A company’s e-commerce success is dependent on having three things: the right people in the right process with the right systems. Though it sounds simple, many companies struggle to bring these integral pieces together at the same time.
This translates into missed opportunities to elevate brand recognition, drive sales growth and capture market share.
With eMarketer projecting that retail e-commerce sales will increase to $4.058 trillion in 2020, making up 14.6 percent of total retail spending that year, there is an urgent need for companies to maximize the performance of e-commerce and supply chain programs.
E-commerce is growing so fast that many companies, including retailers typically dependent on mall traffic, are choosing to close brick-and-mortar stores and operate solely online. Major carriers such as UPS and FedEx are “struggling to keep up with the extra costs of having its drivers stop at homes and apartment buildings,” according to The Wall Street Journal.
In the competitive world of e-commerce, it’s turning out to be survival of the fittest. Here are some ways companies can prepare for growth.
Rethink the traditional supply chain
The traditional channel for products to flow is through a distribution center or warehouse that fulfills orders. That method works fine for wholesalers and brick-and-mortar retailers, but it does not work as well for companies that want to drive e-commerce sales.
E-commerce is about making orders not building pallets. Companies need to make the switch from B2B to B2C and focus on manufacturing smaller, more frequent orders, which require breaking down pallets to single, sellable units, reassembling it with other items and sending small packages to consumers. This is the e-commerce business model.
The goal is to minimize the touch time. The sooner an order can be built, the sooner the customer can receive it. The less touch and transportation time, the less chance there is for damage before the order is shipped. Optimizing the entire supply chain in building an order is the key to success.
The leaders in e-commerce subscribe to this model. Amazon, for example, has distribution centers, fulfillment centers and sorting centers and the company’s entire network has been optimized depending on zip codes.
Remove waste to reduce costs
Looking at an operation holistically will likely expose three main areas of waste:
- Unnecessary Movement - There’s waste in unnecessary movement (i.e. energy): travel time, touch time, and warehouse maneuvering time. It all adds up to higher labor costs because people are moving products instead of conveyors moving products.
- Repetition and Lack of Ergonomics - One approach is to automate anything that doesn’t require thinking so people are kept for decision making, which is difficult to automate.
- Empty Space Drives Shipping Costs Higher - Many companies do not account for void and are sending out boxes that are half full. These wasteful practices proliferate not because a company doesn’t know the actions are counterproductive, but because it can’t halt operations until it has an optimized system. Obviously, companies have to be online or lose market share. In the race to have products available and shipped fast, companies often wind up incurring excess shipping costs, which over time can significantly impact the bottom line.
Get out of the quicksand
Speed and efficiency are not the same thing.
Many companies now offer same-day or next day shipping. We’ve estimated that if an order comes in and within 24 hours is ready to be picked up, chances are nothing was done to that order for a solid 23 hours and 40 minutes. It takes about 20 minutes to process an order. The rest of the time the order may have been held up in the system, or on a pallet, or a truck, or a conveyor, or a staging area.
The processes many companies employ are inefficient. If they batch pick and/or have a lot of staging areas, it will take forever for the orders to come out. A lean manufacturing process doesn’t batch. It breaks down the items in the smallest quantity possible and as fast as possible. The lead time of an order should be less than 30 minutes, but for most companies it takes 48 hours.
Attack the bottleneck and fix packaging first
The process only goes at the speed of its slowest part and the slowest part of the process is almost always packing.
Though it’s often the last thing companies think about, packing is usually the bottleneck of the process. It’s a labor intensive step: shaping and erecting the box, taping the box, putting items in the box, putting documentation in the box, printing and attaching the label, conducting quality control, and taping close the box.
However, there are ways to improve packaging processes.
Many companies are seeing benefits such as reducing cost per package shipped and increased throughput, from automating what has traditionally been a manual process. When you increase throughput, you increase capacity so more orders can go in, which affects the biggest problem in e-commerce: volume.
But packing automation will fix things only to a certain point. It’s not a silver bullet. The silver bullet is looking at the process and the way orders are fulfilled.
Enhance the at-home customer experience
As more consumers shop online than inside stores, retailers must improve the unboxing experience in order to retain them. The feelings elicited when a package is picked up from the doorstep and opened inside the home is the last moment of truth for a retailer.
The goal now is for retailers and brand owners to replicate the lifestyle depicted on their websites and in their catalogs inside the consumer’s home. The only way to accomplish that is through secondary packaging.
Retailers can use decorated boxes that have suspension and retention features which showcase the ordered product much the same way a store display might. They can customize the outside and inside of the box with printed images and messages, insert specially shaped air cushioning for product protection, and include garment hooks and other accessories that have traditionally been part of the in-store experience.
When selection, price and shipping speeds are close to equal, it’s the presentation and personalization of the order inside the shipping box that will differentiate one retailer from another and lead to customer loyalty.
Harness the operational trifecta
The fundamental principles of operational excellence are having the right people, right process and right systems.
By having this operational trifecta, companies can elevate brand reputation, drive sales growth and capture market share. In an increasingly competitive retail environment that continues to move online, companies that prioritize operational excellence will succeed in e-commerce and win over today’s engaged and highly connected consumers.