January 2017 | Commentary | E_Commerce

Solving the E-Commerce Puzzle

Tags: Inventory Management, Retail, E-commerce, Logistics, Supply Chain

Todd Miller is Principal, Sterling Partners, 312-465-7000

Inventory is now on-demand, and predicting what consumers will want on any given day is tricky. Add to that the already challenging scenario that consumers want to shop and purchase goods at any time and from anywhere—and supply chain logistics for e-commerce inventory gets even more complex and complicated.

Many retailers and brands haven't solved the e-commerce puzzle just yet. Quarterly earnings are dismal, major retail corporations are laying off employees and closing stores, and Amazon is dominating the space and setting the bar for customer experience.

To overcome the challenges that e-commerce presents to the supply chain, retail companies should consider taking the following steps:

  • Make brick-and-mortar stores part of the supply chain. Omni-channel fulfillment is an absolute must for retailers and brands to survive and succeed in today's commerce world. Many retailers struggle with profitably executing an omni-channel model. In order to compete—especially against the behemoth that is Amazon—retailers need speed and efficiency so they can provide a seamless, unified, and on-demand shopping experience for their customers.
  • With the rise of e-commerce and growing consumer preferences, the most sophisticated retailers are making their stores part of the supply chain by turning them into mini distribution centers.

    When it comes to peak season, for example, retailers should have a process in place that helps them determine exactly where an online purchased item should be shipped from—a distribution center across the country or a retail store around the block. This reduces costs for retailers and fulfills orders in the fastest way possible for consumers.

  • Leverage dropshipping to reduce risk and costs. Dropshipping allows retailers to expand their product assortment and test new products without the risk and cost of inventory overhead.
  • The retailer doesn't have to store this inventory—the supplier or manufacturer keeps it, and the retailer buys it as the consumer buys it. This is a more efficient model for retailers because it results in inventory moving less frequently, keeping transportation costs down. Dropship improves order processing time, decreases inventory carrying cost and risk, and delivers the product to the customer faster.

  • Consider a centralized order management system. Technology has been changing the supply chain for decades, and with e-commerce, ensuring all points of the supply chain are running smoothly and efficiently is even more critical. In 2015, Nordstrom, for example, announced its plan to spend $1.2 billion on e-commerce and new stores. Investment in technology is now required to provide the seamless shopping experience that today's consumer demands.
  • As soon as a consumer buys something, the purchase needs to drop into the retailer's order system, and then be integrated with all the other touchpoints required from when the consumer clicks purchase to the point of delivery.

Centralized and Scalable

Currently, many companies' systems are still siloed—inventory management, customer relationship management, store fulfillment, and point of sale. Using a centralized and scalable system with intelligent order routing makes integration between order and delivery seamless. This is essential for meeting today's consumer's heightened expectations and demands, particularly during peak season, and ensuring the retailer is meeting its business objectives.

A centralized system ensures purchases are delivered in the exact way the customer wants, while also helping the retailer maximize the profitability of each and every order.