Volume 49 Number 3
© 2017 Decision Sciences Institute
Evaluation of Order Fulﬁllment Options
in Retail Supply Chains
Raymond J. Harbert College of Business, Auburn University, Auburn, AL 36849,
Culverhouse College of Commerce, The University of Alabama, Tuscaloosa, AL 35487,
Retailers face a major operational challenge in fulﬁlling online orders while managing
their traditional store-based distribution processes. In this context, the following order
fulﬁllment options available to retailers are considered: store-facing distribution centers
(DCs), dedicated order fulﬁllment facilities (DTC), retail stores, and direct-ﬁll by ven-
dors. A framework for the online order fulﬁllment process is developed to evaluate these
options using operational and ﬁnancial measures collected from a large U.S. retailer.
The study presents managerial insights regarding each fulﬁllment option and identiﬁes
operational and cost thresholds where a particular fulﬁllment option would be preferred.
The results show that due to better order fulﬁllment efﬁciency, distribution facilities (DC
and DTC) out-perform fulﬁllment from stores and vendors. However, retailers can lever-
age their network of stores to overcome the shortfall in store-based fulﬁllment costs by
focusing on the order delivery process. The analysis presented in this article is useful for
practice as it helps retailers identify options that best suit their order fulﬁllment strategy.
[Submitted: March 4, 2016. Revised: April 18, 2017. Accepted: April 20, 2017.]
Subject Areas: Order fulﬁllment, Retail supply chain, and E-commerce.
For the past decade, online retail sales have increased at a faster rate than sales
through retail stores. In 2015, online sales in the United States were estimated at
$341 billion (an increase of 14.6% over the previous year), whereas store sales
during the same period increased by only 1.4% (U.S. Census Bureau, 2015).
The growth of online sales has attracted many “pure-play” brick-and-mortar store
retailers to add the online channel to their business strategy. These retailers seek to
align their traditional store-based distribution processes with the requirements of
the online channel through coordinating demand management and order fulﬁllment
activities (Ishfaq, Defee, Gibson, & Raja, 2016). This realignment of supply chain