E-commerce supply chain challenges – who is pulling the strings?

It’s all about the customer

Demanding and techno-savvy customers are effectively re-shaping supply chains in the e-commerce world. Customers expect to receive their order within a day or two whether it’s food, fashion or new bed linen. They can choose not only what to buy, but who to buy it from. E-commerce is becoming so competitive that companies with inefficient supply chains can expect to lose business.

Communicate – a lot

The challenge here is to implement a fail-safe web-based online communication system with customers. They want to have real-time visibility
over their orders – track numbers are not enough. Expectations are high, deliveries must be exactly as per specification, on-time and complete. According to a recent Forrester Research Inc. report, consumers own an average of 4.5 digital devices, and they expect a smooth, consistent shopping experience regardless of what device they’re using. E-retailers may be understaffing their customer service teams, and that can lead to missteps and

Inadequate infrastructure

The three main features of an intelligent warehouse: visibility, mobility, and flexibility take on a critical meaning in e-commerce. Smaller order sizes, greater frequency of picking and packing mean that warehouse layouts may need revamping to utilize the existing space as effectively as possible. It becomes especially challenging for companies that are doing more than one type of sales fulfillment from the same physical facility. The increased volume of single-item orders is requiring companies to introduce software solutions such as warehouse management systems (WMS) which up to now may have been a “nice to have”. These WMS systems use sophisticated automation tools such as mobile smartphones that assist with streamlining of warehouse space and activities which enable the business to deliver every order on time, every time.

Inventory levels

E-commerce has introduced new demands on inventory management. An increased number of stock-keeping units (SKUs) is inevitable. High-value electronic items are a particular headache, buffer stock must be kept low and problems arise when the supplier or distributor does not have available stock. Knowing the exact status of your inventory (and that of your key supplier) is vital to ensure you are not losing these orders to competitors. Fast fashion, an area where e-commerce seems to be achieving its biggest growth around the world, comes with its own inventory problems – today’s best seller is tomorrow’s special offer. Replenishment is a real trial where there is little or no turnover predictability.

Where more than one sales channel is being satisfied from a single facility, the challenge is managing the common inventory. Inventory planning may be an area where technology tools will pay for themselves. There is no shortage of inventory software solutions available, but how do you choose which one is right for you?

Picking and packing

Orders that consist of only one item must be picked, packed and delivered seamlessly to an individual consumer. The picking processes for e-commerce are very different and do not easily fit into a system designed to deliver to brick-and-mortar stores. IKEA separates its products into high-flow and low-flow facilities to drive down costs-per-touch, an asset management tactic that says the more hands that touch a product, the higher that product’s costs. Labour is often the single biggest cost and inefficient picking systems can have a huge impact on operational costs.

Transport logistics

Lack of experience in e-commerce and the cost of technology tools is causing many companies to consider outsourcing fulfillment to third-party service providers (3PLs). Specialized 3PLs focused on e-commerce are more likely often have the material handling equipment, systems and expertise to more efficiently process online orders. Each has their own strength based on their delivery network and hub locations. The question is: contract with one dedicated logistics company or use two or more? There are some risks in both options; having multiple delivery vendors may increase costs due to idle time but it means there is a backup service. According to the Forrester report “retailers [that] master logistics will command a market advantage through faster, more reliable customer delivery experiences”.

Let’s get back to customer expectations

Visibility of a customer’s order status is paramount. The customer wants to see where the driver is and exactly when he will deliver the order. Speed and data accuracy are not negotiable, these are not likely to be satisfied by manual systems and processes. Not only do customers want their order on time but they also want the facility to try it out or try it on. This creates issues for the logistics of managing returns. Companies are now increasingly using 3PLs that specialise in returns and reverse logistics.

Whether a customer is shopping on their laptop or mobile device, their customer experience with your business should remain the same, wherever they are in the world. Companies that can adapt their supply chain operations to the new era of e-commerce (using service providers that help them achieve that goal) will have the best chance of success.

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