Ecommerce has come a long way in the past fifteen years. Once largely confined to retailing small consumer goods, online and retailers now sell everything from household appliances to various business-to-business products, outpacing brick-and-mortar stores.
Ecommerce was once seen as an extension of retailing. Now, the highly competitive business is all about providing a gateway for brand owners and manufacturers to sell direct to consumers. Online retailers don’t necessarily hawk their own wares; they’re increasingly in the business of providing a selling platform for a multiplicity of vendors. Amazon is the obvious example in that category, but it’s by no means the only one: Other successful markets include Zulily and Wayfair.
The customer experience is king in the ecommerce world. Customer experience covers not only the appearance of the website and the ease of ordering, but also retail selection, availability, speed and reliability of deliveries, and also the returns experience. Given all that, it’s not surprising that transportation and logistics have emerged near the top of online companies’ priorities. Fulfillment and shipping—given their capabilities to provide customers with quick deliveries—have become key to the customer experience and inventory management has become crucial to fulfillment, not to mention to the top and bottom lines of the internet retailers. Every company needs to keep inventories lean, and to be smart about which products are stocked, how, and where. Shipping and transportation strategies play into all of these factors – which, in turn, are essential to the success of ecommerce companies.
Navigating the ecommerce “ship”
Leading ecommerce retailers typically prepare to fulfill customer orders in three ways: From inventory held in company fulfillment centers, by having third-party vendors supply product to fulfillment centers based on purchase orders, and by vendors drop shipping orders directly to consumers. And, since fulfillment and delivery are important to the overall customer experience, it’s a best practice for e-tailers to own the freight processes involved in getting products to end users and to deploy advanced technologies to help make it all happen.
Drop shipping is generally reserved for products that require flexibility, such as large or bulky objects like furniture, customizable pieces, consumables such as food, and hazardous materials such as perfumes and electronic devices with batteries. This ecommerce strategy allows retailers to save on warehousing space and to push regulation compliance governing shipping food and hazmats onto their vendors.
In the case of Zulily, a company whose business model revolves around promoting 100 72-hour sales a day, the typical shipment starts when a consumer places an order and provides payment. At this point, the company sends a purchase order to its vendor. The vendor then dispatches the items to a Zulily fulfillment center, where the merchandise is packaged, consolidated when possible (which saves money) and shipped to the customer. Only 27 percent of Zulily products are fulfilled from stock kept in the company’s four fulfillment centers. These are the products that the company knows or projects will be in high demand, requiring inventory to be on hand so orders can be fulfilled at a fast rate.
On the inbound side, many sizable ecommerce retailers take delivery of domestic freight by way of truckload (TL) or less-than-truckload (LTL) transportation. But a growing number of commercial shipments inbound to fulfillment centers are now being sent via parcel carriers: In the case of Zulily, about one-third of them are scheduled this way. This is of particular interest to smaller online retailers, which may lack the volume and the infrastructure to handle larger deliveries.
More importantly, ecommerce order fulfillment comes down to the customer experience and the speed of delivery. Parcel delivery may cost more per item, but it’s a much quicker and nimbler mode of transportation, providing an extra measure of flexibility. And, when it comes to costs, today’s inbound transportation management systems are able to rate shop between carriers and between modes of transportation so that the most cost-effective and time-sensitive carrier and delivery method is assigned for each shipment.
Closing the speed gap for online stores
Speaking of getting customers their orders quicker, leading ecommerce retailers now increasingly employ airfreight for items that originate at long distance. In fact, ecommerce is seen as a major factor in the current air cargo boom.
Zulily takes inbound air shipments at one of its three domestic fulfillment centers, where they are processed further for delivery. But the company also has a fulfillment center in Shanghai, and that facility ships products originating in Asia directly to customers in the United States. The idea, to repeat it once again, is to get product to customers ever faster and to provide them with a better experience.
So, as it turns out, large internet retailers like Amazon and Zulily provide logistics services to their vendors and not just a selling platform. Both of those companies—as logistics companies do—have built proprietary systems, such as warehouse management and shipping software, to manage supply chains. Zulily’s shipping system allows the company to make decisions at the shipping point rather than the order point for inbound and outbound packages, providing additional flexibility.
Applying best practices to small- and medium-sized businesses
Small and mid-sized internet retailers may not be in a position to build their own systems, but they can take advantage of shipping systems provided by third-party logistics services providers that have developed their own proprietary software and online platforms for the benefit of their customers, the shippers.
But not all third-party software is created equal. The best of today’s systems incorporates the latest data analytics and decision support elements. Application programming interfaces (APIs), which allow for easy integration with shipper ERP systems, is another popular feature worth the investment.
These systems provide ecommerce shippers with the end-to-end visibility they need to manage inventory, including inventory in transit, and to make quick decisions based on changing circumstances. It’s all focused on making better decisions and quicker and more reliable deliveries to the delight of their customers.
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