365 FO supports really well.

How is Flow Thru Different from a Data View?

Now that we’ve covered what flow through distribution is from a process perspective, let us finish up our discussion of this area talking about flow through distribution from a data perspective. Oftentimes people will misconstrue flow-thru distribution for another warehousing concept called cross docking. But this really isn’t the same thing. Primarily because of the data that’s used to facilitate flow through distribution.

If you look at traditional warehousing and you have the concept of an order where you’re ordering something that’s stored inside of the warehouse and somebody has to go out and pick it and you have the process of allocation, wave planning, picking, etc., associated with that concept of an order, but you don’t really have that in flow-thru. Instead they have another concept that they call a distro, and you may hear this term used when you approach a retailer and talk about their flow-thru process.

The way that a distro works can be seen if you think about the PO itself, the PO placed with a vendor for a given set of prepacks might look something like the one we have here where you have two prepacks for button-down shirts and you have one that’s prepack 1 that has 11 units in it and you have prepack 2 which has got 12 units. When I say units, I should be careful. That really means cases, because each prepack is considered one unit. Despite the fact it may have physically 30 different button-down shirts inside of it, it’s one unit. So you get that PO, and then you associate with a PO what is called a distro. It’s not an order. Instead it’s a distro.

And the distro describes for a given PO line item where those 11 boxes are going to go. And so you can see that this distro is calling out for one box to go to Store 101, another one to go to 102. They want two to go to Store 105. They also want two to go to Store 108. This is the concept that is used to figure out where the product will go. You don’t change orders or anything like that. The other thing that’s really important about this concept is that unlike with an order where you have to say what specific orders are going to go on a truck, there’s no concept of an order. So instead what you’re doing is you’re just lopping off individual boxes into a store staging position and then they get loaded onto a truck. So the concept of what orders are on a truck doesn’t really apply. There’s no concept of an order on a truck. Now, the way this gets implemented in D365 FO is we convert the distro into transfer order. So it really does become an order. But in many places where this is done, they don’t have that concept of an order as it relates to flow-thru. They call it a distro. And that’s what controls where this merchandise ends up going from a data perspective.

So that concludes our discussion of flow through distribution. I just want to remind you again that this is one of the features that D365 FO supports pretty well that really can bring some value to a retailer, should they not be doing this already today. I hope you got a better understanding from a requirements perspective about Flow-thru distribution process, that’s what you should expect a Retail Warehouse manager to be asking about.

Feel free to reach out for any clarifications. If you like my blog posts then comment and subscribe to the blogs.

#RetailDAXing #D365Commerce

Disclaimer: The information in the weblog is provided “AS IS”; with no warranties, and confers no rights. All blog entries and editorial comments are the opinions of the author.

Credits: Microsoft Learn, Microsoft Docs