E-Commerce Supply Chains Adapt to New Market Realities
Two things never change about the e-commerce consumer:
- They want whatever they just bought as quickly as possible.
- They want their shipping free.
This is the ultimate paradox for the e-commerce merchant—to drive speed into the supply chain, while at the same time trying to maintain or even reduce supply chain costs. Just a few years ago, a 5-day service level or slower was considered an acceptable standard for free e-commerce deliveries. Those days are gone. Today, many major brands are aspiring to deliver their packages in 3 days or better to all U.S. domestic customers. Much of this is driven by Amazon, which continues to reinvent the e-commerce consumer experience and made 2-day delivery a shipping standard with its Amazon Prime program.
So how can retailers react and stay relevant with the consumer experience that they bring to the table? Many of the answers lie within the supply chain.
Simply upgrading the shipping service level is not the answer. Why? Most retailers don’t have the margin to absorb the higher costs of premium overnight or 2-day shipping. One thing they can do, however, is place their inventory closer to consumers so they can reach them using ground or deferred service levels that cost a fraction of the price. By taking distance out of the equation, they can service the consumer with high service levels at an acceptable cost.
As a result, fulfillment in the U.S. is regionalizing. Gone are the days when a single warehouse in the middle of the country could service all e-commerce fulfillment demand. New warehouses are popping up all over in major metro areas, while brick-and-mortar retailers are figuring out ways to use retail supply chains and stores to fulfill orders.
One byproduct of this trend is an increase in fulfillment outsourcing. Many retailers and merchants don’t have the scale or capital to build out warehouses all over the country (like Amazon). So, they are moving into multi-user fulfillment centers where many customers share the same space, capital and labor. In turn, they are leveraging each other’s volumes for the required economies of scale to keep their fulfillment costs down, and to reap the shipping benefits that proximity provides.
Often, the facilities are also transactional in nature, or “pay as you go.” They have transactional fees for receiving, storage (based on the sq. ft. of consumption), and outbound pick and pack. Given the volatile and seasonal nature of e-commerce, removing the fixed cost burden is a huge relief for retailers. Also, 3PLs are better able to manage scalability than the retailer as they can spread the real estate and utility risk across a number of customers.
DHL eCommerce has responded to this trend by building out a network of multi-user fulfillment centers. The network already includes U.S. facilities in Columbus, OH and Los Angeles, along with international locations in Mexico, Australia, Hong Kong, Germany and India. Upwards of five new centers are scheduled to be opened in 2017, including one in the New York area. Each is built on the same platform so that a single integration puts the entire network at the merchant’s disposal, with a consistent product feel and quality. The solution is targeted to retailers shipping between 300 and 15,000 orders per day out of each facility, and supports both B2C and B2B transactions.
The DHL eCommerce Fulfillment solution provides all the value-added services and industry-leading service levels that customers need, including:
- Standard integrations with commonly used e-commerce platforms and marketplaces, a published API and more customized integrations to existing systems
- Inventory visibility and order orchestration across the entire global network of facilities
- Omni-channel support that offers the ability to interface and orchestrate orders with external inventory locations, including drop-ship vendors, existing customer facilities and even store networks
- Best-in-class warehouse service levels including 24-hour inventory put-away, and same-day shipping
- A variety of domestic and international shipping service levels
- Transactional “pay as you go” pricing
To learn more about DHL eCommerce and e-commerce order fulfillment solutions, visit http://www.dhl-usa.com/ecommerce.