eCommerce fulfillment: the key enabler for MultiChannel retailing
Global Business to Consumer eCommerce sales has witnessed a sharp growth over the last few years. According to eMarketer, eCommerce sales will top $4.058 trillion in 2020 i.e. 14.6% of total retail sales of US$ 27 Trillion.
Critical to enabling this growth is eCommerce fulfillment. As internet retailing grows, the needs and demands of multi-channel retailing continue to evolve. Clearly, there is a significant need for logistics in many emerging markets and for reliable service providers who can scale up to meet these burgeoning demands. eCommerce fulfillment is an opportunity area for established 3PLs globally as well.
The growth in internet retailing has created multiple new revenue streams for the eCommerce ecosystem. Some interesting trends include:
CPG companies selling to customers directly online
A clear trend is emerging wherein CPG companies are reaching customers online as an additional sales channel while taking care to not upset the existing partner network. This could be through setting up their own website or by selling through marketplaces as an additional channel or a combination of both. Given that most technology systems of CPG companies are predominantly B2B oriented, the fulfillment is being undertaken either by B2C 3PLs or by special purpose fulfillment centers set up by the CPG Companies.
eTailers leveraging cross-border sales and fulfillment
eTailers are partnering with marketplaces in multiple countries and cross-border platforms to reach global customers cost-effectively. There is a clear trend to leverage B2C 3PLs for managing the deliveries and returns to diverse geography customers cost-effectively.
Retailers selling online strategically
Retailers are using a mix of internal and external strategies to stave off completion from other eCommerce players like marketplaces and eTailers. These are:
- Using Internal Omni-Channel Strategies to deepen relationships with customers, providing a consistent experience across offline and online channels. Customers look for extra convenience to buy online, pick up from a store; reserve and collect, inventory lookups, buy online return in store, buy in one store and return in the other etc.
- External Strategies by retailers expanding through cross-border sales, selling on partner marketplaces and for the fulfillment of marketplace orders through inventory in stores.
Technology challenges include integration to multiple marketplaces, Real-time view of inventory, integrations with 3PLs to cost-effectively deliver or to create special purpose warehouses for eCommerce fulfillment.
The growth of B2B eCommerce
B2B Commerce is expected to grow to US$ 1.2 Trillion revenues by 2020. “B-to-B buyers’ prior experiences with B-to-C digital commerce are creating high expectations for those buyers when making online B-to-B purchases i.e. customers rely regularly on the Web to research and buy from their favourite retailers, expect to be able to do the same when they show up at work and go about restocking the office supplies, storage room or maintenance shop.
Impact of Internet Retailing on Supply Chain Processes
In a traditional Supply chain, goods move from a factory warehouse to international warehouses, distribution centers throughout the world and directly to the stores. Typically the international warehouses handle huge pallets of single products that have to be unpacked and shipped to their respective destinations.
Now, if a retailer wants to ship each product/pack of products directly to the customer, the easiest way to do that is from the store. To cost-effectively do this, it is necessary to develop supply chain processes suited for the online customer and to have warehouses either demarcated for eCommerce deliveries or special purpose vehicles be created. It is recommended that Retailers and CPG companies set up separate eCommerce fulfillment hubs or work strategically with 3PLs focused on eCommerce fulfillment.
Impact on the choice of IT Systems – Choose a WMS system Designed for eCommerce Fulfillment
It is critical to choose a WMS (Warehouse Management System) designed for eCommerce fulfillment. Some of the key features to pay attention include:
- Ready Integration to marketplaces. This is a clear need for faster onboarding of customers. This requires that the Warehouse Management System used by the 3PL or the eCommerce fulfillment center is integrated with partner marketplaces.
- It is also critical for the 3PL to be integrated with partner 3PLs and Logistics service providers to be able to widen the geographical reach and manage deliveries and returns cost effectively.
- Client Wise Segregation of Inventory. The WMS solution needs to allow ‘client wise segregation of inventory’ critical to ensure effective end-to-end business process management.
- Batch Picking, Product Sorting, and Order Consolidation. While dealing with offline orders, large size orders can be categorized to consolidate the same items whereas, in Direct to Consumer orders, most small orders will be unique. Thus, a WMS system must enable picking of several units of mixed SKUs in a single pass through an aisle, maximizing the pick quantities, operational efficiency and reducing the travel time.
- 3PL Billing. 3PL businesses or Retailers/ CPG businesses who have invested in B2B fulfillment, often have a fixed billing scheme. An organization therefore, pays for a fixed booking for a long period. The fluctuations of inventory in eCommerce fulfillment, however renders fixed billing an ineffective option. This is a clear need for a flexible WMS system to manage the space – a system that not only handles the transactional based / periodic billing in an effective and timely fashion but is also robust enough to include miscellaneous charges as and when required.
- 3PL Portal. Real-time information of orders, inbounds, transactions and time of delivery is a critical expectation of online customers. Management of this information from a single screen, without the hassle of constant support from a representative, greatly smoothens the customer’s experience. This self–service capability if built into the WMS, not only enables customer retention but also greatly reduces the time and expense invested in customer support.
- Avoid trying to adapt your B2B Supply Chain to meet eCommerce fulfillment needs. Develop Supply Chain processes designed for eCommerce fulfillment/ work with 3PLs who are specialists in eCommerce fulfillment
- Develop partnerships with multiple 3PLs, Last-mile fulfillment and Logistics service providers for cost-effective deliveries and returns management
- Choose warehouse systems designed for eCommerce fulfillment and pay attention to a ready availability of marketplace and 3PL integrations. This will provide significant time to market advantage.
Read in detail, how eCommerce fulfillment enables Multi-Channel Retailing:
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