The eCommerce landscape has become increasingly difficult to navigate. Over the past 18 months, unprecedented numbers of consumers moved online, producing an ecommerce retail boom. However, new factors are now placing pressure on eCommerce markets, beyond volume alone. From soaring prices and global supply chain disruption, to increased environmental awareness and higher customer delivery expectations, a new approach to fulfilment is a priority.
As customers increasingly prioritise reliability of delivery over speed, data driven fulfilment is now key for eCommerce retailers to provide certainty in an uncertain supply chain, explains Emma Dempsey, CEO, James and James Fulfilment.
Delivering on Promises
Supply chain efficiency has been historically based on two theories: fast fulfilment and just-in-time operations. Continual ordering minimised excess stock, and eCommerce retailers offered customers ever-quicker delivery options in a bid to stand out in a competitive marketplace.
This model requires a steady global supply chain and therefore has been turned on its head in recent months. With well-publicised goods shortages, for consumers, having a product arrive when promised now takes precedence over same or next day delivery. For eCommerce companies, additional stock no longer signals inefficiency; it is an essential contingency that is central to fulfilment success in 2022.
With this shift in focus comes a range of challenges, requiring rapid intervention from retailers. Can additional stock be stored in the warehouse? In light of escalating demand for space, which best-selling items should be prioritised to increase profits? Should retailers opt for local micro-warehouses or expand their geographic location? Do carrier options meet rising customer expectations without risking profitability?
Rising costs and supply chain uncertainty put pressure on retailers to ensure a more efficient, effective and responsive fulfilment process. Product ranges should be optimised to meet demand and customers need to be kept informed on their purchase.
Utilising information to maintain day-to-day operational performance should be a given. An overview of key performance indicators such as orders placed, items dispatched on time and picking efficiency, are important in supporting efficient fulfilment. But retailers have access to a wealth of additional metrics that could be used proactively to fine-tune operations, boost profitability and, critically, communicate with customers.
For example, monitoring the age of stock highlights any items reaching the ‘best before’ date. Companies can then prioritise sales – through discounting or offers – to reduce the risk of wastage. A data-led approach can also provide valuable insight on unprofitable overstocked items and other missed profit opportunities.
Interpreting Fulfilment Performance
During the pandemic, the primary focus for many companies was meeting escalating demand, meaning the intricacies of fulfilment improvements were overlooked. But in an increasingly competitive market, customer retention and profitability is hugely challenging.
This issue often comes down to how best to use data. What is the industry benchmark for a specific product or sector? How is the business performing compared to its competitors? These questions enable retailers to establish which part of the process needs to be prioritised to improve profitability.
A dedicated fulfilment service cannot only capture this data, it can offer tangible value by actively working with businesses to highlight specific issues and provide best practice comparisons. For example, many businesses are still opting for a blanket carrier strategy that eradicates product margin on low value products. In contrast, a built-in intelligent carrier matrix ensures the customer is offered an appropriate service that aligns with a product’s value and protects margin.
The need to add contingency stock into already squeezed warehouse space has highlighted the importance of data. It enables businesses to identify slow moving items – those that cost more to store than they are worth – and informs discounting to shift the stock and optimise warehouse space. It also allows retailers to prioritise restocking the most profitable items.
Through intelligent fulfilment, companies can support evolving customer needs and environmental expectations. Retailers can locate stock across multiple fulfilment centres globally to reflect consumer demand in different regions. Analytics on rates of sale and stock turnover analytics for each region can inform replenishment strategies and also customer offers in real time. Data driven warehouse allocation rules can generate different offers based on stock location and quantity, factoring in cost and speed of shipping, and the rate of sale of stock in each area.
Looking ahead, the advances in AI and machine learning will enable environmental impact metrics, such as carbon footprint, to be included in these rules, allowing retailers to meet government targets as and when they are introduced.
eCommerce remains a strong, profitable market – but competition and increasing uncertainty are putting pressure on retailers to exercise greater control over supply chain processes. Retailers who can proactively utilise data to improve operations, manage events and, crucially, communicate with customers, will be best placed to exceed expectations without jeopardising profitability.