July 2016 | Sponsored | Knowledge Base

Optimizing Inbound for Improved E-Commerce Fulfillment

Tags: Retail, Distribution, Supply Chain Management, E-commerce, Logistics, Fulfillment, Supply Chain

Ryan Kelly is Senior Vice President, GENCO, A FedEx Company, 412-820-3801

E-commerce is changing warehousing. Consumers want to purchase merchandise at any time, from anywhere—whether it is online, mobile, or in a store. As a result, efficient and reliable omni-channel fulfillment has become an imperative for retailers. To better align business models with the new paradigm, retailers and logistics providers are augmenting their distribution networks to focus on the consumer, resulting in several interesting warehousing trends.

Several of those trends involve the physical size and location of distribution centers (DCs). Increases in order throughput, in conjunction with larger numbers of stock keeping units (SKUs) and greater order complexity, are catalyzing the need for additional aggregate DC capacity. Retailers are also pushing inventory carrying costs and direct fulfillment activities upstream of storefronts, adding to the need for a larger DC footprint.

At the same time, more demanding consumer expectations, relating to delivery times and returns, are necessitating the proliferation of smaller and more regionalized warehouses and DCs, as opposed to the mega DC model. The resulting scheme comprises increasing numbers of potentially smaller DCs located close to major population areas. This positioning also gives retailers access to the greater workforce needed for running e-commerce fulfillment operations.

Bringing Focus Back to Inbound

With e-commerce spurring rapid change in warehousing, retailers and logistics providers need to evaluate how inbound logistics can help optimize e-commerce fulfillment operations. Inbound logistics has a major impact on the customer experience—even if it is well hidden from the consumer's view. As an example, many online retailers promise two-day shipping, but that does not equate to two days for the retailer or logistics provider. Shipping, fulfillment, and inventory availability all play symbiotic roles in enabling two-day deliveries for customers. Given their symbiotic relationships, it is vital to evaluate the supply chain from a holistic point of view.

Three Keys for Better Inbound

There are three key aspects of inbound logistics that enable a better e-commerce experience: demand planning, modal selection, and product availability. For consumers, the most visible of the three is product availability. If a product is not available to order, it stops a sale dead in its tracks. Depending on the timeframe a consumer may need a product, lack of availability could drive business elsewhere, opening the door for other retailers to take market share.

Less visible to the consumer—but no less important—is modal selection. This needs to be considered with great care, as it can become a balancing act between optimizing profit and ensuring availability. Transportation leaders are being challenged by the ebbs and flows of the pricing environment, all while juggling the choice between less-than-truckload (LTL) and truckload.

A third aspect of inbound logistics is demand planning, which can help alleviate the pressures of pondering modal selection. Demand planning is informed and influenced by many different departments within an organization—with marketing among the most important. If not integrated with demand planning, marketing initiatives can seriously disrupt fulfillment. A website may offer a bundle of products at a discounted rate, but the online special will result in many dissatisfied customers if a DC was not prepared with the appropriate stock for timely fulfillment.

The Fundamental Fix for a Better Supply Chain

Poorly planned inbound operations can be disruptive to an otherwise-adequate fulfillment operation. The fundamental fix to the problem is supply chain visibility. A more comprehensive approach to supply chain management—one that includes visibility into the complexities of inventory supply, inbound transportation, order fulfillment, and outbound transportation—can help to provide for a great omni-channel experience, one that encourages customer loyalty and optimizes profitability.