Online commerce is expected to account for $24bn in sales by 2014, a trend that presents challenges and opportunities for e-tail supply chains, says Fred Takavitz, senior vice president for retail at Exel. "Mobile commerce is going to explode in coming years, so it is a great time to be in this business."
Retailers are adopting several strategies to accommodate this growth, Takavitz says. "Many are choosing to establish separate supply chain fulfillment operations for their online business. Also, "We see retailers setting up fulfillment operations on both the East and West Coasts to be able to serve a majority of consumers with ground transportation," he says. A lot of effort is going into striking the right balance between shipping from distribution centers and shipping direct, he adds, and "there is always the question of whether to insource or outsource logistics."
Takavitz offers a number of reasons why outsourcing is a good option for e-tailers. Experience is the most important, he says, "because retailers, on average, have been at the e-tail game for only about four years." An experienced third-party logistics provider has worked with many different kinds of companies and can bring valuable experience in the form of operating practices and procedures, Takavitz says. Another reason he cites is "bandwidth," noting that e-tailers need a partner that has the scale and breadth to meet its requirements, especially during the kind of surges in business that many retailers experience in the fourth quarter.
"It is not uncommon for e-tail customers to see a surge in business during the last two or three months of the year that can be five times what is experienced in other months," Takavitz says. "It is quite a skill to be able to step up and meet this challenge," and it requires having the right infrastructure in place, in terms of facilities, assets and people, he says.
Finally, says Takavitz, a strong 3PL will be able to provide the assets and technology needed to support services as well as the process discipline required to deliver excellence and drive continuous improvement. "All of this goes into providing the kind of flexibility and adaptability that can help an e-tailer be successful," he says.
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