Beyond 2020: E-Commerce Fulfillment Transformed

Now more than ever, e-commerce has taken center stage in retail. Social distancing measures and other restrictions on brick-and-mortar store operations have pushed buyers towards online channels. The U.S. Commerce Department reports that e-commerce sales in Q3 2020 rose by 37.1 percent compared to Q3 2019. Now, they make up 14.3 percent of all U.S. retail sales. Per the same report, retail e-commerce sales reached $209.5 billion, up 30.6 percent from the first quarter. These trends paint the picture of a step-change increase in e-commerce sales.  

While the pandemic has created challenges for many, some companies have risen to the occasion. How? By applying their core capabilities—such as the supply chain—to drive sales and revenue in an e-commerce-centric setting. Home Depot Inc. said online sales doubled in the second quarter, while Dick’s Sporting Goods Inc. said e-commerce sales increased 95 percent during Q3 2020 compared to Q3 2019. The pandemic helped drive Walmart’s e-commerce sales up 79 percent in its last quarter while Target’s e-commerce sales surged 155 percent in the same quarter.

As the calendar flips to 2021, supply chain leaders must devise short and long-term strategies to support the sustained bump in e-commerce order volume. In doing so, we recommend shaping your strategy through the lenses of capacity, speed, and efficiency:  

Increasing capacity

Start by analyzing and understanding the impacts of the surging buy online pick up in-store (BOPIS) transactions on the holistic fulfillment network. After all, this channel experienced 259 percent year-over-year growth in August 2020.

Next, refresh your overall fulfillment network capacity strategy with revised volume projections across digital and physical channels. In this effort, consider the role that physical stores can play as digital fulfillment points.

From there, develop a strategy for exacerbated seasonal e-commerce transaction volume peaks. For instance, consider on-demand warehouses and “dark store” concepts.

Finally, align on your future vision for physical store vs. e-commerce fulfillment operations. For example, consider whether distribution centers (DCs) should be multi-channel or single in nature based on scale and inventory optimization.

Increasing fulfillment speed

Identify process enhancements to enable multi-order processing instead of traditional discrete order processing.

Also, deploy software and data initiatives to facilitate simple order rapid SKU setup and product receipt on the inbound side. On the outbound side, consider how technology can promote seamless communication with order status and tracking.

Finally, evaluate innovative material handling technologies that can accelerate speed and service levels.  Consider the evolving e-commerce order profile when assessing the ability for automated storage and retrieval systems (ASRS). Similarly, keep e-commerce in mind when evaluating goods-to-person picking systems to support essential business requirements.

Maintain efficiency and minimize cost per unit

Under new volume growth projections, examine and vet the payback of digital fulfillment technologies that can help you optimize the e-commerce fulfillment operations channel. Consider concepts such as a “Fulfillment Center Control Tower”—providing operators with real-time facility performance analytics and recommendations across staffing, product flow, and individual associate productivity.

From there, develop a staffing strategy focused on both recruitment and retention in a new, e-commerce centric landscape. For example, your strategy should account for the long-term increase of labor-intensive e-commerce orders, including the evaluation of performance-based incentive pay programs.

Physical automation also holds promise in helping supply chain leaders tackle manual tasks and reduce labor requirements. As you devise automation strategies and business cases, factor in potential changes in legislatively-driven wage requirements.

Looking ahead

2020 has been a year of firsts. The result? A never-before-seen e-commerce landscape, marked by an accelerated boost in online purchases. At the heart of retail operations, the supply chain will power your ability to keep up. Approaching 2021, it’s time to look at your supply chain strategy through the lenses of capacity, speed, and efficiency. When you do, you'll be better positioned to thrive in the unforeseen landscape that lies ahead.