Ecommerce Fulfillment: 3 Ways to Optimize in 2022

ecommerce fulfillment robot handshake

Ecommerce continues to accelerate at an aggressive rate, and there’s no sign of a slowdown. Many retailers and brands have shifted into survival mode when it comes to ecommerce fulfillment, looking for ways to handle record online order volume and maintain brand integrity while navigating supply chain challenges, an ongoing labor shortage and rising costs.

What can you do to survive and thrive in 2022? Fill and deliver orders faster, scale for growth and fluctuations and control costs. Simple right? Focusing on three core strategies can help.

Strengthen Technology Capabilities

The good news is that automation and robotics are getting better, faster, and more affordable. Companies are employing everything from pick-to-light and wearable devices to mechanized conveyors and automated sortation in their ecommerce fulfillment operations to increase efficiency and productivity.

There have also been remarkable advancements in ecommerce fulfillment technology involving artificial intelligence (AI), machine learning and vision systems. Autonomous mobile robots have proved to more than double productivity compared to manual cart picking. Goods-to-person robots and robotic arms are other good examples of technology applications that can increase efficiency, reduce labor dependency and scale for fluctuating volume.

With dramatic ecommerce growth, it’s also important to have the right infrastructure in place on the back end. You need a strong integration framework that allows you to stay agile as you grow and evolve and partner with other companies. Make sure your systems can communicate using a variety of protocols (i.e., API, AS2 and even SFTP) and standards (such as X12, flat file, XML, or JSON), so you can integrate with other parties’ systems.

In order to grow strategically, you’ll also want to give serious consideration to organizational infrastructure. You need the right leadership and labor in place to support advanced technology initiatives.

Strategically Approach FC Network Configuration

If you need to deliver orders faster and more economically, take a careful look at your distribution network. You might be surprised to see how much you can reduce transit time and cost by moving products closer to end customers.

With one facility on the West Coast and one on the East Coast or in a central location (based on U.S. population), you can reach more than 90% of the U.S. within two business days using ground service. Additional distribution locations can improve service levels even further.

Distributing inventory across facilities in different geographic areas also gives you more ecommerce fulfillment options to help when you experience spikes in volume, staffing issues or supply chain challenges.

If your operations support both B2B and DTC fulfillment, micro-fulfillment centers (MFCs) and dark stores can be an attractive alternative to store-level fulfillment. They allow retail locations to focus on their core competency and avoid alienating customers with congested aisles.

A word of warning: Historically low vacancy rates and high ecommerce demand are driving up costs for industrial warehouse space. This trend is expected to continue through 2023, making it more challenging for retailers and brands to secure space for ecommerce fulfillment.

Explore/Expand Shipping Options

Parcel costs are rising exponentially. Since demand exceeds capacity, carriers currently hold all the pricing power and can be selective when onboarding new volume. They’re also renegotiating contracts to drive less profitable volume out of the network. Regional and local carriers are entering the competitive landscape, but it will likely be 2023 before we see a significant impact to the market or meaningful competition with UPS and FedEx.

In this environment, you’re unlikely to reduce shipping costs through lower rates, so you’ll need to rely on efficiency and optimization to achieve savings.

Rate shopping can help identify the most economical solution to meet your customers’ delivery expectations. You may be able to reduce shipping costs by as much as 25% without sacrificing speed to customer. If delivery time is a concern, combining rate and transit shopping allows you to reach customers faster and more affordably than static routing.

In the current parcel market, data transparency is critical. Take advantage of analytics software to gain visibility into your parcel data, in order to measure performance and cost and evaluate how carrier rate changes impact your distribution.

The year ahead promises significant growth potential if you make the effort to leverage advanced technology, approach your distribution network strategically and evaluate options for parcel shipping. Cheers to a productive and prosperous New Year!

Perry Belcastro is Senior Vice President, Fulfillment at Saddle Creek Logistics Services