I’m a big fan of online shopping. This holiday season, online shopping offered me the perfect buying experience: I didn’t have to face mobs of holiday shoppers, items were easily located with a search query, and–my favorite part–everything was shipped to me for free.
Forrester Research predicts the U.S. ecommerce market will hit $279 billion in sales by 2015, up from about $200 billion today. To meet this explosive demand, more and more retailers are turning to distributors for help in fulfilling online orders. But this is creating headaches–as well as new opportunities–for distributors.
The challenge is increasing consumer expectations, coupled with a paradigm shift from fulfilling business-to-business (B2B) orders to fulfilling business-to-consumer (B2C) orders. Consumers increasingly want to get their merchandise faster. Instead of shipping by the case, the distributor has to ship by the item. And instead of fulfilling the order in five to 10 days (a common turnaround time in the B2B arena), the order is expected to be shipped out in two to three days. Oh, and the customer wants the order shipped at little to no cost.
Four Ways Distributors Can Capitalize on eCommerce
In order to capitalize on the exploding ecommerce market, distribution networks need to evolve. Servicing the B2C market means absorbing some up-front costs. The key is to defray those costs by improving efficiencies in some innovative, often-overlooked ways. I’d like to share four areas that distributors should focus on to best serve the B2C ecommerce market:
1. Make products easier to pick
Organizing the warehouse for the most efficient picking route is, of course, critical. A simple strategy to achieve this is to organize the warehouse so that products with the highest sales volumes are kept at the front, which makes them easier and faster to access. However, predicting product demand is tricky. To determine which products will sell the best, distributors should invest in demand planning software. These systems determine product demand based on past sales trends and distributors can use this data to create a more efficient flow in their warehouse.
Distributors that are looking for more automated ways to pick orders should look at an automated material handling system such as Kiva Systems. Kiva Systems improves picking efficiency by bringing the order to the worker for packing.
2. Minimize package space
Once the warehouse is set up for efficient picking, distributors should focus on the packing process–specifically, the packaging itself. Why? Because, as Jerry Hempstead, founder of Hempstead Consulting, explains, “Shippers have introduced a shipping penalty based on the amount of space a package takes up rather than its weight.” This is a critical area to focus on because fulfilling consumer orders greatly increases the volume of packages leaving the warehouse.
Hempstead suggests distributors consider using Packsize to reduce package space. Packsize is an automated packaging system that can build a box to the size of the package you’re shipping. That frees up shipping space and reduces the amount of space boxes take up in the warehouse. To get distributors on board, Packsize is currently offering to absorb the cost of the machine. The catch: distributors have to buy their boxing material directly from the company.
3. Boost efficiencies in delivery routes
To further drive costs out of your shipping process, don’t neglect to analyze your transportation routes from a cost-efficiency standpoint. A transportation management program can help distributors figure out the most efficient route of delivery. In 2004, UPS started routing their trucks to reduce the number of left-hand turns, which leads to excessive truck idling that wastes gas. Sound trivial? Well, to date UPS has saved more than 10 million gallons of gas.
Beyond intelligent routing, distributors can also use services like EquaShip to help in the delivery process. EquaShip can help small- to medium-sized distributors take advantage of massive shipping discounts by picking up shipments and delivering them to the USPS facility closest to the customer’s ZIP code. With this service, distributors can take advantage of USPS’ last-leg delivery service which delivers straight to the customer’s door.
4. Critically analyze how orders are shipped
Efficiency improvements alone will get a distributor well on their way to coping with the added cost of supporting ecommerce. However, Hempstead notes that these efficiency improvements do little good if there isn’t some way to ensure the right choices are being made. For instance, it may be more efficient to automate the picking and packing of an order on an individual basis. But if three orders are going to the same destination, it doesn’t make financial sense to ship three separate boxes.
To guard against this problem, Hempstead recommends that distributors look at random samples of orders that are being shipped. If multiple boxes are going to the same location at the same time, it’s a good idea to take a step back and analyze the packing process.
Distributors that are able to perfect the process of serving the ecommerce sector will gain an edge over their competition. They’ll be perfectly positioned to take advantage of a market that will inevitably continue to boom.
I’d like to hear from you. How do you think distributors should cope with the new demands of ecommerce? Please leave a note in the comments section. Alternatively, send me your thoughts over Google+.
Thumbnail image was created by hospi-table.