By definition, an agile ecommerce supply chain is a product distribution system focused on speed, cost savings, productivity and responsiveness and flexibility to market demands. Supply chain management (SCM) exists to improve a company’s long-term performance.
Amazon is already capable of offering same-day and one-day delivery to 72% of the total U.S. population, according to RBC Capital Markets. The retail business model as we knew it has been hit pretty hard, resulting in a record number of bankruptcies and store closings.
Pressure to be Agile and Flexible
What pressure do you have to be more agile and flexible in your distribution center and ecommerce supply chain? Here are 10 steps to help you improve supply chain agility and performance:
Get Inventory Closer to the Customer
One way that companies are reducing shipping costs and speeding order time to customer is through having ecommerce fulfillment centers closer to your customers.
Here’s one example: An east coast-based industrial B2B company we work with is looking to move its two distribution centers closer to its two major manufacturers. In addition, it has a third DC run by a third-party logistics provider (3PL). Management is considering changing 3PL locations, moving them closer to west coast clients – representing 20% of its customers – for one-day ground delivery.
Here are 10 critical analyses to determine if a multi-FC strategy is right for you.
Look for Process and System Efficiency
There are many opportunities to make your SCM more efficient, reduce costs and provide higher service levels to customers. A typical ecommerce supply chain includes sourcing, inbound transportation and outbound transportation, IT services and many four-walls functions (receiving, storage, order fulfillment, value-added services and reverse logistics). Here are four major ways to save money in your supply chain.
Make Distribution Convenient and Flexible
The customer is in control, and can see inventory located at the stores nearest them. Options include BOPIS, ship from store and from an FC. Communicating availability and delivery timeframes from each location is key.
In the case of Walmart, 100% of its store assortment is available for store pickup, including fresh foods, packed and brought to your car, at no extra charge.
Streamline the Inbound Supply Chain
The objective is to be able to accept a high percentage of purchase order receipts without any rework and to get the vendor to sign on to your compliance program. A number of our clients use freight consolidators for inbound shipments, resulting in significantly lower freight costs in their ecommerce supply chain.
Many of our clients have transitioned from catalog to ecommerce to multichannel businesses selling to Walmart, Target, Walgreens and other big-box retailers. These changes in supply chain and distribution mean changes in vendor compliance, packaging for direct to customer vs. store display and all the IT systems that EDI-based protocols require. But they lead to building sales.
Strategic Use of 3PL
3PL facilities can be up and running in four to six months, vs. 12-18 months for an internal facility. Additionally, you don’t have the risk of hiring all new management and staff and the capital investment regarded.
An ecommerce company we work with sells food gifts, hitting 45,000 orders per day during the peak holiday season. We helped them locate five independent frozen food-ready 3PLs that deliver 95% of the Christmas gifts via one-day ground. Learn what factors to consider in selecting a 3PL for your business.
End-to-End Supply Chain Communication
Agile fulfillment centers have complete visibility of products flowing from the manufacturer or distributor to the ship, air freight, trucking line or small package carrier, to their FC and outbound to the customer.
One of the major benefits of EDI and inbound IT systems is the exchange of status and documents eliminating paperwork and verbal communication. The common currency is the status of material and finished product through the ecommerce supply chain.
Increase Network Capacity and Throughput
There is tremendous untapped capacity available in some ecommerce FCs. To give you one example, UPS, FedEx and the U.S. Postal Service now offer Saturday and Sunday delivery options. However, most FCs run a single eight-hour shift, five days per week.
Optimize the layout of your center: There are 11 ways that the fulfillment center’s impacts cost and order throughput. These include use of cubic capacity, the width of racking aisles, flexibility of operations and how efficiently you use labor. You can learn more about it in this blog.
Barcode technology for all ecommerce fulfillment processes: this is the most efficient way to increase data capture accuracy, timeliness, track product and order movement throughout. Here are 11 ways barcodes improves operations.
Get more productivity from your labor dollars: Consider using temporary labor to augment permanent staff, and explore incentive pay plans. Here are some more ways to increase your productivity.
Flexible IT Systems and Service Strategies
Cloud-based, SaaS and subscription systems are probably the most innovative technologies in IT. Many robust WMS, shipping and EDI systems that were once out of the reach of small-to- medium-sized ecommerce companies are now affordable based on these models, and IT functions are contracted out. Operational costs are typically based on transactions processed and IT resources used. These approaches make IT more nimble than on-premise licensed models.
JIT Packing Materials
Corrugated materials for boxing and dunnage supplies take up a lot of space. Work with your suppliers on just-in-time delivery to reduce storage needs.
Drop Shipping Vendor Programs
Buyers typically select the products they feel will sell best, and many are passed on because of inventory and space concerns. However, many ecommerce companies can offer a complete vendor line rather than just selected products through a drop shipping program. This can lead to increased sales without tying up inventory dollars, especially with slower-turning products.
Summary
Having great merchandise that your customers want is paramount, but getting it to them when, where and how they want it at an affordable cost is the function of an agile and flexible ecommerce supply chain.
Brian Barry is president of F. Curtis Barry & Company