How Is E-Commerce Changing Supply Chain Management?

Current shifts in consumer buying habits have accelerated the need for companies of any size to ship directly to their customers door. In 2020, COVID-19 accelerated the charge, as IBM reported: the pandemic has accelerated the shift away from physical stores to digital shopping by roughly five years.” Though the velocity of e-commerce purchasing has risen ahead of schedule, five years worth of anticipated growth in just over 5 months, global manufacturers, producers and distributors knew this critical change was on the horizon.

How can companies capitalize on the opportunity to sell their products directly to consumers, what are the benefits of selling through e-commerce channels, and what should be considered when shifting to a direct-2-consumer platform:

Benefits:

  • Efficiency in limiting touch points:
  • By selling directly to their customers door, manufacturers mitigate costs associated with retail fulfillment, including: transportation costs to retailers, sourcing and creating unique SLAs per vendor (Target, Walmart, etc), lost margin due to wholesale distribution and/or marketplace commissions. Cutting out any additional stops in the product journey to the customer’s door also diminishes product damage and potential brick-and-motor inventory loss. 
  • Ideal carriers & direct contracts (retailers no longer handle freight):
    • Consolidating transportation and door-deliveries to a preferred carrier network (UPS, FedEx, etc) allows discounted transportation spend overall. 
  • Expanded customer base:
    • Creating a direct-2-consumer distribution model enables globalization of your product catalog. Buyers don’t need to have access to any particular retailer to find your unique offerings. Your SKUs are a few clicks (and a few days shipping) away from nearly every consumer nationally/globally. 

Considerations:

  • Facility placement:
    • Ideally a shippers distribution center or 3PL warehouse should be as close to their high-volume buyers as possible. Understanding where your product is being shipped is just as important as identifying your target customer and their buying habits. Placing your inventory in key locations can save immense amounts of spend on transportation and inventory relocation if executed effectively.
  • Technology requirements:
    • To execute a successful e-comm business, technology to support inventory management, digital shopping carts, and financials are often required. There are many options to support these needs, including Shopify, Woo Commerce, and others.
  • Build your own E-commerce platform, or leverage an existing network:
    • Product manufacturers must choose between building an e-commerce platform of their own with a technology partner mentioned above, or leverage existing networks to sell their products (Amazon FBM, Ebay, etc).
  • Equipment needed (boxes, handling, etc in a shift from retail fulfillment):
    • Direct-2-consumer shipments often require special handling and dunnage, which comes at a cost, but this also offers the opportunity for customer labeling, branding, and marketing inserts that can be easier to procure and create on your own than through a 3rd party retailer.
  • Throughput per facility (any ceilings to consider):
    • There are a very large number of companies interested in transitioning (at least a portion of sales) to e-commerce. It is key to confirm that deliveries are executed in a timely manner so whether hiring staff internally, or using a 3rd party warehouse, it is important to understand your anticipated outbound volume and find an internal or external resource that can accommodate all orders efficiently. 

The shift in consumers buying habits towards an efficient Direct-2-consumer model isn’t going away any time soon. Building an ideal e-commerce platform for your business will be critical to maintain competitiveness moving forward. Reach out to our team to learn more about building a flexible, effective supply chain.

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