In today’s highly competitive e-commerce environment, retailers must be able to offer fast and free delivery on their e-commerce platforms to survive. Recent consumer research shows that when shopping online, the two highest priorities for e-commerce shoppers are free shipping and fast delivery. As delivery speeds continue to increase and same-day shipping becomes a reality for more and more orders, consumer focus on these offerings will only intensify.
But, as it turns out, it’s very difficult for most retailers to get their products to their customers’ doors in one day, let alone in a number of hours, because their supply chains are fundamentally centered around keeping costs down by leveraging economies of scale. This means that most retailers have a few large distributions centers for e-commerce inventory that are centralized between most of their major demand hubs but particularly close to none. As a result, retailers have exorbitantly high costs for fast shipping over these long distances and struggle to keep up with competitors who can get their products to the customer in a number of hours.
Because of this, modern retailers need to (and some very forward-thinking ones already are) shift their supply chains so that they’re actually focused on their customers, and not just efficiency. This shift is characterized by decreasing reliance on centralized DC’s and moving towards smaller, more localized “micro-fulfillment centers” for e-commerce fulfillment. You might think that this is a stretch, but along with many leading-edge companies publicly building this into their strategies, market data shows that there is surging demand for smaller warehousing space near highly populated areas.
So, the question becomes “how can retailers remain profitable through this shift to a customer-centric network?” There are two keys for retailers to thrive as they make this transition:
- Drive revenue growth by intelligently selecting micro-fulfillment center assortments
- Protect margins by taking advantage of reduced last-mile distances
The most important factor in the success of customer-centric network is the retailer’s ability to create localized assortments specifically tailored to the demand characteristics of the respective areas. With localized demand forecasts and a deep understanding of which products react best to micro-fulfillment, retailers can actively drive an increase in sales through a customer-centric supply chain.
Retailers must also capitalize on the potential efficiency benefits from a customer centric network. It’s common in the supply chain world to say transportation is more about the last 100 miles than the first 1,000, and by using micro-fulfillment centers, retailers are able to drastically cut their last mile distances. This unlocks the potential for significant savings. It is important for retailers to thoroughly analyze their supply chain configurations and approach potential changes with an open-mind when implementing a customer-centric network to take advantage of these opportunities.
Here at Bricz, we’re passionate about helping retailers navigate the exciting transition to customer-centric supply chains. Send us an email at firstname.lastname@example.org for more information on our services.
Contributor: David Wiens, Supply Chain Consultant at Bricz