When analysing fulfilment strategies, including omnichannel operations, the first questions retailers and brands need to ask themselves are: ‘Is my current fulfilment strategy meeting the current and future needs of my customers?’, ‘Is my fulfilment operation close enough to deliver to my customers in a 1-4 day timeframe?, and ‘What level of risk do I have in my operation currently? As retailers and brands continue to grow these questions will become more relevant and rise on the agenda. And, in endeavouring to get closer to their customers, retailers and brands must heed internal data to determine their most effective fulfilment strategy for the future.
IS LOCATION EVERYTHING?
Maximising warehouse space will always be an important factor in fulfilment. As will be technological enablement and continuous improvement. However, when assessing how best to meet growing consumer expectations, the location of your warehouse will have a big impact on how effective you will be at achieving your objective of putting the customer first. Not only will it determine how quickly customer orders can be processed and shipped but you should also take into consideration key external factors, such as access to labour markets – particularly important in order to flex your workforce to meet increased demand, especially the peak season. As eCommerce continues to boom and omnichannel options keep emerging, logistics and fulfilment challenges are taking centre stage. Business Process Outsourcers (BPOs) and Third-Party Logistics (3PL) partners are stepping up to not only offer the best alternative solutions, including multi-node fulfilment, pop-up distribution sites and store fulfilment, but will also help interpret your data to ensure a futureproof fulfilment strategy.
DATA DRIVES DECISIONS
An average retailer with today’s technology knows where shipments are lagging, bottlenecks are occurring, and geographical clusters of clients are unhappy. But, some lack the visibility and ability to understand why they’re occurring and how to make change.
To meet the customised needs of retailers and brands, BPOs and 3PLs preparing for tomorrow have been taking time to intricately plan traditional and omnichannel fulfilment networks to effect a multi-node fulfilment strategy that is not just ideally located, but also considers factors such as inventory balancing and a feedback mechanism that’s on prime form (feedback from website, user experience, and customer service teams). In considering how to leverage your existing operation to achieve a better outcome today, retailers and brands must be guided by the data.
Challenge: A retail brand’s primary customer base is pinpointed to one particular location and 20% of the SKUs equate to 80% of the volume. The brand has been operating a centralized fulfilment strategy but seeks to get closer to their customer, take advantage of access to a new workforce and open new transportation options.
Solution: The brand in this scenario can strategically leverage their internal data to their advantage. Although their centralised fulfilment strategy may have been successful in growing their eCommerce business to where it is today, there is more to be done to both leverage the existing operation and build a strategy for the future. The data indicates one strategic consideration to be inventory consolidation of the top 20% SKUs into one warehouse location, situated closest to the core customer base. Through this exercise, the brand might take their average delivery time from four to two days, even one day – getting closer to their customers and delivering with speed.
LEVERAGING INVENTORY IN YOUR NETWORK
Data should always be used to guide decision-making. It enables each and every brand an opportunity to find their center of gravity – insight into where customers are based, regionally, and where their inventory is turning with recent fluctuations in the point of sale. With this information, a brand can lean into the complexities of multi-node fulfilment and can be guided by outsourced eCommerce providers.
Keeping supply in specific locations to facilitate effective operations and avoid pain points (an effective Distributed Order Management (DOM) system), alongside your futureproof multi-node fulfilment strategy, can be a game changer. With DOM in place, brands can go from delivering orders in four days from two nodes, to shipping anywhere within two days by leveraging three nodes. Larger brands have started to flex further still by expanding their network to eight nodes, achieving one-day shipping. But, however successful this method is, navigating multiple fulfilment channels and locations can be cumbersome and costly, particularly for brands in hyper-growth that need to move fast. Outsourced BPOs and 3PLs offer an alleviation, easing nervousness and taking guidance from your data to make you successful.
CORE DELIVERY STRATEGY VS. PEAK VOLUME STRATEGY
The wildly anticipated 2021 peak season went as quickly as it came and many retailers had not placed the appropriate resource into solving the previous year and its pain points. As the eCommerce landscape adapts to consumer demand it will become more common for retailers and brands to adopt a new mindset for two strategies: the core delivery strategy, operational year-round, and a specific, unique strategy for peak capacity volume, that can be eight times (or more) larger than the average ordering volume. Although this isn’t new to eCommerce, some brands, particularly accelerators, might have found in recent years they need to begin adopting this – more targeted – two-pronged approach.
One key peak season disruptor remains: transportation. Retailers and brands can act now – off the back of pain points experienced in 2021 – to decentralise their transportation by onboarding independent, local, last-mile carriers or delivery partners. Companies such as Lone Star Overnight announced the expansion of their coverage area in 2021, in time for peak season. This is also not in isolation. It’s a trend amongst regional parcel delivery companies, in response to retail business complaints against the big carriers, who raised rates, imposed peak-season surcharges and volume caps at the end of last year – and subsequently, caused price increases as higher shipping costs are not going anywhere anytime soon.
Look to BPOs now who can start to help you overcome peak challenges of the past, by offering docking strategies to help with the inevitable backlog of orders (this includes temporary trailers and short-term storage solutions for prepared shipments waiting to be picked up for delivery), pop-up distribution options, and more.
The biggest component which will heavily influence all the above? Data. Data pulled from Warehouse Management Systems (WMS), Transportation Management Systems (TMS), and Order Management Systems (OMS) will all paint a picture to guide your decisions around your logistics and supply chain approach. Above all, data can bring you closer to your customer in the best possibly way, whilst also enhancing efficiency and building your brand for the future.
We’re all analysing an exceptionally interesting peak season, but it’s safe to say that retailers who placed particular emphasis on location and multi-node fulfilment were well positioned to come out the other side relatively unscathed. Preparations must now be made to continue to leverage your data to ensure success in 2022.