Dr. Misty Blessley is Associate Professor of Supply Chain Management at Temple University.
Consumer behavior is shifting from shopping in retail stores to ordering online. In response, Walgreens says it is going “all-in on the idea that its stores will do double duty as both retail outlets and hubs for home delivery.” Walgreens is able to leverage retail outlets for home deliveries because the pharmacy store chain expects that store fulfillment for its non-pharmaceutical products is more efficient than managing separate distribution networks for e-commerce and in-store sales.
In lieu of e-commerce warehouses, Walgreens’ employees will pick and pack items for same-day delivery, through third-party apps such as DoorDash and Uber Eats. (Walgreens finds that 78% of Americans live within five miles of one of its stores). It has not completely abandoned its 16 distribution centers that restock their stores and its hub stores that operate as small distribution centers, which provide two to four-day delivery via FedEx. However, when placing an order, customers are encouraged to choose store fulfillment for the same shipping cost of $5.99, or free for orders over $35.00. The benefit to the customer is 50 minutes on average delivery, as opposed to waiting for 2-to-4 days.
Walgreens has not stopped short of considering what network would be best for prescription fulfillment, but this class of products must operate under a separate logistics network because of the added complexity of handling pharmaceuticals. While online prescription orders are filled through the pharmacy chain’s 11 highly automated fulfillment centers, the company also offers same-day prescription delivery through DoorDash and Uber Eats, for medications that are ready to be picked up by the customer.
Classroom discussion questions:
1. Refer to Chapter 11’s discussion of Distribution Management in your Heizer/Render/Munson text. What does Walgreens expect the change will be to response time because of moving from warehouse to store fulfillment? What about the change in delivery cost?
2. Why is it important for firms like Walgreens to constantly review their distribution networks to appeal to shifts in consumer behavior?