By John Boucher, President and CEO, ModusLink
Recent reports rolling in about the 2015 holiday season have indicated that many consumers chose to stay away from stores on Black Friday and instead shop online – in fact, early numbers said that U.S. consumers spent $4.45 billion online the Thursday and Friday of Thanksgiving alone.
The continued growth of e-commerce simply cannot be overstated – American shopping habits have changed forever, which means retailers have to put a much larger focus on ensuring that their e-commerce operations fully satisfy the needs of their customers. This also means improving the time in between order and receipt of goods. Retailers and brands need to improve the efficiency of their operations at all levels in order to improve how quickly they speed products to customers.
But what can companies do to improve their e-commerce efficiencies? Do brands need to try and match Amazon’s headline-grabbing same-day and drone delivery approaches?
The answer is much more practical than quick (but expensive) deliveries by flying robots. In fact, instead of focusing on the method of delivery, the first place where companies and brands should look to make improvements is in their supply chain.
Sure, it’s much more boring than flying robots – but by putting some focus on your systems and processes and what you can control, you’ll be able to improve customer satisfaction and prevent them from jumping to a competitor.
Operational Visibility and Real-Time Stock Management
This is of critical importance, regardless of whether you’re a brick-and-mortar, online or omni-channel business. In this day and age, you need to know what you have on hand for stock and it needs to be synched up with purchases (in-store or online). Already this holiday season we’ve heard of retailers losing money on out-of-stocks (and overstocks). Today’s supply chain management and planned best practices, combined with the latest real-time visibility technologies, mean that companies no longer have to accept out-of-stocks or overstocks as a regular part of doing business.
This is of critical importance, regardless of whether you’re a brick-and-mortar, online or omni-channel business. In this day and age, you need to know what you have on hand for stock and it needs to be synched up with purchases (in-store or online). Already this holiday season we’ve heard of retailers losing money on out-of-stocks (and overstocks). Today’s supply chain management and planned best practices, combined with the latest real-time visibility technologies, mean that companies no longer have to accept out-of-stocks or overstocks as a regular part of doing business.
There’s no way to accurately forecast demand 100% of the time, but by getting a real-time look into how much stock you have on hand, whether you have enough parts and materials to assemble more if needed – and being alerted that product is – or isn’t -- selling well can help you make better decisions. Tying this to information about factory slowdowns or shipping issues helps you have an even more detailed view of your operations from beginning to end.
In the past, this information would only be available at the end of the month (or quarter) – far too late to make adjustments. Now, if you see demand rising and see you need more materials, you can order them in advance and be ready for the additional interest. You can also shift production to another factory if there is a slowdown or equipment failure or you can ship it differently to avoid bad weather.
Understanding the full scope of your supply chain and communicating that information so adjustments can be made is critical to making e-commerce work.
Fulfilment/Speed
Your supply chain needs to be fast and efficient. How long is it taking you to get products through your supply chain and out to customers? Are you able to offer next-day or expedited shipping options (as is becoming the industry standard), or are you stuck with a firm delivery timeline because of how your supply chain is currently constructed?
Many companies have found that once they reviewed their supply chain operations, there were several areas that could be improved and made more efficient. Perhaps the factory wasn’t laid out to optimize speed, or maybe it takes too long to get the materials to the workers. It could even be as simple as lowering the height of storeroom shelves so workers can get access to tools or materials more quickly. There are usually several tweaks that can be made to your process that will add up to overall improvements in speed and efficiency.
Route Optimization
Much like the factory floor, you need to review the blueprint of your supply chain itself. Are products being shipped or routed to the right areas? Should your factories be physically located closer to your supplier? How about shipping? Should you be located closer to a port? If you haven’t asked yourself these questions yet, you should. Sometimes a change of location to a more optimal setting can make all the difference between happy customers and ones still waiting for a shipment.
Much like the factory floor, you need to review the blueprint of your supply chain itself. Are products being shipped or routed to the right areas? Should your factories be physically located closer to your supplier? How about shipping? Should you be located closer to a port? If you haven’t asked yourself these questions yet, you should. Sometimes a change of location to a more optimal setting can make all the difference between happy customers and ones still waiting for a shipment.
Don’t Forget Returns
One of the most overlooked aspects of running a successful e-commerce business is setting up a strong, efficient returns system. For far too long, companies have treated returns like they’re a drain on their business, instead of something that can be a source of product information and buying habits. Returns need to be closely tied to both your e-commerce and your supply chain processes so that any patterns uncovered from returns can be used to improve future products. For example, 45% of holiday returns being related to screen cracks or damage should tell you that there’s a problem with the materials your screens are made of – and that you should replace them in the next version of the product.
One of the most overlooked aspects of running a successful e-commerce business is setting up a strong, efficient returns system. For far too long, companies have treated returns like they’re a drain on their business, instead of something that can be a source of product information and buying habits. Returns need to be closely tied to both your e-commerce and your supply chain processes so that any patterns uncovered from returns can be used to improve future products. For example, 45% of holiday returns being related to screen cracks or damage should tell you that there’s a problem with the materials your screens are made of – and that you should replace them in the next version of the product.
Support Omni-Channel
Many consumers like the instant gratification that comes with making a purchase in a store and taking the product home immediately. By the same token, the e-commerce industry has made great strides to speed the time it takes for products to be completed and delivered. There is a third way, however, that you should be supporting: omni-channel. In today’s world, where consumers have several choices for purchasing the goods they want, many are looking to buy items online and pick them up in their local stores, giving them a level of the instant gratification they crave.
Many consumers like the instant gratification that comes with making a purchase in a store and taking the product home immediately. By the same token, the e-commerce industry has made great strides to speed the time it takes for products to be completed and delivered. There is a third way, however, that you should be supporting: omni-channel. In today’s world, where consumers have several choices for purchasing the goods they want, many are looking to buy items online and pick them up in their local stores, giving them a level of the instant gratification they crave.
To manage omni-channel you need real-time information about your supply chain – without it you won’t be able to identify what products are where and what needs to be adjusted or moved in order to support the omni-channel model. Without the real-time information, there’s the danger that too much or too little stock will be left in one place; or that it becomes impossible to move stock in a timely fashion.
Conclusion
There’s no stopping the growth of e-commerce – unless you’re attempting to succeed without closely tying your e-commerce to your supply chain. By embracing real-time information you’ll be able to see potential disasters before they happen, make adjustments – and continue to provide customers with the products they want, when they want them. You may not be able to have a product arrive at a consumer’s doorstep instantly, but you can make sure it feels like it does.
About the AuthorJohn Boucher is President and CEO of ModusLink Global Solutions. Through his operational experience in many of ModusLink’s key target markets — including consumer electronics, PCs and IT infrastructure — John provides the company with a deep understanding of global logistics challenges and opportunities, and a proven record of building highly successful customer relationships.
Before joining ModusLink, John served as Chief Commercial Officer and Chief Operating Officer for Symbotic LLC, a global provider of integrated supply network automation solutions for warehouses and distribution centers. John also served from 2004 to 2010 at Celestica Corporation, an $8B tier-1 electronic manufacturing services (EMS) company where he held a number of executive-level positions, including EVP Supply Chain and Engineering Services, EVP Global Sales and Chief Procurement Officer. Prior to its acquisition by Celestica in 2004, John spent 9 years with Manufacturers Services Ltd. (MSL) and over 17 years with Digital Equipment Corporation.