The front-end of e-commerce has never been easier, thanks to platforms like Amazon.com Inc. and Shopify Inc. Merchants can start an online store, process payments and advertise their products to millions in a matter of days. The process of getting these products to a customer’s front door, however, has never been more complex. Any brand selling online needs a solid infrastructure to support sales from multiple channels and meet increasingly high customer expectations of fast, accurate delivery.
The COVID-19 pandemic rapidly accelerated the shift to e-commerce purchasing. Up 39% year-over-year, the explosive growth of e-commerce has awakened brands and merchants to the need for fast, flexible solutions that allow them to “future-proof” ahead of the next supply chain disruption, whatever it may be.
More than 50% of organizations have not yet actively started to build a roadmap for supply chain digital transformation, according to Gartner Inc., but those that do will find themselves empowered with the tools, transparency and control needed to make decisions that keep their businesses on track and their customers satisfied.
Future-proofing means solving for problems before they’ve arisen. In the context of the supply chain, that means things like fragmented systems, inventory management challenges, rising shipping costs and external threats presented by tech giants.
Though many top logistics companies have warehouses across the country, they have grown through acquisition, which means the same logistics company may be running different software or versions of software in different buildings. Further, if a brand seeks to contract with different warehouses or 3PLs for different parts of its business, it would find itself building several point-to-point integrations and using multiple logins to fulfill orders.
The entire relationship — including all inventory that enters and leaves the buildings — can and should be accounted for in a single, unified platform that tracks inventory levels, creates shipping labels, enables product scanning and generates monthly invoices.
For every $100 spent online, brands spend $20 on fulfillment and logistics to get the product to the end customer. For traditional big-box retail, that cost was about $5.
Shipping costs, while often greater than fulfillment and warehousing costs, are at their root a warehousing strategy problem. To drive down shipping costs, a company has three options: increase their volume to achieve a greater discount with carriers, downgrade to slower shipping services, or move their products closer to their end customers.
Moving products closer to customers is the most impactful and actionable for most companies. For example, a company going from one West Coast distribution center to a second distribution center on the East Coast can save 30% on their parcel shipping spend.
Roughly 35% of warehouses in the U.S. are not running warehouse management software (WMS), as Microsoft Excel remains the most popular inventory management tool.
Manually managing inventory in one location is difficult; across multiple locations, it’s nearly impossible. Most organizations need at least three fulfillment centers to offer two-day shipping to their customers. To offer one-day shipping, they’ll need about 14 fulfillment centers. Amazon, for example, has more than 100 centers that serve its Prime customers.
To enable multi-point fulfillment at scale, there must be a technology layer that efficiently routes orders to the most cost-effective warehouse and enables brands and warehouses to manage and track their inventory on a single platform.
The same platforms that have made it possible for brands of all sizes to set up an e-commerce channel quickly also pose a real threat to the merchants that use them.
One of the core benefits of direct-to-consumer e-commerce is the ability for the brand to know and understand its customers. Marketplaces, however, retain that customer data for themselves, and sometimes even develop products to compete with the most popular brands on their platform.
Tech giants also maintain control of many critical logistical functions that can severely impact a brand’s business. They can decide on a whim to increase fulfillment and inventory storage fees, or limit the amount of inventory that can inbound and outbound from warehouses, effectively preventing a brand from selling its products.
Businesses that are serious about future-proofing need an independent alternative to tech giants that enable them to accelerate their e-commerce success and provide the convenience of online shopping and the expectation of two-day shipping to customers, without the threat of throttled overhead control.
Without digital transformation, organizations must rely on a logistics industry built for a different era. These legacy products simply cannot support omnichannel and e-commerce order fulfillment, and the time is now for brands and warehouse operators alike to consider the steps they must take to future-proof their systems with the sophisticated technology that will leave conventional operators left behind.
Ben Eachus is co-founder and CEO of Flowspace.
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