Optimizing Fulfillment with Intelligent Supply Chains
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Expectations and Opportunities for flexible delivery
The surge in online sales and new delivery modes over the past few years is making supply chain fulfillment crazily complex. It’s no wonder organizations are struggling — from product pick-up to delivery speed, consumers now expect a wide variety of fulfillment options, all offered in near-immediate time.
And unfortunately, the pressure is revealing cracks in companies’ capacity to adapt.
Digital disruptors like Amazon led the way, being able to offer virtually anything a consumer desired, delivered the next day, same day, or even within minutes, while still maintaining low prices. To even get close to that, you need to have your finger on the pulse of your inventory, your delivery ecosystem, and your customer.
Oh, the expectations…
The eCommerce spike of the pandemic years accelerated the need for reliable, cost-effective, and consumer-focused fulfillment strategies. As online order volumes soared, so did consumers’ expectations.
Here are a few statistics to back this up:
- 71% of shoppers said they expect to view in-store inventory online, while 50 percent expect to buy products online and pick them up in a store of their choice (Forrester Research).
- Nearly half of US online adults now agree that they want “lots of fulfillment options” to suit their needs of the moment, and 45 percent wish they had more information about their in-transit orders.
Managing customer expectations for fulfillment options and delivery relies heavily on bringing inventory and delivery data into the shopping experience to enable the promises customers crave. To meet these new demands, retailers are moving quickly to add omnichannel fulfillment retail tactics, such as:
- Buy online pickup in-store (BOPIS)
- Buy online pickup at curbside (BOPAC)
- Reserve online pickup in-store (ROPIS)
- Buy online return in store (BORIS)
Other options like locker delivery, ship from store, ship to store, endless aisle, and two-day delivery, are adding more complexity and challenges for retailers to deliver on their order promise. Does anyone have a headache yet?
A dynamic fulfillment approach is a reality of where retailers need to be today, and it can be highly profitable. For example, the ability to provide a more convenient customer experience can result in a larger basket value. According to Adam Silverman, a principal analyst at Forrester Research, those retailers that adopt ship-from-store programs “can drive a 15 to 30 percent lift in online sales.”
It’s not just about the options available for pick up and return, but the speed at which products can be delivered into the hands of a customer — and that’s highly dependent upon where the inventory is located, and how far away it is from the purchaser.
Where is the optimal location?
With brick-and-mortar brands relying heavily on online sales, the demand for warehousing is at a premium. Retailers are trying to answer questions like: where in the delivery chain do you store inventory (purchased or reserved) to your advantage so you can achieve the highest margin in the shortest time?
Some companies are now including micro-fulfillment — a strategy based on decentralized inventory locations. Micro-fulfillment places small-scale warehouse facilities in the heart of urban centers. These facilities can occupy many diverse types of space, including standalone buildings, ‘dark stores’ in strip malls, and even dedicated portions of existing brick-and-mortar stores.
Micro-fulfillment facilities are typically set up near large populations of end consumers to increase resilience against potential regional supply chain disruptions. Overall, the goal is to minimize the time, energy, and money it takes to deliver products where they need to go — and minimize the chances of things going wrong along the way.
Trends in last-mile delivery
New last-mile delivery options can dramatically shorten delivery windows and improve companies’ ability to meet same-day or next-day targets. Everyone doesn’t have Amazon’s resources, so it’s crucial that companies are constantly searching for the most cost-effective way to shrink the last-mile delivery window as much as possible.
One efficient way to do this is to partner with a third-party logistics (3PL) provider that leverages a warehouse management system to optimize the order fulfillment process. These services are highly convenient but come at a cost and put your customers’ experience in the hands of an external party. Data analysis will be critical to evaluate the true impact of these services on your bottom line as well as on the overall customer experience.
New B2B services are also making a play – Walmart’s B2B service Walmart GoLocal allows merchants of any size to use Walmart’s delivery platform to get orders to their customers. Merchants can use the service for a variety of delivery types, including scheduled and unscheduled deliveries, and same-day delivery, all using Walmart’s last-mile network and logistics. Home Depot, for example, has partnered with Walmart GoLocal to provide same-day or next-day delivery on a variety of home improvement products.
Other trends in last-mile delivery are being driven by the gig economy. Uber started the trend many years ago, and new startups, from Amazon Flex to Postmates to Roadie are cropping up all over the retail ecosystem, offering independent contractors a way of earning extra money with their own vehicles to deliver packages, and at the same time provide same-day or better delivery times. This is often called crowdsourced delivery.
“Crowdsourced delivery was not possible 10 or 15 years ago,” said Ingrid Bekkers, VP of Marketing at Deliv, a crowdsourced same-day delivery startup. “There has been a profound technology shift for drivers. Today, everyone has a GPS computer in their pocket. With that, you can mobilize a disparate workforce of delivery drivers by a whole host of factors, chief among them is where they are.”
That said, crowdsourcing last-mile delivery isn’t without its challenges. To truly enable final mile crowdsourcing, delivery companies must help drivers jump over a lengthy ‘learning curve.’ Rather than expect drivers to figure out routes on their own, companies should provide drivers with mobile technology that takes them through the delivery process and eliminates the opportunity for error.
The good news is that such technologies do exist in the market. Dynamic routing, geofencing, and a photo database of drop-off locations are all features that can assist drivers. Live tracking, chat tools, and an instant settlement system can help companies gain control over crowdsourced operations while removing unnecessary friction.
The future of fulfillment
The future of fulfillment will be about the intelligence behind delivery — achieving true end-to-end visibility using AI, IoT, and data science, as well as leveraging intelligent order management and state-of-the-art mobile tools to fulfill orders within the shortest window, at the lowest cost.
To take advantage of the trends we’ve discussed regarding both warehousing and last mile fulfillment, retailers and brands need to commit to cloud-based solutions capable of delivering the near real-time computing power needed for large data sets and long-term scalability. Only then can you get a complete understanding of fulfillment costs across the entire network — from stores, distribution centers, and vendors — and optimize accordingly.
Why Hitachi Solutions
As the industry continues to navigate supply chain disruptions and digital transformation, there is an incredible opportunity at the intersection of fulfillment and technology. No doubt, an integrated cloud-based strategy, and innovative AI and machine learning tools will play a critical role.
Hitachi Solutions uses the Azure cloud as a foundation platform and has a team of dedicated data scientists and supply chain experts to address all aspects of the retail supply chain. It’s a complex endeavor, and fortunately, Hitachi Solutions can remove this complexity for your organization so you can achieve comprehensive supply chain management without employing a team of your own cloud experts and data scientists.
To find out how Hitachi Solutions can help you balance every element of your supply chain, contact our retail and CPG supply chain specialists today. You can also investigate our current workshop offer to find out how data science and analytics can help you mitigate risk and build a more resilient supply chain for the future.