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A Surge in eCommerce Has Forced 3PLs to Rethink Direct-to-Consumer Fulfillment

December 10, 2020 3PLFulfillment

Moving away from brick and mortar retail stores has fulfillment centers focusing on how technology and process can aid in the customer experience.

According to Forbes, total US retail sales grew at an average annual rate (CAGR) of 3.4 percent from 2013 to 2018. Meanwhile, the e-commerce portion of these sales grew at an average annual rate of 14.6 percent over that same period. This shift accelerated in 2020 due to the coronavirus pandemic. E-commerce sales in the second quarter of 2020 increased by 44.5 percent when compared to the second quarter of 2019.

What does this mean for fulfillment centers? Companies have had to pivot to meet the growing demands of online shopping. Inventory that was shipped directly to retail stores is now being sent to fulfillment centers to process and ship directly to consumers.

Fulfillment centers have had to create their own processes and strategies to streamline inventory demands, packaging, labeling, and of course, shipping. Retail stores are able to receive large shipments from fulfillment centers, but direct-to-consumer packages are much more distinct. The result is smaller, lighter packages, creating an increased volume of packaging, labeling, and shipments, and substantial changes to warehouse operations.

Competing with the Amazon Effect

As the E-commerce giant continues to dominate the digital marketplace, consumers’ expectations of online shopping have also shifted. B2C shoppers expect product availability, accurate fulfillment, rapid product delivery, and less burdensome returns when making purchases online. The Amazon Effect has put undeniable pressure on 3PLs to increase inventory and decrease order fulfillment timelines.

3PLs have had to rethink their warehouse operation systems and processes to meet these growing demands and keep up with their competitors. Their ultimate goal is fast and efficient operating procedures that result in speedy, accurate deliveries.

Investing in Success

The boom in e-commerce resulted in fulfillment centers investing in new warehouse technologies and automation processes, including high-density storage, the concept of condensing stored items into less space.

But all of these changes come at a cost. Warehouse operations and processes are frequently supported by warehouse software intelligence, including AI, that aids in task assignment, order consolidation, and product through-put. “But these investments require high volumes and time to cover the fixed costs of an investment. At the same time, warehouses are dealing with increased variability in order volumes, order profiles, and other measures. This variability is increasing the value of adaptable automation.”

Fulfillment centers have taken a step back to find the balance between the investment in warehouse software upgrades and adaptable automation and the benefit of reliable product availability, quality fulfillment and transportation, and ultimately, customer satisfaction.

Does your company need help with the growing demands of e-commerce? We’re here to help!

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