The COVID-19 pandemic has revolutionized the e-commerce industry and has brought dynamism to this field. There have been tremendous shifts in the e-commerce sector in the last two years. The pandemic played a significant role in catalyzing the growth of e-commerce and enabling access to a wide range of products without the need to step out of the house. Despite the strict COVID contact restrictions, e-commerce companies have continued their operations with concepts like ‘Contactless Delivery.’
Recent shift in E-commerce
E-commerce transactions have witnessed a massive shift from luxury goods to essential goods during the pandemic. Moreover, the changes brought by COVID to the e-commerce business are likely to continue in the future. For example, the buying habits learned during the pandemic may continue to exist if the world faces yet another pandemic wave. Therefore, the long-lasting impact of the pandemic in the e-commerce industry proves to be an accelerator for e-commerce firms.
The unprecedented expansion of e-commerce has also prevented physical store interactions that significantly impacted offline stores. Since people preferred online shopping as a COVID-safe way of buying goods, the brick-and-mortar store saw a considerable decline. In addition to that, the worldwide lockdown made it worse for the physical-store owners. This transition from brick-mortar retail to virtual stores has been seen globally.
A difference in consumer behavior on e-commerce platforms was seen during COVID-19. Hygiene and healthcare products such as medicines, hand sanitizers, and toilet papers disappeared from the virtual stores in no time. On the other hand, online sales experienced a spike in household cleaning products by 40% and food and drinks by 31%. Additionally, the demand for ‘2-day delivery’ and ‘same-day’ delivery was huge, and consumers gave a whopping response to these concepts of delivery. The panic-buying behavior of consumers amidst the pandemic led them to buy more and expect faster deliveries. Therefore, giving rise to the quick delivery concepts.
Statistics show that in 2020, the United States experienced a 32.4% increase in e-commerce sales, a whopping $791.7 billion rise from $598.0 billion. According to a global survey carried out by McKinsey, the first-time users adopting online shopping drove around a 50% increase in virtual grocery shopping. Furthermore, according to a study by US Census Bureau, online sales in North America also increased by 50%.
This overall growth in e-commerce led to a global expansion of warehouses in terms of space and units. As per Warehouse Building Stock Database - a global warehouse assessment states that, in 2020, there were only 150,000 warehouses across the globe that offered a space of 25 billion square feet. This figure is expected to skyrocket to 33 billion square feet, adding a 5.2% increase year-on-year by 2025.
Impact of E-commerce on Supply Chain
The impact of e-commerce on the supply chain can be understood as an increase in volatility. That is so because anyone can order anything any time from anywhere. As there is no certainty as to which product would start trending, it is hard for business owners to predict the demand and supply of goods. Additionally, the search engine algorithm disrupts the brand’s visibility.
For example, there was an unexpected surge in demand for consumer-packaged goods used in hospitals for COVID-19 patients during the pandemic. Brands did not see this coming and were unaware of the sudden demand. Similarly, it created volatility in the demand and supply of several other essential goods. Therefore, due to unpredictability in consumer demands, the shift to online ordering has caused difficulty in managing inventory.
Furthermore, in the global supply chain, businesses source the goods internationally. This process includes buying the materials, shipping them, and managing the foreign goods domestically. As consumers expect quick deliveries of their orders, the supply chain management must be in proper control.
Supply chain strategies for E-commerce
Adapting multi-supplier strategy
Depending on a single geographic location or supplier for sourcing inventory is risky. Practically, if one relies on a single supplier to save costs, it can increase expenditure if that supplier faces an issue or is capacity constrained to deliver the required goods. Therefore, in such a scenario, implementing a multiple-supplier strategy is helping in reducing the buying dependency on the single supplier and supply risks.
Strategic warehouse placement
The warehouse placement is vital in offering quick deliveries to customers. Physical proximity is an essential factor determining the feasibility of reaching out to shoppers. That’s precisely where strategic warehouse placement comes into the picture.
Strategic warehousing means placing warehouses or warehouses close to high-density urban areas. This strategic positioning of the warehouses dramatically reduces the local shipping costs and allows the business to offer ‘same-day’ delivery to its customers. Ultimately, saving shipping costs will help the business gain good profits and provide free shipping to shoppers, thus offering a competitive advantage.
Having inventory and capacity buffers
A resilient supply chain always has a buffer to address the sudden surge in sales of a particular product. While buffers might seem expensive and not convincing, they can turn out to be profitable when the demand for that inventory rises. Businesses can contract manufacturers and address their requirements. Besides, buffer capacity can be helpful during expansion to new growth areas or while a new product launches.
Sourcing inventory locally can appear costly. But in fact, local suppliers can help a business have enhanced control on the inventory and push the product closer to the consumers faster. Over-dependencies on some geographical regions, especially global dependency, leads to longer cycle times for finished products. Although local supply can add plenty of complexity to the system, it indeed does contribute to offering quick deliveries.
Warehousing and Fulfillment changes with E-commerce
More than ever, the demand for warehouses and distribution centers is rapidly increasing. As a result, today’s warehouses have seen a reasonable transformation in size, location, operation, and specification. The two significant components in efficient warehousing and fulfillment are the locations of the warehouses and links to the distribution network. The impact of e-commerce on warehouses and fulfillment centers has caused a significant rise in large regional warehouses that are usually away from the cities. At the same time, urban e-commerce logistic facilities and fulfillment centers have also made a rapid growth due to the tremendous demand for ‘same-day’ and ‘two-day delivery.’ Therefore, e-commerce providers are placing such e-commerce fulfillment centers at multiple locations to satisfy the quick delivery expectations of their consumers.
Ways to cope with the e-commerce-driven changes for warehouse and fulfillment centers
E-commerce has obliged warehouses and fulfillment centers to become flexible and agile. Agility is essential to ensure timely deliveries to the end consumers. In addition, the distribution centers and urban fulfillment facilities must be flexible enough to handle the volatility and trends amplified by social media. Therefore, strategically placing the warehouses and fulfillment centers contributes to the increased flexibility in delivering the goods.
Adopting a holistic approach
Before a product reaches the end-consumer, it undergoes numerous operations like designing, packaging, storing, transporting, etc. If the product is sent to different places to complete each process, it would require a lot of time and cost. On the contrary, if most product operations are carried out under one roof, it would result in a massive saving in cost, time, and efforts; thus, resulting in enhanced agility.
For example, photography of a product for online advertising can be done at the warehouse studio itself rather than sending it to a new facility for photography.
Eliminating manual processes
Automating manual processes is a vital step towards sustaining the impact of e-commerce on warehouses and fulfillment. By getting rid of the manual and paper-based processes, errors and inefficiency of operations are significantly reduced. Furthermore, companies can systematically streamline day-to-day warehouse activities and quickly execute operational alterations or changes. In addition, reduction in manual processes results in less requirement of warehouse associates/staff, which in turn contributes to maintaining social distancing and following covid precautions.
Making return transactions seamless
With the unprecedented growth in online sales, the number of items returned to the warehouse has also spiked. More items returned means more warehouse space is required to accommodate the returned goods. The ability to enable quick returns and bring the product back into the inventory system is a competitive advantage for e-commerce fulfillment companies. Besides, creating excellent return experiences for customers can make your shoppers repeat customers and increase sales in the long term. According to reports by the National Retail Federation, 18.1% of items purchased online in 2020 were returned. But the ‘easy return policy’ of e-commerce companies led to customer satisfaction and made them repeat customers. Businesses should have clear return policies, pay for return shipping, and accept returns via shipments to enable seamless returns.
E-commerce never sleeps. To handle the pressure of continuous online orders, warehouses need to be carrying out their operations 24/7. As a result, warehouses have to adapt to ‘open-all-hours’ working patterns to manage timely deliveries of the increasing number of orders every day.
Warehouse order picking is a crucial component in e-commerce warehouse management. Speed has become the single-most driving factor and a challenge that has made e-commerce a competitive industry. Speed combined with accuracy in picking and execution can help the business stand out from its competitors. Customers expect an error-free quick delivery of their orders. Therefore, accurate picking is crucial to lower return rates and create a satisfying experience. Strategic practices like batch picking (picking all identical orders at once), reducing manual entry, and order item validation is best adopted for e-commerce fulfillment at the warehouse for high-speed picking.
Why don’t legacy WMS work for modern E-commerce?
Implementing comprehensive warehouse management software can save time and effort and improve efficiency. On the other hand, one of the drawbacks of legacy WMS is that it doesn’t allow companies to work at maximum potential and efficiency. Therefore, modern e-commerce companies have to leave a lot of the checklist that push them behind other competitors.
Legacy WMS prevents businesses from understanding their inefficient operations that outweigh its drawbacks. As a result, upgrading to the latest WMS can bring holistic progress and efficiency in all aspects of warehouse management.
Following are a few reasons why legacy WMS is not the right fit for e-commerce:
They are not built for the e-commerce age
The order mix of e-commerce is complex and has versatile products with high order velocity. Also, pallet picking and shorter lead times are expected for e-commerce orders. Legacy WMS fails to fulfill the e-commerce age requirements that make them less usable today.
They are closed ecosystems with pre-built integrations
WMS of the e-commerce age needs features like advanced inventory tracking, acquiring real-time data of inventory, warehouse space optimization using AI, dynamic resource allocation, and other automated features to survive the e-commerce competition. Legacy WMS cannot integrate with multiple online and offline sales channels, carriers, hardware, and robots. They are closed ecosystems and incompatible with new technologies. Moreover, reconfiguring them is time-consuming and expensive. Therefore, using them would result in reduced agility and scalability.
Lack of analytics and insights
Big data wasn’t a popular concept when legacy WMS was built, as collecting and processing big data wasn’t practiced then. As a result, there was a lack of information and poor access to deep insights into warehouse operations. Ultimately, poor insights of warehousing data lead to drifting away from taking data-driven crucial business decisions.
Lack of inbuilt intelligence
Precise inventory tracking, finding misplaced items, guiding toward reliable business-decision with verifiable data, and other inbuilt intelligence features are absent in legacy WMS. Besides, poor scalability, inability to offer off-the-shelf solutions, and reduced traceability are AI-related drawbacks of legacy WMS. Yet, these AI-based tools are today's critical business drivers for the e-commerce industry. Therefore, the lack of such technology is a significant disadvantage for the top e-commerce fulfillment companies.
What do E-commerce operations need a modern WMS?
Upgrading to the latest WMS has become a necessity for the e-commerce industry. More than ever, the need for a WMS, full-fledged with advanced technologies, is crucial. In addition, businesses today need easy-to-use WMS that can translate warehouse operations into simpler, efficient, and smarter tasks.
Following are the key components of a modern WMS for e-commerce:
Distributed Order Management
Distributed order management optimizes fulfillment for customers' timely and cost-effective order deliveries. So, to carry out this task, distributed order management systems help automate several operations like,
- Order routing
- Order shipping
- Inventory management
- Inventory forecasting
Besides, shoppers can order from multiple platforms/channels or even within an online store. Therefore, a distributed order management (DOM) system makes it easier to manage omnichannel retail and meet product demand. Moreover, DOM can be integrated with modern WMS.
Advanced Inventory Management
The modern WMS has advanced real-time inventory management capabilities and allows multi-channel inventory synchronization. This ecommerce inventory management software feature helps monitor inventory availability throughout all channels and warehouses. The inventory is updated based on the number of orders received from all channels throughout the day. Similarly, when new inventory is brought to the warehouse, it updates the ‘out-of-stock’ products after replenishment.
- Overall, the advanced e-commerce inventory management system contributes in terms of the following:
- Using AI algorithms that can efficiently plan optimal inventory placement
- Automating manual tasks like back orders or replenishment processes
- Preventing Stock-out or Dead-stock situations
- Predicting future inventory consumption patterns and increasing cash flow
- Boosting warehouse productivity
Compatibility is the key to a modern WMS. Today’s WMS allows integration with a wide range of selling tools and online and offline selling channels, including marketplaces and web-store platforms. Furthermore, it also enables seamless integration with shipping carriers and warehouse hardware for barcodes, RFID, printers, and picking robots.
Picking and Packing Automation
The modern WMS should essentially have the pick/pack capability to reduce order lead times and lower shipping and packing costs with analytical packing recommendations.
- Picking - It supports several picking strategies like Pick to light, Pick by Vision, Robotic picking, and Goods to person. In addition, the AI technology optimizes picker routes, measures picking accuracy picking rate, and gives vital insights for picking operations.
- Packing - The WMS automates the entire packing cycle, reduces packing time, and gives box packing recommendations while optimizing shipping costs for e-commerce fulfillment providers. Besides, it helps with quick printing guides and other packing material.
Coding a program is undoubtedly time-consuming and needs technical expertise. However, the modern WMS offers an excellent no-code interface that gives exceptional flexibility by configuring business rules with no coding. In addition, it helps one to configure business rules at the company level and support multiple flows within single or multiple warehouses. This flexibility can help a business offer competitive e-commerce fulfillment pricing.
E-commerce operations of today’s era need enhanced device management capabilities. The modern WMS lets faster integrations with robots, AIDC devices, and automation hardware. These features bridge the gap between humans and machines and help to monitor all devices with no custom code. The detailed insights of devices contribute to the productive use of devices and optimal failure handling. This prevents device failures and unexpected downtimes of the hardware.
The e-commerce industry has seen tremendous competition in the past couple of years. With this ever-increasing rivalry, it has become crucial for e-commerce players to adopt the latest e-commerce warehouse management software to survive in the business. Automating all the warehouse elements and implementing smarter ways to function warehouse operations is the doorway to a future-proof e-commerce business.
Thus, it’s high time that companies start implementing advanced technologies like AI and Big data to optimize their warehouse operations and bring efficiency in all aspects of e-commerce warehousing and order fulfillment.
Hopstack Inc helps to take one’s e-commerce business to the next level. We provide holistic, AI-powered digital warehouse software for automating warehouse management and execution. Our platform has helped top e-commerce fulfillment companies to simplify operations and optimize warehouse management.
Get in touch with our expert product specialist to understand Hopstack’s Software Suite and how it can skyrocket your business with our best e-commerce fulfillment services.