Buy Online Pickup In Store: Retail in Evolution

Yet, the store remains a core focus of the buying experience. That’s how it should be. The in-store customer is typically more loyal and tends to buy more than the online shopper.

A robust strategy for “Buy Online, Pick Up In Store,” or BOPIS, can offer the best of both worlds. BOPIS expands a retailer’s online exposure while preserving and deepening the in-store experience. In fact, retailers find that is common for shoppers to buy more product once they arrive at the store to retrieve their online orders. 

A well-designed BOPIS retail program also helps reduce delivery costs because the customer is going to the product, not vice-versa. Consumers prize the ease and convenience of the transaction, especially when the COVID-19 pandemic has made contactless interactions more of the rule than the exception.

Responding to a New Retail Landscape

For retailers with limited resources and insufficient time spent mastering alternate fulfillment methods, the real world suddenly became a very different place in 2020. Many have been challenged to adjust to an unfamiliar “fractured fulfillment” model where products are ordered, fulfilled, and distributed from anywhere to anywhere. It is difficult for retailers to strike the right balance of inventory levels that satisfy in-store shoppers and ensure product availability to support online channel growth.

Retailers often over-order store inventory to avoid the risk of stock-outs. This raises carrying costs, and shrinks inventory  available to allocate to online channels. 

Moving ahead with an ill-vetted BOPIS strategy can make things worse. Customers assured of a product’s in-stock status on a retailer’s website will be displeased if they take time to visit the store only to find the item isn’t available. This could damage a brand’s reputation, especially if word spreads quickly on social media.

Visibility is the pain point. Many retailers lack proper visibility into the inventory flow from their partners to effectively plan and execute an error-proof BOPIS strategy. Without visibility, retailers will continue to prioritize avoidance in-store stock-out scenarios, and will continue to absorb excess and costly inventory.

A strong 3PL provider arms retailers with superior, actionable data that improves inventory visibility without forcing them to increase levels of safety stock. The endgame is to manage appropriate safety stock thresholds for both in-store and BOPIS experiences so the customer is satisfied in either scenario. 

Personalized Solutions Require Visibility

Each retailer is unique, and each shipper-retailer partnership is unique. Working with good data, an experienced 3PL partner creates customized plans to achieve optimal results. Progress and outcomes are constantly measured and refined so fill rates achieve acceptable thresholds. Changes to the plan can be implemented quickly should circumstances change – and they often do. 

For example, a plan could require the partners to issue electronic order acknowledgements indicating changes to item quantities and arrival dates within a specified time of receiving an order. It could call for transmission of advance ship notices within two hours of a shipment’s departure so visibility is optimized. Fully leveraging distribution center connections to stores optimizes shipping flexibility to react quickly to customer behavior. 

It is still most profitable for stores when customers pick up their orders in-store, but the busy holiday season could make it difficult for consumers to get to the store. Data generated by zip codes can identify areas of strong online ordering and in-store activity. This offers retailers insight into how to best position inventory for timely and accurate distribution.

For example, a retailer wants to offer one- to two-day deliveries but its transportation providers are challenged to consistently hit those targets. It may be more feasible to ship that order out from a store versus a fulfillment center. This could require shippers to invest in a drop-shipping strategy to support an e-commerce strategy where goods are brought directly to the store level. All this strategy is grounded in visibility.

This holiday season will be like no other. In-store buying will still be prevalent. However, more consumers have adopted online ordering after being required to do so in the early days of the pandemic. BOPIS utilization will be strong this holiday, but it will continue long after peak season and even after the virus passes. Consumers want options. It is critical for retailers to comply, but to do so efficiently.

Master Your BOPIS Revolution

The last mile is the most complex part of e-commerce fulfillment. It is also the most important. The last mile makes or breaks everything that came before it. That final delivery is the moment your customer will remember your brand most. How well do you finish?

A BOPIS strategy is just one of several last-mile offerings that shippers and retailers are expected to deliver. Done right, it reaps brand loyalty, lower costs and profitable opportunities for new market share. However, it requires a specialized level of resources and knowledge. It also requires skills and vigilance to ensure flawless execution.

We created The BOPIS Revolution: Navigating the New Never Normal to highlight some of the things you need to keep in mind when approaching – or modifying – your BOPIS strategy. Watch our SME Roundtable for a deeper dive into the ways we drive top line revenue results through personalized solutions driven by technology and expertise.

To continue the conversation, reach out to one of our supply chain experts. Let’s talk about how we can help you evolve solutions that support final delivery strategies to control cost and consistently wow your customers.

Indirect Spend Cost Increases Continue into 2021

Many of the elements driving these cost increases cannot be controlled. 

That does not mean your organization is limited in its ability to manage and mitigate some of these rising expenses. A strong relationship with your support partners helps. So, too, does an expert partner with awareness of industry trends and spend management tactics that realize efficiencies, even during volatile times. 

To support your indirect spend management efforts in Q4 and heading into 2021, let’s explore some of the factors driving cost increases in your operation.

Resin Increases, E-Commerce Demand Drives Cost Spike

Resin costs continue to fuel increases for companies that utilize stretch film, bubble wrap, flexible mailers and other polyethylene products. Each resin increase usually translates to a product cost increase of 6-7 percent.

Five consecutive months of resin cost increases have inflated prices 44 percent. That has translated to a 20-25 percent uptick on flexible packaging-related products costs, such as the Oct. 1 increase announced by all major manufacturers of stretch film. That is the second stretch film increase this year – and we anticipate there will be additional increases on other produces that rely on polyethylene. 

At the same time, demand is up in the plastic market compared to 2019. A growing e-commerce marketplace began booming when COVID-19 accelerated consumers’ online buying behaviors for a broader range of products, from groceries to home office products. 

More e-commerce businesses are utilizing plastic packaging, bubble bags and poly bags to ship their products, whereas a few years ago they put those items in small boxes. In the 2020 parcel shipping environment, it is more cost effective to use poly mailers, and that is impacting demand.

While demand is up, some of the major manufacturers implemented maintenance related shutdowns in Q2 and Q3, reducing supply in the process. Increased hurricane activity along the Gulf Coast is also forcing shutdowns for many resin operations and nearby poly-product manufacturing plants situated close to petroleum refineries in the region. Additional shutdowns will only create a tighter market.

Cardboard and Other Commodity Costs Require Awareness

Market conditions may not support a fourth quarter cost increase on corrugated and linerboard. Often the top producers of these materials float the prospect of a rate increase to gauge pushback. Expect talk of a 6-8 percent increase to emerge toward the middle or late part of the quarter. 

Due to activity that scaled back for many operations during the pandemic, the demand and inventory levers may not support that increase. Expect that increase to emerge in 2021.

As businesses continue to ramp up coming out of COVID-19, demand may increase on those cardboard products, as well as others that are already in short supply. Costs for Personal Protective Equipment (PPE), safety supplies and cleaning products will continue to escalate into 2021. That will cause pain for businesses from a pricing and availability standpoint. 

Cost increases on steel and related products will have a similar effect on MRO supplies. Expect price movement on nuts, bolts, fasteners, and other maintenance products in the early part of next year.

Lessons Learned for Future Performance

The challenges emerging in 2020 really validated the importance of strong relationships with your support partners. 

Do you always beat up your suppliers to get the best price?

If you do, the pandemic has taught us, you might suddenly find that you do not have a reliable supply base because you have not been loyal to a supplier. If you focus on buying what you need at the lowest cost and jump from vendor to vendor, when trouble arises you may not have a partner you can count on. 

Thanks to partnerships forged through Transportation Insight’s Group Purchasing Organization, we have the leverage to secure both the best product prices and the supplies you need to continue operating.

The pandemic has taught us that when businesses align with national supply partners, they have access to competitive prices and products delivered on a timely, reliable basis. 

This is especially important in the poly-packaging space. When times get tough and supply gets tight, suppliers will take care of the customers that have been good to them. They will have a difficult time supplying customers that are here today and gone tomorrow. 

Relying on long-term partnerships established in Transportation Insight’s Group Purchasing Organization, we are able to secure both good pricing and consistent supplies of products necessary to your operation. At the same time, we help you manage indirect spend areas that is driving up your overall operational costs that could be jeopardizing your profit. 

To learn more about how we help organizations manage their indirect spend and achieve double-digit savings watch our recent webinar.

E-Commerce Logistics Demands, COVID-19 Empower Ocean Alliances

Although there is still a slim chance that the fourth quarter produces some rate compression – or a downturn in the need for e-commerce logistics. When freight levels are at an all-time high, there is little motivation for the three major shipping alliances to drop rates significantly during the remaining calendar year.

Shippers looking to 2021 would be wise to consider contingency budgeting – especially if you are a major importer competing in a supply chain environment that continues to be affected by ongoing growth in online sales and e-commerce logistics.

Likewise, there has never been a more important time to reassess your entire import supply chain to validate compliance with evolving trade regulations. Emerging pinch points in the international supply chain are elevating risk for shippers who must be prepared to address traditional risk areas that carry a financial impact.

As we have stated since early 2019, contingency planning must be the part of your monthly and sometimes weekly business plans. Diversification in foreign sourcing has never been more critical, particularly in an election season that has pushed global trade forward as individual candidates differentiating issue.  

Close review of the international transportation landscape can lay the groundwork for developing strategies that mitigate that risk heading into 2021.

Alliances Take Control Amid E-Commerce Boom

Consumer behaviors are shifting the traditional retail models, and the unchecked growth of e-commerce is keeping the global supply chain packed with product. 

Credit some of that international freight volume to the rapid production and movement of Personal Protective Equipment (PPE) in response to a global health crisis. At the same time, retail supply chains have been irreversibly impacted by the functional success of e-commerce. Until some of the demand cycles in both realms stabilize, predicting ocean shipping rates will be a challenge.

More importantly, the three major shipping alliances response to COVID-19 demands the attention of organizations that rely on global commerce and e-commerce logistics. Vessel operators have shown remarkable discipline by matching supply to demand volatility.

During the first half of the year, the three alliances (2M, Ocean Alliance and THE Alliance) constricted supply by canceling dozens of scheduled voyages with the intent to remove excess capacity. However the net effect was scarcity of space, i.e. rates were increased monthly or bi-weekly and started to build. Representing 21 ocean vessel operators and roughly 10 million 20-foot equivalent units (TEU), these alliances have maintained rate discipline as the retail supply chain began to open in July in August. 

In the past, increased demand for service and the prospect of rate increase motivated operators to add sailings. With a strategic approach that ensures vessels are filled before others are added, ocean carriers keep upward pressure on rates that are roughly 80 percent higher in a year-over-year comparison to 2019.

This strategy supports a more dependable service for international shippers as it creates more reliability for in-country logistics operators, but if the alliances maintain this discipline, plan for rates to stay elevated. Solid bookings will continue through October and contingency budgeting should be a focus for major importers.

Persisting Pinch Points Create Risk

As we approach what has traditionally been a calm period at the end of the e-commerce logistics peak season, the ports of Long Beach and Los Angeles are at capacity. Historically higher volume for this time of year will undoubtedly spur downstream challenges deep into Q4 and into 2021. 

Finding available chasses to support container movements will continue to be a problem into December. As these containers and chasses (to a lesser degree) move in country and on the rail, it is hard to balance the need for equipment during a disruption-filled year like we’ve had. Vessels hoping to expedite movement for the last wave of peak season freight to North America are now waiting for containers to come back to port so that have something to load and ship. 

We know there will be an end to this kind of imbalance, but we have not gotten there yet.

The timing has never been greater for organizations to assess their entire import and export supply chain. Look for places to increase efficiency. Identify pinch points that elevate risk that emerges in times of global volatility. At this point, organizations should have complete awareness of the supply chain challenges arising during COVID-19 and address their preparedness for the next global disruption, both economically and around traditional risk areas. 

Trade Regulations and Tariff Battles Require Eye on Compliance

Plaintiffs representing a diverse set of industries are suing the U.S. Trade Representative (USTR) for relief from China 301 tariffs. The argument: tariffs implemented without sufficient advanced notice caused unfair and improper financial harm to their organizations. Many shippers have been negatively impacted, some to a crippling point, and they are looking for any dollars they can get.

These organizations – including some of the world’s largest brands – will not likely get complete relief, but their actions demonstrate that businesses will not sit idle when trade laws are put in place, as they argue, without warning.

Meanwhile, implementation of the trade regulations intended to replace the North American Free Trade Agreement continues to carry some unexpected consequences.

The U.S.-Mexico-Canada Agreement (USMCA) is having the largest effect on businesses close to the automotive supply chain, but many companies were lulled into thinking there would be limited changes in the new agreement. Updated documentation is required to execute cross border entries. Make sure to review your international trade compliance processes to avoid this type of needless risk caused by what seems like a simple change in regulations. 

E-commerce Supply Chain 2020: Digital Deck the Halls

The challenges this year will be as long a family’s shopping list:

  • The traditional holiday peak converges with elevated online demand due to the COVID-19 pandemic. E-commerce sales will match or surpass brick-and-mortar. Consumers have multiple ordering channels to tap. E-commerce supply chain fulfillment and delivery operations need to respond to this decentralized − and unprecedented − demand-pull.
  • Many supply chains remain out of kilter, one of the pandemic’s many legacies. U.S. inventories are at their lowest levels in five years, according to several analysts. Stock-outs have been common throughout most of 2020. U.S. imports are spiking. However, those goods may not reach store shelves or distribution centers in time to satisfy peak consumption needs.

  • Parcel networks have been overwhelmed by demand since March. This has led to inconsistent delivery performance across the board. National and regional parcel carriers have maxed out their fulfillment and distribution infrastructures. Late deliveries mean that consumers will be forced to accept holiday service levels that are beneath their expectations. If there is good news, it’s that e-commerce consumers are aware of the problems and will be more tolerant of slower delivery. What they demand, and should expect, is access to real-time information about any service issues.
  • Consumers may order goods earlier than usual, allowing the supply chain to spread out delivery timetables to create a “load-leveling” effect. That would be positive news, but it should not automatically be counted upon. Amazon’s shift of its “Prime Day” program from July to mid-October could pull forward a fair amount of holiday activity.

  • Warehouse space is severely constrained. Amazon said several months ago it will need 50 percent more space to keep up with its projected holiday demand. Retailers with brick-and-mortar exposure need to position stores as “forward fulfillment” nodes. This allows orders to be pulled from store inventory and delivered over relatively short distances. Store networks will also support what is expected to be major demand spikes for in-store and curbside pickups of online orders. Pure-play e-tailers without store networks will need to get creative.
  • FedEx and UPS are levying meaningful peak surcharges on volumes from their largest customers. The U.S. Postal Service imposed the first peak surcharge in its history. Carriers say the fees are needed to offset their higher costs to serve. That is true, up to a point. Demands on delivery networks will be unprecedented, and carriers are pricing their services accordingly. Companies will have to consider this in their free shipping strategies to maintain profitability.

THE CLOCK IS TICKING

Is it too late for shippers and retailers to get their holiday house in order?

Not necessarily, but it will take fast action and deep planning. The challenges, as we’ve laid out, are immense. One key is to get ahead of the “demand curve.” When shippers gain visibility into end demand, they can prepare and execute a plan that enhances customer satisfaction and does so profitably. After all, meeting customer demands while losing money in the process is the hollowest of victories.

Managing the upstream channel is just as critical. Calibrating inventory flows with replenishment needs is a year-round challenge, and especially so during peak. The challenge is magnified this year with the headwind of COVID-19. Retailers need a clear line of sight into supplier production so they can forecast their inventory replenishment. In normal times, lack of visibility can lead to costly over-ordering to ensure adequate buffer stock. This season, however, over-ordering may be an adequate response, given how and where the inventory is positioned. 

During CSCMP’s EDGE 2020 Virtual Conference, Target Executive Vice President and Chief Supply Chain and Logistics Officer Arthur Valdez advised to “not be afraid to overreact.” That may sound counter-intuitive, but it can be an appropriate step during this peak. Target will be investing heavily in transportation services with a focus on improving delivery timing, Valdez said. Again, that appears to run against the grain as transport is considered a cost center. Yet it will be less costly than failing to execute deliveries because capacity is not available. A seasoned logistics partner can map out a strategy to leverage a customer’s existing assets, as well as to bring in outside capabilities that profitably meets customer demands.

This is especially important as shippers encounter an increasingly complex surcharge environment constructed by FedEx, UPS and, to a smaller degree, USPS and regional carriers.  High-volume FedEx and UPS customers could be looking at surcharges as high as $4 to $5 per piece. These are by far the most expensive surcharges we have ever seen. They can spell the difference between peak season success and failure, even if everything else breaks right. Any shipper expecting to tender significant traffic to either or both must be able to navigate those surcharges all within the framework of their logistics execution.

Amid the coming storm, it may be hard for folks to get a good fix on demand profiles beyond the holidays. But it pays to do so. For example, we may see another e-commerce surge early next year as fears of a combined COVID-seasonal flu cycle keep more consumers homebound. Already, we are seeing 2021 budget plans being adjusted to account for the lingering effect of COVID-19. We also expect similar peak season patterns for the next 3-5 years even after a coronavirus vaccine is approved and distributed. A strong logistics partner not only can help you get through 2020. It can prepare you for 2021, 2022, and beyond.

BOPIS: What Does It Mean for Shippers?

Linearity is on the way out. So is the shipper’s control of the supply chain. E-commerce has spawned the “omni-channel fulfillment” model where orders, distribution and deliveries occur from anywhere, anyone, and at any time. The traditional supply-push scenario with shippers calling the shots is giving way to a demand-pull approach with consumers in control of the transaction.

The “Buy Online, Pick Up In Store” (BOPIS) concept has become a key part of the asymmetrical, demand-pull world we live and work in. Who ever imagined a consumer ordering an item on an electronic device, having a retailer immediately pick and pack the product at one of multiple locations, and having it ready for the consumer’s arrival at a pre-arranged time, typically within a few hours and sometimes under an hour? 

Experience Depends on BOPIS Excellence

The COVID-19 pandemic is driving BOPIS toward mainstream adoption. Contactless interactions remain the order of the day – especially during the holiday season as health-conscious consumers continue to minimize time spent shopping in confined spaces. But BOPIS and other alternate fulfillment practices will outlast the pandemic. They will become permanent additions to the logistics landscape.

To execute an effective BOPIS strategy, shippers must understand retailers’ two overarching objectives: 

  • Ensure a seamless customer experience regardless of the order touchpoint.
  • Maintain adequate in-store inventory while expanding digital buying opportunities.

It is essential for retailers to have the right goods always available, and at the right place at the right time for the consumer. The “right time” could involve shipping to a residence or to another physical location. It could mean an in-person brick-and-mortar sale. It could mean BOPIS, or its first cousin, “Buy Online Pick Up at Curbside” (BOPAC). It could be a drop-shipping model where the shipper delivers directly to the store, thus minimizing the need to hold inventory in a space-constrained facility.

Striking the correct balance between in-store and digital inventory is just as critical. In-store customers are typically more loyal and buy more per visit than online customers. Retailers are loath to broaden their digital channels if doing so threatens to siphon off in-store activity.

Allowing both scenarios to thrive requires elevating visibility and analytics tools to new heights. A clear line of sight across the ecosystem allows shippers to align production with the retailer’s current replenishment needs. Analytics like Machine Learning and Artificial Intelligence also provide shippers with vital clues about consumers’ future buying habits so they and their retailer partners can stay a step ahead.

Technology is only as productive as the knowledge of the people managing it. Seasoned third-party logistics specialists understand how to design and implement a consistently successful BOPIS program that leverages cost-effective automation. They have worked extensively with all stakeholders, and can quickly adjust the go-to-market processes to optimize outcomes and avoid costly missteps.

Final Delivery Drives Loyalty or Brand Damage

Online fulfillment is a fast-paced, often-unforgiving business. You are only as good as your last delivery. The margin for error narrows still further in a BOPIS transaction. Failing to execute an order after the consumer was assured the product was in stock and went out of their way to retrieve it is a breach of the “trust covenant” between the stakeholders. A BOPIS-related stock-out can seriously damage both brands, especially if a negative review spreads on social media.

The good news for shippers is that mastering this intense pivot point should result in enduring brand loyalty from consumer and retailer alike. Consumers prize convenience, and will favor retailers who make the BOPIS experience as easy as “pulling up and popping the trunk.” This goodwill extends to the products they pick up and take home.

Retailers, meanwhile, know how complicated it is to make life easy for today’s consumer.  Shippers who consistently execute will become sticky to the retailer. Product quality is obviously important. However, consumers often cannot discern between the nuances of multiple products of similar craftsmanship. What they do know, and will remember, is how, when and where they received their product. Or why they didn’t. That is how your brand will be remembered. In today’s world, logistics, more than any part of a shipper’s business, is becoming the competitive differentiator.

Navigate the New “Never Normal”

Planned properly, the BOPIS fulfillment model is a valuable tool in the highly competitive e-commerce space. 

The devil is in the execution.

Transportation Insight specializes in designing and executing supply chain strategy adjustments that empower you to provide the final mile delivery options required to wow end customers.

We created “The BOPIS Revolution: Navigating the New Never Normal” to offer insight into the many variables involved in meeting consumers’ evolving demands for service. Read it today to understand the strategies that we can help you leverage to enhance customer service, grow market share and increase competitive advantage.

6 Qualities to Look for in an E-Commerce Logistics Partner

With changing customer demands, new carrier surcharges, COVID, and other challenges taking a bite out of shippers’ bottom lines right now, those companies are best served by logistics partners that bring a high level of value to the table. Even better, they do this while helping shippers overcome their key pain points and achieve their organizational goals.

If your e-commerce logistics provider isn’t living up to expectations in these six areas, it may be time to find one that will.

  1. Technology Systems that Mirror the Carriers’ Own Systems
    This allows the provider to estimate cost impact and predictive modeling to the penny. Every time the carriers make a change, that change should also be made in your provider’s system.
  2. A Strong Team of Subject Matter Experts
    That team should include engineers and analysts that know how to leverage the carriers’ profitability areas to gain better advantages for you (versus what a traditional account rep can manage). Our experts regularly share their insight with the marketplace.

  1. Ongoing Analysis and Strategic “Thinkery”
    Look for a partner that thinks well beyond the “one and done” approach. Today’s business environment requires a partner that focuses on continued delivery optimization and cost mitigation.
  2. A Proactive Auditing Function
    Rather than relying on a reactive mindset (e.g., asking for the same refunds over and over again), your provider should be working with an “identify and repair” mindset to eliminate these potential issues and mitigate ongoing costs.
  3. Advanced Analytics and KPI Tracking
    As e-commerce continues to grow, you need a partner that is constantly innovating and adding functionalities like margin management, SKU-level profitability, KPI tracking, order performance management and high levels of supply chain visibility.   
  4. A Problem-solving Mindset
    When new accessorials or surcharges are released, your logistics provider should be measuring the impacts of those changes on your budget and helping you mitigate those impacts.

Master Your E-Commerce Supply Chain

Possessing these key qualities, we bring our client partners ongoing value as they race to meet demands for delivery speed, service and choice. Supporting your efforts to enhance customer experience, we also implement strategies to control costs so that you can maintain awareness of how each and every product and customer is performing. 

Our Parcel Experts created “You Shipped It, but … Did it Make Money?” to identify some of the emerging challenges that jeopardize your profit. It highlights our approach in the marketplace and gives you a glimpse into the level of analysis that we bring our customers. 

Let’s take a deeper look at the supply chain challenges you are experiencing. Reach out to our supply chain masters today to begin a conversation about your personalized solution.

Margin Management: Why Are You Selling Money-Losing SKUs?

In July, Coca-Cola announced that it was cutting some “zombie brands” and focusing its resources on more profitable lines by introducing margin management. The company has about 400 master brands, half of which are brands of little or no scale and that account for about 2% of the firm’s total revenues. 

These brands (Odwalla juice and smoothie brand was among the first to get the axe) consume resources and divert money and time away from Coca-Cola’s more profitable businesses. 

Do you know the products that are consuming your resources without delivering the profitable benefits of sale?

Following Suit

Shippers of all sizes can borrow a page from Coca-Cola’s playbook which takes the examination of SKU viability to new levels by assessing (and in some cases, eliminating) entire brand portfolios in order to determine which products are making money, and which ones aren’t. 

When you understand SKU viability, you can refine your marketing messages, pricing, pass-through costs, and other elements that determine whether you make money on an order (or not). The key is to determine which products are “winners” and which are “losers,” and then focus on the former. Weed out the products that are not making money and focus on the ones that are profitable.

Use the 80/20 Rule

The Pareto Principle (80/20 Rule) comes into play here, and asserts that roughly 80% of the effects come from 20% of the causes. Recognizing that 20% of your SKUs typically represent 80% of your sales volume, determine a baseline. Focus on what it costs to pick, pack and ship each of those different SKUs. 

There aren’t many companies that have a good handle on profitability at the individual SKU level, particularly when factoring in fulfillment costs, inbound costs and shipping costs. Combined, these drivers can make a major difference in an order’s profitability.

Consider the manufacturer of outdoor goods that typically sells to big box retailers. During COVID, this company began shipping directly to consumers when more people started placing orders online. Shipping a pallet of 25 outdoor umbrellas to a large retailer at no charge was a profitable venture. On the other hand, free shipping for those 9-foot, 75-pound umbrellas bound for 25 different households via Parcel takes a huge chunk out of the bottom line.

This is a situation where evaluating SKUs based on the price that customers pay doesn’t work. Offers like “Buy $50 in merchandise and get free shipping” can further complicate the circumstances. Complexity increases when orders must be shipped in multiple boxes—a reality that quickly consumes the profitability on any order. 

Find a Partner to do the Heavy Lifting

Without good transportation analytics, SKU profitability becomes an expensive guessing game. And the more SKUs you’re selling, the more complex your margin management profile will be. 

Avoiding these problems requires a pick-and-axe approach similar to what Coca-Cola is using to whittle down its brand portfolio. If you don’t have the time, staff, or technology in-house to manage it on your own, Transportation Insight is here to do the heavy lifting for you.

To help you better understand all that’s required in determining SKU profitability, we created “You Shipped it, but … Did it Make Any Money?” Download it today for strategies that will help you protect profitability on every order.

You Ramped Up E-Commerce Shipping for COVID…Now What?

The effort didn’t go unnoticed. 

Comparing year-over-year e-commerce sales, DigitalCommerce360 says volume was up 76% in June. And while that increase leveled off at 55% for July 2020, e-commerce sales are still up 55% year-over-year for the first seven months of the year. 

Retailers are driving much of that growth as many completely changed their distribution models (either permanently or temporarily) away from brick-and-mortar and over to alternative online fulfillment strategies. Already underway pre-pandemic, the movement to sell more online accelerated rapidly once B2B and B2C customers started placing more orders from their laptops and mobile devices. 

Reacting quickly to an event that hit fast, hard and unexpectedly, companies made e-commerce shipping decisions based on a desperate need to stay in business. As a result, those decisions do not always include a complete analysis of the true cost of shipping those goods to customers. As added costs emerge, including peak parcel surcharges from UPS and FedEx, the true cost picture becomes blurry. 

It’s time for a thorough assessment of exactly what your COVID-related e-commerce strategy is costing your company.

Take a Step Back, Assess E-Commerce Costs

As you continue to hone your business model to accommodate e-commerce growth and changing customer demands, it is time to take a step back and truly assess the costs associated with these models. 

Many of these companies will continue handling more e-commerce volume than they did pre-COVID (even with their physical stores opening again). Managing both sides of the equation profitably requires a thorough investigation of the true cost of shipping and a strategy that factors in customers’ needs with organizational profitability. 

Companies should also weed out their “losing” SKUs, assess shipping costs right down to the package level, practice good margin management across the entire organization, utilize data for good decision-making, and work with a reputable logistics partner. 

Master E-Commerce Shipping, Master Order Profitability

Continue shipping products without closely examining the time, effort and money that goes into sending out each package and you will soon find yourself underwater. As pandemic pushed e-commerce sales and residential orders to new heights, was your organization among those that raced into reactive mode?

Do you know the true cost of your e-commerce shipping decisions? You can not afford to ignore this problem.

To help you master your response to online demand, our Supply Chain Masters created “You Shipped It, but … Did It Make Money?” Read today and access strategies to protect profitability for every order and every customer.

Post-Pandemic Tactics for E-Commerce Logistics Advantage

Before COVID-19, businesses looking to build an e-commerce presence were hamstrung by the lack of speed in developing their current labor pool with the skills required for e-commerce, as well as fulfillment automation capability. Others dabbled in a web storefront strategy. These companies typically lacked the sophisticated technology, generally a good Warehouse Management System (WMS), needed to pick multiple orders to a cart and then have them quickly and accurately auto-sorted through a RF or mobile device. The result was unsustainable inefficiencies. We saw that e-fulfillment costs in some cases exceeded 25 percent of sales.

In the meantime, Amazon.com, which controlled about half of all U.S. e-commerce going into the crisis, kicked into high gear during it. At one point during the crisis Amazon customers spent as much as $11,000 a second on its products and services. By contrast, nearly 1 million traditional retail workers were furloughed in one week, and more than 250,000 stores had shut down. Many stores may never reopen, or may look very different going forward. The same goes for fulfillment centers. Many have and will continue to be physically modified to ensure worker safety. The flow of operations may need to be modified as well.

For many e-tailers, the “new normal” of e-commerce will be challenging and may seem insurmountable, but getting to the other side is doable. 

E-Commerce Logistics Strategy for the New Normal

Understand what current state looks like in the new normal − starting with your cost per-order. 

Are your costs segmented by freight, management and supervision, labor, facilities and shipping supplies?

Then understand what and how these costs can be managed, optimized and reduced. Typically, freight costs exceed the sum of the other components. Reducing freight dollars spent per revenue dollars created should be an immediate focus. 

The questions to ask from this point are critical to the next step. 

  • Is your network aligned to best serve the customer? 
  • Are your shipping lanes optimized? 
  • Are you using the best shipping partners to meet your strategic goals? 

Stay on top of your rates. Evaluate them frequently, and renegotiate them when appropriate. 

This is where collaborating with a seasoned logistics expert adds enormous value to you e-commerce platform. Our long and deep relationships with carriers, our data analytics and information mining expertise and our proprietary audit technology platform give you end-to-end visibility to answer those key questions.

Align Your Operations and Your Network

Once your network is optimized, it is time to consider how your operations play into that. What questions can quickly be addressed?

By asking these questions and making some quick, deployable solutions, you can improve your profitability profile in short order.  

Benchmark your service-level performance with best-in-class metrics. How does your fulfillment center operation compare with leaders in the field? 

Focus strongly on the efficiency of your picking and packing operations, which can account for more than half the cost of your order outside of outbound shipping. A thorough analysis of your fulfillment center process will yield changes to improve operations and reduce costs.

Apply technologies where it makes financial sense and where it fits your growth plans. Many legacy WMS applications were designed to manage fulfillment orders in pre-determined waves. They were not optimized to manage the unpredictable flows of e-commerce traffic. Today’s technology is built to allow orders to be picked for store and e-commerce simultaneously. This enables businesses to leverage inventory buys to achieve economies of scale.

Also, consider a multi-fulfillment center strategy, including BOPIS strategies. These can expedite orders to consumers quicker and reduce shipping costs. Facilities expansion can carry with it significant operating expense. An expert partner with a robust portfolio of data, expertise and carrier relationships can support your decision-making on this critical issue. 

Improvement Focus Drives Customer Experience

Above all, be consistent with ongoing process improvements. Don’t consider e-commerce logistics just a project, it is a process that has to be constantly improving. Companies that dedicate full-time employees to process improvements are those that make the biggest strides. 

Analyze your facility space requirements, and how labor is being utilized. Be open to suggestions on how to improve productivity and boost customer satisfaction. Make it a part of your corporate culture.

According to a recent study, millennial consumers who account for about $1.2 trillion in U.S. retail sales say they value the “experience” that accompanies an online order as much as the product itself. The “Generation Z” group coming up behind the Millennials shares those sentiments. 

At the core of that experience is fast, timely delivery supported by in-transit visibility across multiple digital platforms. Succeed in executing on that final step, and you will achieve favorable word of mouth that can help build a brand. Fail, and that brand may not get a second bite.

Those attitudes were in place well before Covid-19. And they are unlikely to diminish. It is both an enormous opportunity, and daunting challenge. Is your e-commerce strategy ready?

Master Logistics, Power Competitive Advantage

You invest a lot of money in your logistics network. But are you maximizing its value? Do you feel like your logistics operation is more of a cost center than a tool of competitive advantage?

It doesn’t have to be. In fact, with the right strategy and execution, logistics can drive the success of your enterprise. Companies like Amazon, Walmart, Target and Dell made logistics a priority, with spectacular results. There is no reason you can’t do the same!

To master your logistics strategy, read “Moving to the Front of the Line: Making Logistics a Competitive Advantage.”

Budget Planning 2021: 9 Supply Chain Things to Know

The booming e-commerce marketplace opens access to new segments of consumers seeking direct delivery on a growing list of staples previously procured through brick-and-mortar channels. Meanwhile, end users seeking personal protective equipment, sanitizers, cleaning supplies and other products required for contagion response will create new revenue streams for organizations nimble enough to shift supply chains and adjust processes to meet fluctuating demand.

Responding in this environment, executives who prioritize supply chain strategy will be best positioned to not only meet and exceed customer expectations, but also control costs that jeopardize bottom line profit.

Looking ahead to the remainder of 2020 here are some looming trends I expect to emerge, as well as recommendations for how a supply chain master can continue to control business performance, even through the disruptions that are bound to happen in 2021.

4 Supply Chain Predictions Influencing 2021 Planning

Looking ahead to the remainder of 2020, ongoing marketplace awareness informs a few predictions that will determine priorities for 2021.

  • The recovery will be a saw tooth, with an upward trend. There will be ups and downs as economic activity re-emerges, particularly in regions that experience fluctuating levels of COVID-19 outbreak and control. Companies have to really protect themselves for that and plan alternative ways to serve their customers and compensate for workforce disruption. As Gartner points out, the path to recovery will be unique for every organization as they respond, recover and renew.

  • Companies that deal in non-essential goods will struggle, and they need to be the most agile. Consumer spending will continue to shift, largely toward e-commerce channels. There’s going to be fluctuating demand for hand sanitizers, cleaning products and personal protective equipment. A lot of companies can maintain workforce in the manufacturing realm by pivoting to secondary products that support pandemic response and recovery. Expect demand spikes, particularly related to the back-to-school and Christmas shopping seasons. Organizations impeded by shipping limitations, will depend on a nimble supply chain to access available shipping channels.
  • Boards and executives will expect robust contingency planning to deal with disruptions. Contingency planning is one of the most critical pieces that informs everything else about how you respond to another likely disruption, whether it be a COVID relapse, an unexpected stop in production or depletion of raw materials.
  • Companies that invest in process and technology during this time will see the best long-term growth. These companies will be in the best position to take advantage of consolidation in their respective industries.

Five Recommendations for 2021 Planning

Organizations creating budget plans for 2021 should consider these recommendations to maintain customer service levels while controlling costs.

  • Treat the 2021 budget as a range and be prepared to adjust as conditions on the ground evolve. In many ways budgeting will be a guessing game, and companies need to put together a plan based on contingencies. When revenue doesn’t meet expectations, have a plan for cost-cutting measures to implement. If earnings swing the other way, identify investments to make. Executive leaders must commit to evolving cost management so that scarce resources and funds consistently flow to the most valuable business outcomes.

  • Leverage supply chain resources to determine corporate impact (cost, service, risk) of plans produced by the other departments (sales, procurement etc.). Experts working in supply chain possess analytical capabilities and a global picture of an organization’s total business. This supports acute awareness of the control levers that affect cost and service. When you put supply chain masters in the role of trusted advisor, they are in the best position to help those executives and leadership boards navigate tumultuous waters.
  • Take a partnership approach with all relationships. The supply chain is dependent on everyone succeeding. Often, by working with an expert supply chain partner you can access end-to-end transparency that facilitates more opportunities across your network. That visibility allows you to be a better partner to your domestic and foreign vendors. With good clear communication around sales information, time-in-shipping data and other key performance indicators, you can help predict when you will need to reorder supplies and track trends that can help drive production guidelines. This supports a workflow that keeps your shelves stocked with the right items, and customers happy with the efficiencies of their orders.
  • Aggressively evaluate the entire supply chain and take an open-minded approach to the long-term structure. Ensure the supply chain strategy aligns with corporate strategy – and leverage analysis and expertise to inform that strategy. This is especially important as e-commerce demands continue to drive increased expectations for flexibility in customers’ end delivery options. You may be getting product shipped out the door – but are you making any money on it?
  • Low water exposes a lot of rocks. Take the opportunity to evaluate internal processes and systems. Balancing resiliency and efficiency, supply chain leaders can secure their networks. A recent Gartner survey revealed that only 21 percent of respondents believe their supply chain is resilient enough to provide “good visibility and the agility to shift sourcing, manufacturing and distribution activities around fairly rapidly.”

A global pandemic changed priorities for many supply chain leaders, elevating the agility of their network alongside the balance of service and cost. As Gartner points out, more than half of its survey respondents expect their supply networks to be “highly resilient” within two to three years. 

Master your 2021 Budget Planning

The first half of 2020 provided painful lessons for many organizations, some of which still face jeopardy. The businesses that quickly adapted to dramatic marketplace changes have often done so through an effective strategy for risk management. 

Future success relies on your ability to assess potential risks that exist in your network and create alternative ways to plan demand response. Contingency planning today, especially in light of network weaknesses revealed in the past six months, will position your business to not only weather the storm but also seize growth opportunities.

While you are in the midst of managing your business, a supply chain master can provide the risk assessment and strategic planning required to establish a flexible responsive network. With that, you will always satisfy customers in the most cost-effective way.