Traditionally, when a manufacturer or wholesaler sells products through a retail giant they ship items via full pallet truckloads from a distribution center (DC) to the retailer. But times are changing, and you can thank the seismic shift occurring in the way consumers like to shop. The ecommerce channel is gaining more and more sales ground and, as a result, it is putting a spotlight on the operational efficiency and profitability of retailers’ online business.
What does this mean for companies who sell products through these retailers and/or third party sites? When it comes to distribution operations, expect new requirements and directives. For example:
- Push more product through our online channel
- Ship online purchases (individual items) directly to our customers
- You stock the product
- If your products don't perform against our scorecard, they risk being dropped
- If you're that manufacturer or wholesaler, what do you do?
According to survey results mentioned in a recently published article of CSCMP’s Supply Chain News, responding companies representing the spectrum of ecommerce players expect online sales to grow an average of 40 percent over the next five years. This is significant, because as ecommerce sales grow, so does the need to get those purchases to customers, and fast. Same day requirements are becoming the norm. From an operations perspective, this creates a host of challenges for manufacturers, as they aren't generally set up to pick and ship individual item shipments. Many don’t even own warehouses.
At FIDELITONE, we help manufacturers and wholesalers who sell products through the big retailers as well as third party sites (e.g., Amazon). “Companies are looking for real-time solutions today,” says Pat Diggins, Vice President of Business Development - Order Fulfillment. “Practices such as single wave picking and shipping may have set the tone in the past, but with same day shipping requirements as soon as an order hits the system, it needs to be processed quickly.”
SHIP TO STORE
Retailers are also responding to customers’ desire to pick up online purchases at a nearby store location. These visits provide the retailer with opportunities to generate in-store sales, too. “Ship-to-store items require additional handling,” says Diggins. “We’re set up to take the box and special label it, so that when it gets to the store, the store’s team knows where it is and who it is for.” He added: “Companies who are doing it themselves should remember to build in costs for this additional processing when negotiating pricing with retailers.”
A CASE FOR OUTSOURCING
Drop shipping directly to the consumer’s home or to the store for pickup — picking items one at a time — is not a core competency of most manufacturers. But it’s quickly becoming something they must do. This is influencing their decision to outsource — particularly during peak seasons like summer, winter or the holiday rush. With ecommerce, there is also the 24/7 processing dilemma and weekend sales that create Monday morning order processing crunches.
With increasing volumes from ecommerce, shorter transit time expectations and more “ship to” destinations, competitive advantage is increasingly being realized through a reliable, agile, efficient supply chain.
Want to learn more about how to get a handle on your ecommerce delivery expenses this seasons? Read our 5 Tips to Offset Parcel Rates This Season.