Michaels had a major ecommerce ship-from-store challenge. It’s not that this fulfillment method wasn’t popular — the arts and crafts retailer shipped nearly 3 million orders from its 1,300+ stores across the U.S. and Canada in 2023. But the lack of a systematic approach to assortment and order prioritization meant that individual stores were shipping items to too many far-away locations. That was not only expensive for Michaels but contributed to slower-than-desired delivery speeds for its customers.
“Prior to instituting a hub model, stores were shipping from anywhere, to anywhere,” said Dave Luke, Director of Ecommerce Operations at Michaels during a session at last week’s Manhattan Momentum conference in San Antonio. “We had stores in Alaska shipping to [people in] the lower 48 states, and shipping from anywhere [in the continental U.S.] to Hawaii. Additionally, because our basic assortment was spread evenly across locations, orders were not shipping complete as often as we desired, resulting in split shipments and increased fulfillment costs.”
At the beginning of 2022, the retailer had more than 1,000 active ship-from-store (SFS) locations, and Michaels’ order allocation system would “simply attempt to fill complete [orders] and source close to the customer’s ship zone,” said Luke.
The solution was to institute a hub model that could expand the participating store base to align with the retailer’s peak seasons. Now, during non-peak periods, approximately 20% of Michaels’ stores serve as hubs, a percentage that rises to approximately 50% during its busiest times.
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Once Michaels designated which stores would serve as hubs in June 2022, “we increased the inventory of our standard basic assortment SKUs in hub stores to increase the likelihood of orders shipping complete, resulting in fewer split shipments,” Luke said. To begin this process, the retailer had to “artificially inflate replenishment” at these hub stores, but Luke noted that “eventually the system would learn where the demand is in the U.S.,” allowing Michaels to establish replenishment levels that better aligned with customer demand. “We also integrated this model into our Manhattan order management system to further refine our order allocation logic for ship-from-store orders,” he added.
The results were impressive:
- Orders shipping from a single ship point increased 4%;
- Cartons per order (a measurement of split shipments) declined 5%;
- Carton value climbed 10%; and
- Days-to-deliver times decreased 21%.
Boosting BOPIS Speed and Performance
Michaels, which has used a range of Manhattan solutions since 2018, also leveraged Manhattan Active Omni to improve the efficiency of its buy online, pick up in-store (BOPIS) offering, which comprised 70% of all omnichannel orders in 2023.
Store associates equipped with handheld devices and belt printers now can use pick-path optimization, which lists items in the most efficient order for picking as they work their way through the store. There’s also a pick-to-slot functionality that allows associates to pick items for multiple orders on one trip through the store, while keeping each order separate. Labels printed by associates’ belt printers can be used for BOPIS orders or for those that will be shipped via USPS or another carrier.
“We wanted to make it as frictionless as possible for associates, and it’s proven to be a big labor saving for stores,” Luke reported.
Michaels’ ecommerce division now has established regular reporting cadences in partnership with store operations, including the monitoring of service level agreements (SLAs), fill rates, damages, shipping charge corrections and metrics such as BOPIS hold expirations (when a customer doesn’t pick up their order after a certain window). “Follow-up with the field drives success,” noted Luke.
These enhancements have helped Michaels bring average BOPIS order pick times to under one hour, and the time needed to bring curbside pickup orders to customers to an average of 3.5 minutes, a figure that had been “creeping up” to five minutes, according to Luke.
What’s Next for Michaels?
Michaels isn’t through improving its fulfillment capabilities. Its same-day delivery services, instituted during the COVID pandemic, will be moving into their next phase: “The original had been set up very quickly, with no real coupling with Omni and built using custom processes directly in the front-end platform,” Luke explained. “Now there will be a direct integration with Manhattan Active Omni that will provide as close to real-time updates as possible.” These advances will allow Michaels to scale up and add more delivery partners, reaching a total of four within the next few months.
The retailer also is planning to launch a pick substitution functionality later this year, which will identify a substitute item for BOPIS orders if the requested items can’t be found. “In terms of the associate experience, it identifies substitutable items on their handheld device, which also allows the associate to give the reason [the original item] wasn’t available, whether it’s missing, damaged or some other reason,” said Luke. “We’re planning a pilot and A/B testing to ensure this doesn’t interfere with other store systems.”
