Unlocking the last mile: A strategic framework for in-store fulfillment

After years of designing and implementing supply chains, one truth has become undeniable: the competitive battleground has moved to the customer’s doorstep: The last mile of delivery. That final, complex journey represents over 50% of total e-commerce fulfillment costs and is the primary driver of customer satisfaction.

Many companies still default to building more centralized e-commerce fulfillment centers to solve this problem. From my experience, this is a losing battle. It ignores the most powerful, proximate, and under-leveraged asset in their portfolio: their existing network of brick-and-mortar stores. The strategic imperative is clear: transform stores into high-efficiency, distributed last-mile fulfillment hubs.

Doing so unlocks immense benefits. It offers unparalleled speed, allowing customer order cutoff times to be stretched hours later than a traditional FC, as late as 10 p.m. for same-day delivery. It promotes sustainability as shipping from a location closer to the customer inherently reduces carbon emissions from long-haul air and ground transport. But this transformation is not a simple operational tweak; it is a fundamental re-engineering of the store's purpose and needs execution with discipline.

The first mistake I often see companies make is underestimating the fundamental disconnect between a retail environment and a logistics operation. Simply handing a store associate a picklist and a shipping label is a recipe for failure. The conflict is threefold:

1. Process and space: Stores are designed for discovery. Aisles are wide, and products are spread out to maximize engagement. A fulfillment center is designed for speed. Aisles are narrow, and travel time is the number one enemy.
2. Inventory: The truth of store inventory is often a well-intentioned guess. On-shelf availability, phantom inventory, and data latency mean an e-commerce order routed to a store has a high risk of failure.
3. People and culture: Store associates are trained and incentivized on customer service and sales. A fulfillment operator is measured on accuracy and speed. These are two different mindsets and skill sets.

The transformation framework: A how-to guide

Pillar 1: The digital foundation

This is the non-negotiable starting point. You cannot fulfill what you cannot see.

• Intelligent order management: The foundation is a single, real-time view of all inventory, everywhere. An intelligent order management system (OMS) must act as the brain, deciding in milliseconds the most profitable fulfillment path based on inventory, capacity, and proximity.
• Data capture: Though store volumes may be low initially, it is critical to capture data at every step of the order journey. This data is what builds operational intelligence, allowing you to react to failures and catch them before they happen.
• Carrier integration: The digital stack must include a versatile carrier integration layer. You will need a mix of national, regional, and specialized last-mile couriers. This layer, whether built in-house or through a multi-carrier orchestrator, must be able to connect to multiple carriers based on the specific delivery speed, schedule, and cost required for each order.

Pillar 2: The physical & process re-engineering

Once the digital brain is in place, you must re-engineer the physical muscle of the store.

• Industrial engineering discipline: When designing fulfillment from stores, you must apply the same industrial engineering discipline as in your FCs. This means implementing wave planning to turn your fulfillment space over multiple times a day and working backward from the customer promise to optimize every step: order picking, packing, and carrier handoff.
• The space conundrum: Leaders often get stuck debating whether to sacrifice sales floor space for shipping operations. This is a false choice. A sale is a sale, and your job is to meet the customer wherever they are. The fulfillment space can be as small as a single 2-foot x 8-foot rack in a backroom, optimized for both delivery and customer pickup operations.
• Strategic store selection: The question of whether to enable all stores or just a few key hubs is critical. Enabling all stores spreads out volume but increases complexity. Enabling a few hubs increases density but can limit SKU availability. There is no one-size-fits-all answer. A hybrid approach often works best, and the right model may differ between urban, suburban, and rural markets.

Pillar 3: The people & change management

This is the most underestimated pillar. The best technology is useless if the store team isn’t bought in.

• Create and train the store associate 2.0: This involves creating dedicated fulfillment roles or time blocks for a digital fulfillment team, trained specifically in picking accuracy, careful packing, and exception handling.
• Rethink the incentives: A store manager’s bonus is almost always tied to their store’s P&L. The e-commerce model must evolve to give stores credit for every order they fulfill. Store KPIs must include fulfillment rate, pick-to-ship time, and order accuracy.

From theory to practice: A phased approach

In my experience, the biggest obstacle to this transformation is analysis paralysis. The best way to build a scalable process is to start small.

Pilot, test, and learn. Begin with 1 to 10 stores in a few select markets. Start with a small volume and test different models for store selection and operations. Establish a constant feedback loop with your store associates and supply chain partners. As you learn, iterate on the process and then expand to more stores, more nodes, and increased volumes.

This iterative approach is how you derisk the investment and build a model that truly fits your network. By following this framework, retailers reduce their last-mile delivery costs and cut their average click-to-ship time significantly. Also surprisingly, along with shipping, retailers also saw their buy online pickup in store (BPOIS) volumes increase—driving new, profitable foot traffic into their stores.

Stores as a strategic asset

The transformation of retail stores is no longer a niche experiment; it is a core strategic lever for survival and growth. By abandoning the outdated idea of the store as a standalone sales channel and embracing it as a dual-purpose hub, executives can solve their most significant logistics challenge. It requires integrating the digital foundation, re-engineering the physical processes, and realigning the workforce of the operation. Do this, and you will turn your stores into your most powerful strategic supply chain asset.

About the author

Sai Teja Yerapothina is the head of last mile van & 3P delivery at Walmart. He leads the business and product strategy and operations for last mile delivery at Walmart.

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