Retailers know that despite high inflation and a volatile economy, consumer expectations are at an all-time high. Research shows that the majority of consumers want next-day delivery. A Nielsen IQ Omnichannel Shopping Fundamentals Survey found that 61% of participants would like orders delivered as fast as possible, compared with 39% who indicated they would accept a slower delivery speed. Delivery speed will only grow in importance, as same-day delivery is expected to reach $20.36 billion by 2027.
Yet consumers don’t want to pay for speed. McKinsey found “that more than 90% of U.S. online shoppers expect free two- to three-day shipping.”
Meeting these expectations is challenging. A simple look at FedEx or UPS rates shows that your profits will take a significant hit if you have to deliver products from a single warehouse. Single- or even two-warehouse fulfillment approaches force brands to choose between 1. Paying exorbitant prices for unprofitable next-day or second-day air shipping or 2. Shipping everything via ground, which results in slow delivery times.
To meet consumer expectations, brands are designing flexible, dynamic fulfillment strategies to deliver at the speed and cost consumers demand. Old paradigms of ecommerce and logistics software no longer work. Legacy systems like enterprise resource planning (ERP) are slow, fail to deliver the metrics that today’s brands need to stay competitive and have become unwieldy with bolted-on integrations. Modern fulfillment is built on speed, visibility and resiliency between third-party logistics warehouses (3PLs) and brands.
Rise of Omnichannel Fulfillment
Omnichannel strategies allow retailers to drive greater sales by improving customer experience and providing more channels for customer purchase. Brands need to accommodate a variety of delivery options, including buy online, pick up in-store, drop shipping, buy in-store with delivery from the warehouse and more. This requires trusted 3PL partners that can accommodate this complexity. Brands need to find trusted, competent 3PL partners that provide omnichannel fulfillment, but this can be difficult. The 3PL Central Third-Party Logistics Warehouse Benchmark Report found that only 22% of 3PLs called out omnichannel as a strategic fulfillment type.
To evolve into a thriving omnichannel fulfillment model for your brand, optimize customer experience and drive growth, address several key things:
Start with your goals: Think about solving challenges today and tomorrow. Is your inventory going to expand? Many products require specialized requirements such as retail compliance, seller-fulfilled Prime, cold storage, bulk goods, hazardous materials and more. What are your expectations for speed of delivery and the cost of shipping?
Track the market in real time: Things are changing quickly. If your business is dropping or growing, how does that compare to other vendors in that same marketplace? Use free tools to understand market trends. For example, Extensiv Market Insights offers visibility into the order volume of major marketplaces.
Vet your partners: Find and build a relationship with a trusted distribution partner, one with a proven track record, technology stack and the resources to help you succeed. There are more than 14,000 3PL warehouses in the U.S. alone. Brands should look to build dynamic fulfillment networks that utilize multiple geographically dispersed 3PLs, making finding a partner increasingly important. Consider utilizing a fulfillment marketplace to help match your brand’s needs to a 3PL that supports your specific requirements.
Brands looking to scale through a 3PL require detailed information to ensure the quality of service. Evaluate each 3PL’s level of technology sophistication, its geographic reach, available fulfillment services and the products it can handle.
Look at technology comprehensively: More than half (57%) of businesses report losing up to $500,000 of annual revenue due to poor integrations. When choosing a 3PL, consider their technology. Do they automate workflows by integrating inventory management tracking to order management systems (OMS), shopping cart integrations or warehouse management system (WMS) software?
Facilitate reverse logistics: Brands know that today’s buyers want the ability to return products quickly. When looking for a 3PL partner, make sure they have smooth reverse logistics processes to help replace items wherever and however consumers receive them.
Finding the best 3PL partners to support a thriving omnichannel fulfillment model is critical. With new tools and marketplaces, brands are finding fast, efficient and successful ways to build out dynamic fulfillment networks.
As Extensiv‘s VP of Strategy, David Miller manages the lifecycle of the company’s E products, including roadmap planning, development scheduling, specification writing and training. His unique background in both the supply chain and software development industries includes such diverse posts as branch manager for C.H. Robinson, one of the world’s largest third-party logistics (3PL) providers, VP of Technology for Logistix Services and Director of IT for B.E. Logistics Inc. Miller has been certified as a Microsoft Certified Database Administrator (MCDBA) and holds a BA in Economics from the University of Southern California.