E-commerce continues to grow rapidly, with sales reaching $453.5 billion in 2017, increasing 16 percent from last year according to the U.S. Census Bureau.1 As e-commerce continues to grow, retailers may be struggling to keep up with consumer demand in regards to speed, accuracy, and efficiency. As the industry shifts and brick-and-mortar stores are replaced with online entities, it’s essential that companies’ supply chains are evolving to suit the unique needs of the e-commerce industry as well. This is particularly important in regards to distribution, as warehouses must be able to accommodate a wider variety of products and goods, while close enough to reach consumers as quickly and efficiently as possible.
Below are a few key components to consider to ensure a successful distribution strategy is in place that can adapt to the growth of e-commerce.
Regional Distribution Centers
As “fast and free” shipping becomes standardized among consumers, due in part to the “Amazon effect,” retailers should consider adjusting their fulfillment center strategy.2 Previously, retailers typically had one or two centralized fulfillment centers that offered much longer lead times, a level of service that consumers, at the time, accepted. Today, many consumers have come to expect free, two-day shipping which can best be accomplished through a strategy of smaller, regional fulfillment centers to locate products closer to their consumers. This modification requires a multi-channel approach in order to gain accurate visibility across the entire network to efficiently serve customers.3
Utilizing a Multi-Channel Strategy
By operating a multi-channel strategy, businesses could gain real-time visibility to stock across their entire network, including warehouses and brick-and-mortar stores, to accurately and efficiently fulfill orders – meeting consumers’ demand for quick delivery. Bar codes or RFID tags with scanners, as well as automated storage and retrieval systems (ASRS) can help to further improve inventory visibility and accuracy, while also expediting the process.4
Data from previous years can help drive inventory strategy and contributes to a seamless and efficient supply chain. In particular, demand forecasting could aid in identifying and providing just-in-time (JIT) inventory to avoid both overflow and out-of-stock within fulfillment centers. Demand forecasting can also be helpful to manage inventory to ensure customer satisfaction by contributing to on-time deliveries, reducing inventory stock-outs, scheduling production more efficiently, and lowering safety stock requirements. Additionally, forecasting could improve the ability to determine the impact of price changes, which could have a positive effect on both revenue and gross margin dollars.5 Because items could go in and out of demand quickly within the retail realm depending on trends, it’s also important to keep demand volatility in mind and consider small, frequent deliveries and stay in close touch with suppliers to replenish stock quickly if needed.6
It’s estimated that global retail e-commerce sales will reach $4.5 trillion by 2021, a 246 percent increase from 2014.7 As e-commerce continues to develop, it’s important to create a multi-channel strategy to improve inventory visibility, as well as understand product volatility and forecast demand. Supply chain professionals can help evolve retailers’ logistics to adapt to e-commerce and improve the customer experience, while continuously evolving with the industry.