The COVID-19 pandemic has drastically changed how we do business. With countries enforcing far reaching lock downs and restricting movement, ecommerce was certainly one of the more prominent gainers from the new order.
But the world of ecommerce has had to make some key changes of its own to conform to the new reality. Some of the shifts that have taken root especially around fulfilment are likely to hold long after the pandemic has dissipated. The shifts present a challenge for ecommerce businesses but also an opportunity to align with the changes and grab market leadership.
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Expand Fulfilment Capacity
Long-term demand trends already pointed to steady growth in ecommerce parcel volume. With COVID-19 abruptly pushing so many consumers into online shopping for the first time, this growth has accelerated. The growth momentum is bound to persist post-COVID-19 at least in the short to medium term.
Average peak utilization of warehouses and distribution centers was already at 82.5% in 2019 according to a Logistics Management survey. A fifth of those surveyed had peak utilization of 95% or more. In the context of the unusually rapid rise in parcel volumes in 2020 and the likelihood of this trend holding post-COVID-19, ecommerce stores must be prepared to expand their fulfilment options.
Existing capacity in sortation and distribution centers could get saturated much quicker than was expected. Fulfilment throughput could benefit from not just expanded capacity but also fulfilment automation solutions.
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Single Distribution Centers No Longer Tenable
A decade ago, businesses were content to rely on the smallest number of warehouses to meet service goals. Having one or two distribution centers (DCs) to support your fulfilment network was fairly routine and quite efficient. Then Amazon’s two-day and one-day service happened that made speed a critical component of ecommerce fulfilment. With that, the need for more warehouses emerged. COVID-19 has only further accelerated this trend.
A single DC fulfilment solution is great on paper when you evaluate it against workforce, inventory carrying cost and a variety of other business variables. But if just one person in that DC tests positive for COVID-19, it has to be shut down. You will have to scramble for an alternative with little warning. So even after COVID-19, you have lower the risk to your fulfilment capacity by expanding your options. That may increase your expenses in the near-term but is key to building a sustainable business.
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Outsourcing Fulfilment
Leading ecommerce retailers often rely on a network of owned or leased warehouses. The multiple distribution centers meant they had a resilient fulfilment system that could withstand the disruption of natural disasters. After all, natural disasters such as hurricanes and tornadoes had a limited geographical area of impact.
But COVID-19 has demonstrated that a pandemic doesn’t abide by such geographical restrictions. And when an organization is heavily dependent on its own network, it lacks the flexibility to shift fulfilment operations on short notice. The post-COVID-19 world favors an outsourced approach to fulfilment.
Interestingly, small and medium-sized ecommerce stores may be better prepared to surmount a COVID-19-style pandemic. Your ecommerce business could be better served by outsourcing to either a single third party or having multiple fulfilment partners you could call upon in the event of a crisis. On-demand warehousing services can add flexibility and redundancy. These pay-as-you-go (PAYG) schemes require just one or two weeks to deploy as opposed to the months needed to establish a new 3PL.
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Fulfilment Priority for Top SKUs
COVID-19 accelerated the market shift to online shopping. That doesn’t however mean all ecommerce stores experienced roaring business during this time. Actually, job losses dampened consumer spending to a great degree with some sectors especially hard hit.
Many ecommerce companies will grapple with cash flow difficulties post-COVID-19. They therefore may not be able to establish a resilient, flexible fulfilment process for all their SKUs. The cost of doing so could erode any profit from their sales. Instead, retailers should adopt the Pareto principle and focus on the SKUs that are responsible for the majority of their revenue. Depending on the size of the store, that may mean paying attention to the top 5 or so SKUs.
The goal is to ensure you have the ability to ship these SKUs from and to almost anywhere. Address any supplies, inventory, training or information system barriers that could inhibit your ability to fulfil priority SKUs.
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Train and Protect Human Resources
At the peak of COVID-19, entire warehouses, factories and offices had to be shut down when just one employee tested positive for the virus. The pandemic showed why protecting employee wellbeing is essential. Post-COVID-19, this is a principle ecommerce stores must continue to abide by. It’s important that not just your own workers but those at your outsourced fulfilment providers adhere to best practices in pandemic containment.
Establish escalation procedures that workers would invoke whenever an infection or other similarly disruptive event is suspected. Ecommerce stores are in a better position than most businesses to take advantage of the Internet for remote work. Explore the possibility of allowing some or all employees working off site either as standard procedure or on short notice.
Not One Size Fits All
COVID-19 presented business challenges of a type and scale that the world had not seen in more than a century. Similarly, the post-COVID-19 era will be new territory that ecommerce stores must quickly adapt to. Customers’ shopping habits will change and that could catch companies that fail to change off-guard.
Ecommerce managers will have to navigate the sea of uncertainty and prepare to make appropriate changes in order fulfilment. While the points covered here are crucial, ultimately you know your business and customers better than anyone else does. Let these tips provide a starting point to creating a fulfilment process that allows you to serve your customers as best as you possibly can.