Solving the last-mile challenge: How Sikich automated smarter fulfillment in Dynamics 365 F&SCM

Last-mile fulfillment logistics has become one of the most urgent challenges for today’s distributors. Customers expect fast turnaround, real-time visibility, and reliable delivery windows. For distributors with multiple facilities across the country, the “last mile” isn’t just about final-mile parcel delivery. It’s about choosing the right fulfillment location, every time, in a way that preserves speed and profitability.

But that decision is rarely simple. Many distributors now operate hybrid networks: large hubs supported by regional warehouses, local branches, and storefronts that double as micro-fulfillment centers. Without automation and accurate data, determining where an order should be fulfilled can become guesswork.

Sikich recently partnered with a national distributor facing this challenge head-on. Leveraging Microsoft Dynamics 365 Finance & Supply Chain Management (F&SCM), we are in the process of advising and building a solution that automates fulfillment decisions, reduces freight miles, and restores clarity to demand planning, all without changing their physical network or adding new applications.

This is how we solved their last-mile problem and how other distributors can do the same.

The hidden costs of manual fulfillment decisions

Our client operates a nationwide footprint of roughly 70 locations, a blend of:

• A handful of true distribution hubs
• Several regional warehouses
• Dozens of storefront or “pro center” locations with storage space

This hybrid structure allows them to stay close to customers, but it also creates a hidden complexity: Which location should fulfill an order when the local branch is out of stock?

Historically, this decision was manual. If an item wasn’t available at a local pro center, employees would open D365 F&SCM, see which other locations had inventory, and pick one based on intuition or convenience.

On the surface, this seemed harmless, but underneath, it created a chain reaction of operational problems:

Cross-country shipping that shouldn’t happen

Employees sometimes chose a faraway warehouse simply because it appeared first on the list. Orders that should have shipped from a nearby hub were routed across the country, adding unnecessary freight cost and days of transit time.

Inconsistent customer experience

Delivery windows varied widely depending on which employee made the decision and which location they selected.

Distorted demand signals inside the ERP

This was the biggest issue and the least visible. When an order was routed to a distant warehouse, D365 F&SCM interpreted that shipment as demand originating from that region, not from the customer’s true geography.

Over time, this introduced “phantom demand” in the wrong places, causing:

• Over-purchasing in certain hubs
• Understocking in others
• Incorrect reorder patterns
• Planning instability and higher working capital needs

In other words, manual fulfillment choices were quietly rewriting the distributor’s demand profile. The business was unintentionally paying for the last-mile problem twice: once through higher freight costs, and again through distorted inventory planning.

Why last-mile fulfillment is so difficult for distributors

This distributor’s challenge is common across the industry, especially among networks with hybrid warehouse-store models. Several market dynamics make last-mile fulfillment particularly complex:

• Decentralized networks: Locations serve multiple purposes (retail storefront, fulfillment center, storage site, etc.), and without clear rules, it’s easy for staff to choose suboptimal inventory sources.
• No real-time decisioning tools: Employees lack visibility into distance, freight impact, or optimal hub selection. Intuition replaces data.
• Data distortion: Random fulfillment choices ripple through planning engines, creating inaccurate forecasts.
• Hybrid customer profiles: Distributors increasingly serve a mix of walk-in customers, field technicians, franchise operators, and corporate accounts. Order volumes can swing dramatically, challenging predictable stocking strategies.
• Customer expectations for speed: Even when margins are compressed, customers expect next-day or two-day delivery, pushing distributors to optimize every mile of the fulfillment journey.

Distributors need a reliable, automated method to identify the source of each order across e-commerce, inside sales, and branch transactions.

Sikich’s approach: Automated, intelligent fulfillment inside Dynamics 365 F&SCM

The distributor partnered with Sikich to eliminate the guesswork and standardize fulfillment rules in Dynamics 365 Finance & Supply Chain Management.

The goal was simple: Use data, not intuition, to determine the optimal shipping location for every order. To achieve this, Sikich designed and implemented a custom “hub ranking engine” inside D365 F&SCM that evaluates proximity, availability, and fulfillment capability in a consistent, automated way.

Building a ZIP-based ranking engine

We began by analyzing the client’s historical fulfillment patterns by U.S. postal geography. Using ZIP codes and prefixes as regional markers, we created a ranking system that determines the hub closest to the customer, second closest, third closest, and so on.

This ranking structure became the backbone of the automated decision engine and provided a reliable way to guide hub selection across a large, distributed network.

Adding flexibility with “depth of search”

Next, we introduced a configurable depth of search that allows each warehouse or pro center to define how many nearby hubs the system should examine before committing to a decision.

For example, a location may search the first three nearest hubs for full fulfillment. Another may search the first five, depending on order-volume patterns. This approach gives the business flexibility while maintaining consistent, rules-driven logic.

Prioritizing full-line fulfillment and smart fallback logic

To support a better customer experience, the engine prioritizes full-line fulfillment. Before reserving any inventory, the system first looks for a hub that can fulfill all items and quantities on an order. If one hub meets the requirement, the reservation is locked, and the order moves forward, reducing split shipments and consolidating freight.

If no hub within the defined search depth can fulfill the entire order, the system uses a smart fallback:

1. It selects the closest hub.
2. Reserves whatever quantity is available.
3. Places the remainder on backorder with that same hub.

This prevents orders from being scattered across unrelated warehouses and helps maintain clean, accurate planning data in the ERP.

The first deployment focused on e-commerce orders, where the process runs without human intervention, and the engine can function exactly as designed. After validating the logic and results, the next phase expands the rules to internal order entry and in-store transactions, ensuring every order, across every channel, follows the same intelligent sourcing process.

The business impact

Replacing human judgment with automated, data-driven fulfillment logic produced immediate benefits across the distributor’s network:

• Faster, more predictable fulfillment: Orders now originate from the closest viable hub, reducing transit time and improving reliability.
• Higher customer satisfaction: Customers benefit from consistent delivery windows, fewer split shipments, and improved order accuracy.
• Reduced freight spend: Shipping from the nearest fulfillment location cuts unnecessary mileage and minimizes transportation costs across the network.
• Operational efficiency: Employees no longer spend time determining where an order should ship from; the system handles it automatically.
• Cleaner, more accurate demand planning: Because all orders now flow through consistent sourcing logic, D365 F&SCM’s planning engine receives truer demand signals, strengthening forecasting and reducing excess inventory.

Perhaps the most valuable outcome of this approach is its built-in scalability. As the distributor grows, the hub-ranking engine can easily incorporate new hubs, retail locations, regional expansions, or even future third-party logistics (3PL) partnerships. This ensures the fulfillment logic evolves with the business rather than limiting it.

In short, it becomes a flexible, foundational engine that supports ongoing network optimization well into the future.

Broader industry trends: blurring lines between distributors and 3PLs

The project also reflects broader shifts in the distribution landscape. Many distributors are now:

• Leasing overflow space in former retail centers
• Partnering with 3PL providers
• Operating blended networks of owned and outsourced nodes
• Using micro-fulfillment centers to shorten last-mile delivery
• Integrating external inventories directly into their ERP systems

These strategies can strengthen regional coverage, but they also raise the stakes for data accuracy and fulfillment automation. As networks become more distributed—and less centralized—the decision of where to fulfill an order becomes even more critical.

For this distributor, automating fulfillment inside the ERP closed the gap between customer demand and operational reality. It enabled faster delivery, cleaner data, and a more efficient network without changing their physical footprint.

As distributors face rising customer expectations and increasingly complex networks, intelligent last-mile fulfillment will become one of the most important capabilities they can develop.

Sikich can help you build it practically, strategically, and at scale.

If you’re ready to eliminate costly guesswork and transform your last-mile fulfillment, reach out to us today. Our experts can assess your network, identify high-impact opportunities, and implement solutions that deliver real results.

Special thanks to my colleague Andrew Stephens for helping me with this article.