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eCommerce fulfillment and the modern supply chain: Out with the old, in with the new

It's no secret that online shopping has introduced operational complexity to retailers and brands. But without it, very few (if any) retailers can survive at scale.

It's no secret that online shopping has introduced operational complexity to retailers and brands. But without it, very few (if any) retailers can survive at scale.

eCommerce and omnichannel retail give retailers and brands new opportunities to reach more consumers across different channels. To be successful, businesses need a modern supply chain to support buying behaviors and paradigms.

Today’s consumers expect online shopping to be simple, and delivery to be affordable and fast. Retailers that want to remain competitive must figure out how to keep up. Forward-looking brands are leaning into new technologies—focusing on flexible solutions that improve multi-channel distribution and, ultimately, give customers what they want. Retailers and brands that fail to adapt are being left behind.

All that to say, traditional supply chain solutions are no longer enough. Consider warehousing and fulfillment. For example, if you own your assets or are locked into leases of 3+ years at each location, you aren’t left much flexibility. Your distribution strategy is restricted to the fixed locations in your network.

For businesses that want to expand or diversify their distribution networks using traditional solutions, it quickly becomes time-consuming and requires an entire team to source, vet, and procure new facilities in various locations.

In short, if your network is fixed, you’re sacrificing flexibility, and flexibility is key for success in today’s retail environment. With a flexible warehousing and fulfillment network, you can:

  • Launch new initiatives and test product promotions in different regions
  • Pop up fulfillment centers to position goods closer to consumers
  • Shorten the last mile of delivery and optimize for ground transportation
  • Grow the eCommerce side of your business without fixed costs or long-term investments

Retailers and brands must modernize the supply chain. New solutions that are on demand, automated, and integrated unlock flexibility and complement existing infrastructure and operations.

Traditional solutions vs. the modern supply chain

Let’s take a deeper look at how the modern supply chain differs from the traditional solutions.

Traditional solutions tie up cash and limit visibility

Owned assets and long-term leases tie up cash and limit your options. Whether you’re looking at warehouses, transportation fleets, or other assets, you won’t have the flexibility you need to operate efficiently when you are committing resources to fixed costs.

Traditional solutions for managing the supply chain are fragmented—relying on manual processes and disconnected systems. This results in retailers lacking the visibility needed to identify the source of problems. The traditional supply chain is especially limited in providing insights into last-mile, where many issues lie.

Modern supply chains provide flexibility

Forward-looking retailers and brands are modernizing supply chain operations with on-demand solutions for warehousing, fulfillment, transportation, and more. Retailers can scale as needed to meet an unexpected ballooning of demand or to align with promotions of certain products in certain locations. Because technology connects systems, databases, and processes, retailers have full visibility and can fix problems and streamline operations accordingly.

Logistics is one of the fastest-moving categories of tech in 2020. Logistics tech startups are raising capital and leveling up the supply chain in a variety of ways. Whether you're a legacy retailer or a fast-growing digitally native brand, modern logistics solutions give you the ability to fulfill orders more effectively and provide enhanced buying experiences.

With variable cost models and the option to scale your operations more flexibly, retailers and brands can shorten the last mile and reduce costs. Risk is also mitigated since you aren’t locked into fixed terms or assets.

Traditional warehousingFlexible, on-demand warehousing
Manually source and procure providers: Time-consuming to secure and onboard with new 3PL providers; steep startup costs; months-long implementation times; have to repeat if expanding into new markets or adding providersSearch is simple and fast: A network of vetted providers are connected through a single platform, which removes the hassle of sourcing individual providers, eliminates startup costs because the technology is standardized, and makes it simple to get started.
Disconnected technology: Implement and manage multiple technology systems across different 3PL providers; No view of aggregate data across network Standardized technology: Unified technology platform across providers; Centralized visibility and control across your network; Real-time dashboards and detailed reporting
Expensive and rigid terms: Requires fixed investments and steep startup costs; Unused capacity and services are a sunk cost; Terms and contracting vary from provider to provider Pay-as-you-go model: Only pay for the space and services you use; No long-term leases or startup costs; Flexibility to ramp up or down depending on your business needs
Limited: Growth is limited by network locations and capabilities; Service levels drop when volumes increase; Lack of expertise in supporting new channelsFlexible: Expansive network includes every major metro area; Broad range of capabilities; Overflow, retail distribution, and eCommerce fulfillment options; Access to a team of logistics experts

How to innovate eCommerce fulfillment

Exactly how is the modern supply chain able to deliver these benefits? And how can you innovate your own eCommerce fulfillment? Let’s explore three areas where you can seize opportunities.

1. Smarter supply chains and better planning

See warehousing as a source of potential

A flexible solution for warehousing & fulfillment gives retailers and brands more options and freedom to solve supply chain disruptions as they occur. On the other side, warehouse providers can maximize their facilities and create more revenue by offering on-demand arrangements. The new model of on-demand warehousing provides fresh opportunities for both retailers and warehouse providers.

Optimize the supply chain for customer loyalty

The traditional supply chain was built to avoid risk, and it worked fairly well before eCommerce came along. eCommerce introduced new risks and introduced complexity that wasn’t designed to be managed by traditional solutions. With a flexible solution, you can mitigate the impact supply chain disruptions have on your business while improving your service levels.

The supply chain and last-mile logistics underpin the success of fulfilling orders safely and on time, all of which culminates in creating more loyal customers. Everyone has seen how Amazon has used this strategy with success, and thanks to technology, even smaller retailers can implement the same strategies.

Use AI and automation to iterate

Success in eCommerce has always relied on iteration. Retailers see what’s working and what’s not, and make changes based on their insights. Automation helps remove human error by automating processes, such as inventory allocation and forecasting. Artificial intelligence (AI) is giving retailers predictive capabilities that allow them to forecast accurate outlooks and get in front of developing issues and opportunities. Job descriptions must evolve for retailers to take advantage of the potential of AI and automation, but humans will always remain necessary to guide and manage these processes.

2. Increased margins and decreased risk

Environmental sustainability + social sustainability = corporate sustainability

Environmental and social sustainability used to be seen as a luxury — nice, but not necessary, and certainly not cost-effective. As customers (led by the Millennial cohort) have put concern for the environment front and center, retailers have had to adjust. Modern logistics solutions enable businesses to reduce their footprint and continually optimize processes, which is inherently sustainable and good for the environment. Reducing waste also makes a business more sustainable as it uses resources more effectively.

Recession-proof the supply chain

History tells us that we’re overdue for a recession. The “r-word” has traditionally triggered panic, especially in retail, but modern logistics solutions can soften the impact when one does occur. On-demand solutions prevent retailers from getting locked into fixed, long-term contracts that don’t support the dynamics of the market. Retailers can scale operations and assets as demand fluctuates.

3. eCommerce breaks through limitations and continues to innovate

Take advantage of new opportunities for heavy/bulky

While eCommerce had been limited primarily to smaller, lighter items due to the costs involved in standard warehousing and shipping, this is no longer the case. Because consumers are more comfortable with eCommerce, almost every product can now be sold online — even the large, difficult-to-ship products. If you’re able to economically manage the fulfillment of larger items, you can land these sales rather than forfeiting them to your competitor with this capability.

Innovate with brick and mortar

eCommerce is no longer the new thing, and it continues to innovate. Perhaps surprisingly, this innovation has included a new take on brick and mortar. Online retailers are now opening physical stores to provide next-level service and evolve shopping from a transaction to an experience . Additionally, businesses are creating “bricks and clicks,” online/physical store hybrids, where customers can shop in-store and order online or shop online and pick up in-store. There’s no one right model for eCommerce anymore. The sky's the limit for brands looking to differentiate and provide a unique customer experience.

The modern supply chain as a vehicle for greater profitability

Retailers that take advantage of what the modern supply chain has to offer will be better able to align with what customers value. As retailers optimize operations and reduce costs while improving customer satisfaction, profits will grow.

Download the FLEXE report, "2020: 9 Retail and Logistics Predictions"

Find out what major advancements will impact our industries this year, as well as where to focus to optimize your retail and distribution strategy.