Ecommerce network design is being rethought, accelerated by recent history (credit: Pin Adventure Map on Unsplash)

There has been a trend in ecommerce network design to support a strategy of “getting product closer to the customer,” leading to more efficient, optimized models that control costs and better deliver on the service-level promises.

In recent years, this has led many retailers to take a fresh look at traditional network structures and processes, and rethink the traditional hub/spoke model to create more forward placement of inventory near demand centers.

Then came the COVID-19 pandemic, which upended everything by shutting down stores and making ecommerce into both a business and customer lifeline. Out of necessity, many retailers quickly turned on and massively scaled up store-based online fulfillment, both curbside pickup and ship-from-store operations.

While physical retail is back, though economically challenged, the pandemic lesson was learned: leveraging stores for ecommerce fulfillment whenever possible, and finding other ways to decentralize inventory, makes sense both economically and in terms of the customer experience.

On the inventory side, retailers are still recovering from the prevalent “just in case” approach that led to massive overstocks which are still being worked through. This happened via the infamous “bullwhip effect” of over-ordering to hedge against supply chain issues in 2021 and 2022. Companies are now taking more of a balanced approach that skews more toward “just in time” ordering.

Now that we’re a bit removed from the pandemic, how has ecommerce network design shifted? In what ways are data and analytics being applied to better manage inventory, route orders more efficiently and save on shipping costs? And how are shifting demand patterns plus the realities of logistics and supply chains affecting network decision-making?
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Let the Prime Day show begin!

Or rather, make that shows, as Target and Walmart are once again offering up competitive summer bargain events as each tries to shake off the economic doldrums, steal the other’s thunder and stir up consumer interest in a raft of online savings.

It’s also an opportunity to continue clearing out overstock goods, as retailers have been working to recover from the bullwhip effect on inventory levels, with new fall/holiday good set to steam in. One obvious advantage in Walmart and Target’s favor: the ability to drive bargain-hunter traffic to massive store fleets, as well as their marketplaces.

As expected, Amazon will hold its annual summer shopping extravaganza on July 11-12. It comes preloaded with brand partners, invite-only deals and recommendations from celebrities and influencers – who are fairly indistinguishable at this point – some of course from Amazon Prime Video programs.

There is some positive social buzz afoot for Amazon and its extravaganza, now in its ninth year. According to social media analytics firm Sprout Social, mentions of Prime Day on Twitter jumped 2,454% following Wednesday’s announcement, with a 92% positive sentiment rate.

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MyFBAPrep, one of several companies brokering warehouse space and fulfillment services between shippers and 3PLs, has expanded its network from 15 million to 85 million square feet in the past four years to meet demand, increasing coverage in the UK, Germany, Canada and Mexico as well as the U.S.

CEO Tom Wicky, who founded MyFBAPrep in 2018 with partners Bart Boughton (COO) and Taylor Smits (CSCO), said the model is simple: stay asset light, purchase service and space commitments at volume from 3PLS at a wholesale rate, then charge shippers below retail.

Others operating in this corner of ecommerce fulfillment and logistics include Flexe, Stord, UPS unit Ware2Go, Flowspace and Deliverr – recently sold by Shopify to Flexport – although some of them have begun to abandon the pure asset light model and taken on their own fulfillment facilities.

Wicky said the majority of its customers are Amazon aggregators, top Amazon sellers and established DTC brands. The business is split among retail, B2B and co-packing (20%), DTC sellers (30%) and its legacy marketplace prep, including value-added services like kitting and order breakdown (50%).
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FedEx provided details on its plan to consolidate its Ground, Express and Service units by 2024, announced last year, with its less-than-truckload Freight unit remaining separate, projecting cost savings of $4 billion by 2025 and an additional $2 billion in network efficiencies by 2027.

The consolidation will cost an estimated $2 billion and take several years to complete, while the units will be combined on paper by June 2024, FedEx said at an investor event this week in New York.

The move, undoing a big piece of FedEx founder Fred Smith’s legacy, brought universal praise from industry analysts and observers. They said the move was a necessity for its long-term survival given the competitive climate, especially with UPS, and an economically challenged ecommerce logistics market with lower volumes.

Shippers will benefit from a single FedEx pickup, a sticking point for years and an advantage that UPS reps often use when touting its “power of one” single-network structure. There was general agreement that the integration timeframe was doable, although some were concerned about the execution.
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