The eCommerce party just became a little more challenging. Online businesses have enjoyed a boom time over the past 18 months as customers moved online in unprecedented numbers. With a raft of new factors now placing additional pressure on eCommerce retailers, however, from rising prices to global supply chain disruption, escalating environmental awareness and changing customer expectations, new fulfilment thinking is a priority.
Whether it is adding contingency stock to mitigate shortages, expanding fulfilment locations to get closer to the customer or reviewing carrier options to better set and meet customer expectations, effective fulfilment demands insight, understanding and the data to support immediate decisions.
With customers increasingly rating reliability over speed, successful eCommerce retailers are embracing data driven fulfilment to achieve certainty in an uncertain supply chain, explains Emma Dempsey, CEO, James and James Fulfilment.
Achieving Reliable Fulfilment
Until recently, supply chain efficiency has been predicated on two key theories: fast fulfilment and just-in-time operations. In addition to minimising excess stock through continual ordering, eCommerce companies have offered customers ever-quicker delivery options in a bid to stand out from the competition.
On-going global supply chain upheaval has turned that model on its head. With well-publicised goods shortages and peak season availability fears, consumers are now prioritising reliability over speed: ensuring the product arrives when promised is far more important than same or next day delivery. For eCommerce companies, additional stock is no longer a sign of inefficiency but an essential contingency that is now core to fulfilment success.
This shift in focus raises a whole new set of challenges that demand rapid intervention. Is there room for additional stock in the warehouse and, given the escalating demand for space, what stock should be prioritised to maximise profitability? What is the best way to get closer to the customer – such as local micro-warehouses or expanding geographic location? How can retailers ensure carrier options meet customer expectations without jeopardising profitability?
Best Practice Operations
With escalating costs and uncertain supply chains, the pressure is on retailers to be even more efficient, effective and responsive throughout the fulfilment process. Product ranges need to be optimised to meet demand and customers kept informed every step of the way. This simply cannot be achieved without access to clear, accurate, insightful data that is used proactively to take decisions, optimise planning and improve customer communication.
The use of information to keep on top of day to day operational performance should be a given. An at a glance view of key performance indicators including orders placed, orders dispatched on time, picking efficiency and so on, are core metrics to support efficient fulfilment. But there is so much more data that could and should be used proactively to fine tune operations, boost profitability and, critically, keep customers in the loop.
For example, using data to keep track of stock age will highlight any items heading towards the ‘best before’ date, empowering companies to prioritise sales – through discounting or offers – to minimise the risk of wastage. Tracking rate of sale of all items can spotlight a raft of valuable insight including ageing stock, unprofitable overstocked items, as well as out of stock situations that represent a missed profit opportunity.
Understanding Fulfilment Performance
For the past 18 months, many companies have been focused on nothing more than meeting escalating demand – the intricacies of fulfilment improvements have not been on the agenda. But this is a changing market and one that is more challenging – retaining customers and maintaining profitability is becoming more difficult day by day.
For many companies, however, the challenge is not just gaining access to this depth of data but understanding how best to use it. Companies often don’t know what good looks like – what is the industry best practice for a specific product or market sector? How is the business performing compared to the competition and what part of the process needs to be prioritised to achieve profitability improvement?
A dedicated fulfilment service that not only captures this data but actively works with businesses to highlight specific business issues and provides best practice comparisons offers tangible value. For example, many companies are still using a blanket carrier strategy that eradicates product margin on low value products. A built-in intelligent carrier matrix is a simple way to ensure the customer is offered an appropriate service offer that matches a product’s value and safeguards margin.
Getting Closer to the Customer
Data is higher on the agenda for many businesses – not least as a result of the need to add contingency stock into already squeezed warehouse space. Understanding the location and age of existing stock is key. Using data to identify slow moving products – those that cost more to store than they are worth – allows a retailer to embark upon discounting, shift the stock and optimise the available space. It also ensures restocking can be prioritised towards the most profitable items.
This insight is also helping companies to reconsider fulfilment models to support evolving needs, including customer behaviour and environmental expectations. One option is to intelligently locate stock across multiple fulfilment centres globally in a way that accurately matches consumer demand and takes products closer to customer locations. Rates of sale and stock turnover analytics at each site can inform not only replenishment strategies but also customer offers, with intelligent warehouse allocation rules used to create different customer offers based on stock location and quantity, as well as cost and speed of shipping, and the rate of sale of stock in each area.
Using this insight in real time allows the allocation model to determine the optimum fulfilment location and, linked with a carrier matrix, present that option to the customer. Looking ahead, the increasing sophistication of AI and machine learning tools will make it possible to include environmental impact metrics, such as carbon footprint, to these rules to allow retailers to meet government targets as and when they are implemented.
eCommerce is still a strong, growing market – but new competition and increasing uncertainty are putting pressure on companies to impose far greater control over supply chain processes. In this market, setting and meeting customer expectations is far more important than next day delivery. It is those companies with the ability and confidence to proactively use data to improve operations, manage events and, critically, communicate with customers that will be best placed to satisfy customers without compromising profitability.