Retailers invest in logistics as e-commerce booms, Blue Yonder survey finds
US retailers are investing more in logistics, including micro-fulfilment solutions, to get closer to customers and solve delivery problems amid this year’s e-commerce boom, a survey by supply chain technology provider Blue Yonder has found.
E-commerce revenues are rising strongly for many retailers this year but major fulfillment challenges are continuing with more than two thirds of retail and logistics executives saying current order management solutions fall short of solving problems with omni-channel fulfillment, according to the company’s new Future of Fulfillment Research Report.
The report revealed that retailers saw e-commerce revenue as a percentage of total revenue increase by 33% while 27% of retailers added fulfillment centers to meet this shift. However, the survey found that many retailers are still challenged by stock availability, profitability, visibility and accuracy, as well as labor scarcity and a lack of fulfilment automation.
When it comes to the last mile of the supply chain, most retailers stated they are struggling with increasing delivery costs (54%) and reliable order fulfillment (36%).
The research, conducted by Researchscape International in October 2020, quizzed 300 senior executives across retail and e-commerce with responsibility for logistics and fulfillment operations in the U.S.
Micro-fulfillment and large fulfillment centers surge
One key finding is that retailers are expanding their logistics network with more fulfillment and micro-fulfillment centers to meet the surge in e-commerce orders and customer preferences.
Roughly three-quarters (71%) cited that they expanded their logistics network to meet increased e-commerce demand and nearly half (46%) cited that they needed to be closer to the consumer to reduce cost to fulfill and enable delivery speed and convenience.
Since March, more than a quarter (27%) of retailers increased the number of fulfillment centers in their logistics networks, and half (50%) have centers dedicated to e-commerce order fulfillment.
However, despite the recent rise in the use of micro-fulfillment centers amongst certain retailers, only 15% of all retailers surveyed claimed to have leveraged micro-fulfillment centers in their logistics network.
Meanwhile, stock availability, social distancing and worker scarcity continue to challenge retailers. More than half (51%) of retailers cited out-of-stocks as their biggest fulfillment challenge driven by the pandemic. Inventory accuracy is critical, along with the ability to view enterprise and third-party vendor inventory across locations and suppliers.
“The explosion of e-commerce orders, in conjunction with consumer expectations for rapid fulfillment, has resulted in an unprecedented need for more digital, automated fulfillment solutions,” said Ed Wong, senior vice president, Global Retail Sector, Blue Yonder.
“Retailers, especially those in essential goods, are ramping up their online fulfillment operations and footprints to meet growing customer expectations and to better position inventory more strategically. While this is a short-term solution, they must consider how to profitably manage this growth in e-commerce revenue in the long term. That is where automated back-end commerce and fulfillment solutions, coupled with machine learning-led demand planning solutions on the front-end, can ensure retailers are most profitably meeting these demands.”
Rising need for digital, automated fulfilment solutions
Technology remains a challenge, according to the report. Only 29% of retailers rate their current order management solution as ‘excellent’ for meeting omni-channel fulfillment needs, citing a big need in the market for more intelligent solutions to help predict and fulfill demand vs. existing DOM solutions.
For example, when managing product assortment to meet demand spikes, nearly 40% of retailers stated they were forced to manually prioritized high demand SKUs to maximize production capacity.
Only 14% of retailers stated that their fulfillment locations are automated today. Notably, nearly half of retailers (49%) who cite all revenue is from e-commerce have automated fulfillment locations today.
Eugene Amigud, group vice president, Product Management, Blue Yonder, asserted: “Traditional DOM approaches are dead. As retailers grapple with the new reality of shopper convergence on one shopping channel – e-commerce – they must also expand automation, inventory accuracy and real-time visibility, as well as order promising intelligence to profitably get products to customers on time.”
Blue Yonder will release the second part of its Future of Fulfillment Research Report in January 2021, which will focus on e-commerce fulfillment priorities and investments for 2021.