Social media are having a significant impact on electronic-commerce fulfillment, says Alan Taliaferro, senior manager for supply chain management with Deloitte Inc. Because of their ability to communicate instantly about a service problem, customers are far less tolerant of errors in order processing and delivery by merchandisers.
E-commerce fulfillment activity is growing much faster than traditional brick-and-mortar stores, notes Taliaferro, with purchases over the internet cutting deeply into store sales. In the case of the latter, an inventory mistake isn't particularly costly, and can usually be absorbed without much cost. "You've just taken it out of one pocket and put it into another," he says. In the e-commerce world, by contrast, inventory going to the wrong customer can have much greater implications on brand reputation. A disgruntled customer can immediately go on line and flame the errant retailer. "There's no buffer in the system for error," Taliaferro says.
"An extremely high level of accuracy is required in e-commerce fulfillment," he says. "That means that different methods and material-handling systems are necessary."
Often that means a company must maintain two streams of inventory. Nearly every multi-channel retailer has a separate facility for e-commerce fulfillment. "Most enterprise resource planning systems are not able to handle allocated customer inventory in a warehouse environment that's set up for brick-and-mortar stores," Taliaferro says. What's more, inventory accuracy rates must be much higher. By segregating the two types of inventory, a retailer can manage product in a more precise way.
Material-handling systems in an e-commerce environment must be set up to handle very small orders, often single items. Taliaferro predicts that the logistics market will see increased demand for batch and group picking equipment, with the capability to sort into smaller orders.
In essence, he says, an e-commerce distribution center needs to be treated more like a retail store, "because of the inventory accuracy required and the lack of ability of an ERP to handle mixed inventories in the same slot."
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