Blog postsMay 01, 2019
Top 3 logistics challenges for retailers and brands and how to solve them
How an on-demand model provides new solutions to warehousing and fulfillment challenges
It’s a whole new world for today’s retailers and brands—eCommerce, omnichannel, buy-online-pickup-in-store, same-day delivery—the way we shop has changed. While this is great news for consumers, it creates new logistics challenges that businesses either have to solve, or risk going the route of so many others: Bankrupt.
CBRE recently released a report that dug into 68 recent retail bankruptcies. The common theme amongst them? An inability to adapt.
The landscape has changed. Whether you’re a legacy retailer that needs to optimize for online sales, or a digitally native brand looking to expand into brick-and-mortar locations, your ability to grow and thrive in this new age hinges on your logistics strategy.
eCommerce has been on the rise for more than a decade, but the logistics infrastructure necessary to support it has been slow to adapt—especially in warehousing and fulfillment.
Until recently, distribution networks were primarily designed to get goods from warehouses to store shelves. They weren't built to handle eCommerce, omnichannel, and the myriad of other ways customers purchase now. This has resulted in some significant logistics challenges including:
- Meeting customers’ ever-increasing expectations
- Lack of insight into operations that span multiple buying channels
- Responding to supply chain disruptions
Find out more about the implications of these challenges and the modern logistics solutions that can solve them.
1.) Meeting customer expectations
Every retailer’s primary goal is to give their customers what they want, but when what your customer wants is a moving target, it’s hard to do.
Amazon set the bar with free, two-day delivery, then raised it with next- and same-day options. And, as of this week, Amazon announced it would now be making one-day delivery its standard for Prime members. Retailers and brands who want to compete or avoid selling through Amazon, are now compelled to match their delivery promise or provide differentiated value to their customers. According to our soon-to-be-released 2018 eCommerce Fulfillment and Logistics study, 73% of polled retailers and brands now offer two-day or faster shipping for free.
But your delivery promise alone isn’t enough. Consumers aren’t always satisfied with fast, free shipping—they want convenience, too. That requires that your products be accessible through a multitude of purchasing channels—in store, online, via social media, and third-party retailers. From the store to the website to delivery, the experience must be seamless and convenient across every channel. Omnichannel is no longer optional, it’s a requirement.
What can you do?
If all that seems unfeasible, it’s because it is. Every year, Amazon hemorrhages nearly $28 billion on shipping costs and another $34 billion on fulfillment costs to facilitate its delivery promise. No other retailer can do that, and they don’t have to. Meeting your customer expectations starts with knowing who your customers are and what matters to them. Speed and cost of delivery, the unboxing experience, your returns process, and messaging consistency all play a role in satisfying your customers. You have to find the right balance for your business and your logistics.
In order to handle fast, affordable delivery and support omnichannel sales, retailers and brands need a flexible warehousing and fulfillment solution that makes it simple to build out a network to create compelling delivery promises. The option to pop-up warehouses and fulfillment centers close to your customers allows you to save on transportation costs, and the ability to do so without being locked into lengthy contracts or incurring steep startup costs ensures you can remain nimble in the face of changing consumer shopping habits.
2.) Lack of visibility into order and inventory data
For both large enterprises and fast-growing brands, forecasting and inventory allocation are incredibly difficult. A new study revealed that 73% of corporate retail professionals believe that “inaccurate forecasting [is] ‘a constant issue’ for their store” and 87% report that it’s a “larger factor in revenue loss than theft.”
Why is forecasting so hard to do? Well, it comes down to data. 33% of warehouses don’t have a warehouse management system (WMS), meaning they lack the basic technology needed to give retailers and brands a holistic view of their inventory and order data.
Even if your provider is using a WMS to manage operations, there's no guarantee it will be the same system across multiple facilities. This forces you to adapt to disparate systems and can add complexity to your technology stack. Consider this: According to our 2018 FLEXE Warehouse Capacity Economics & Trends (WCET) survey, a majority (55%) of retailers and brands have at least three or more warehouses in their network, and a third have six or more. Not all of them are running different systems, but even if just two are, you’re going to run into problems.
If you’re using multiple providers and multiple WMSs, then there is an inherent disconnect between sets of data, making it incredibly challenging to get a comprehensive view of order issues, inventory levels, and warehouse KPIs (just to name a few) across your network. Without a connected system, you’re left with a fractured view of operations, which makes it extremely difficult to plan ahead.
What can you do?
Beyond buying a crystal ball, your best option is to look for a provider that offers simple and diverse integration capabilities, making it easy to sync data across your warehouses with your own internal systems. You also want a provider who offers performance dashboards and reporting tools—taking the guesswork out of your inventory management so you can make more data-driven decisions.
One of the great things about FLEXE is our tech platform, which standardizes operations across multiple, traditionally disconnected providers. Your entire fulfillment operation is connected by a single technology platform that provides at-a-glance insights via real-time dashboards and reports.
3.) Responding to supply chain disruptions
Managing day-to-day operations is tough enough, but when you throw outliers like weather complications, natural disasters, tariffs, and other unforeseen events into the equation, things really get complicated.
Unfortunately, unexpected disruptions are something you can count on. In our WCET survey, we found that 74% of retailers and brands deal with inventory fluctuations, and of that group, 90% need additional capacity throughout the year because of them.
For retailers and brands, the biggest hindrance to reacting to these disruptions is the time it takes to vet and integrate with new warehouse providers. If you need to pop up additional capacity to handle peak season inventory levels or sudden fluctuations you'll have to onboard a new facility and undergo a lengthy search and integration process. On top of that, if you need multiple locations, you’re going to have to do the same thing each time.
What can you do?
To streamline this process and react more quickly to those inevitable disruptions, on-demand warehousing and fulfillment provides access to a network of providers with available capacity and services in every market. This means that wherever and whenever you have a need, you’re able to find the right provider with the right specifications for you. And since every provider is connected through a single, standardized tech platform, it’s incredibly fast and simple to add more locations—a lifesaver when you’re trying to react on the fly to natural disasters or other unplanned complications.
If adaptability is the key to modern retail success, then structural flexibility—the degree to which your distribution network is capable of scaling and responding to market demands—is the infrastructure that supports it.
In order to keep up with your customer demands, you need a warehousing and fulfillment strategy that can help you adapt to those requirements. And as those demands continue to evolve over time (which they are doing faster than ever), flexibility within your supply chain will become an essential part of your business strategy.
The truth is, you need to be agile in order to adapt. Just as startups have adopted agile organizational strategies, there are ways to make your supply chain more responsive as well. There are now alternative solutions to building out your own distribution network or even entering into long-term contracts or lease agreements that lock you into fixed costs.
Warehousing and fulfillment isn’t the only step in the supply chain that’s getting disrupted. There are new digital logistics providers that provide transparency throughout the supply chain. From freight forwarding to warehousing and fulfillment to parcel shipping and last-mile visibility, these solutions provide end-to-end visibility so you can remain agile and responsive, even in the most chaotic of situations.
Want to learn more?