Why Ecommerce is Driving the Need for Greater Flexibility in Retail Supply Chains

Retailers need to streamline their supply chain in order to successfully manage sales peaks.

Meeting demand and customer expectations has never been more critical for retailers. Online sales are expected to hit £52 billion in the UK in 2015, a 16.2 per cent rise on 2014, according to the Centre for Retail Research, making us Brits the most frequent online shoppers in Europe. The main pressure point of these developments is in the supply chain where rapid change is needed to keep up with shifting consumer demand.

ecommerce supply chain

Rethink product stortage, fulfilment and distribution

To address this issue, retailers have to rethink how they manage their product storage, fulfilment and distribution to successfully navigate seasonal changes in demand and manage the unpredictability of new sales peaks, such as Black Friday and Cyber Monday.

Firms are often burdened with warehouses under-used for several months of the year and face the issue of having to ramp up staffing levels at significant cost. So how can businesses adapt their logistics operations to tackle these challenges?

Introduce flexibility into supply chains

Introducing flexibility into supply chains is key to successfully managing peaks in demand, and one effective method which can bring multiple benefits is to take advantage of shared user warehousing by partnering with a third party.

Firstly, this approach enables retailers to scale their storage capacity in reaction to changes in demand – whether that be over flash sale periods such as Black Friday, or in the traditional run-up to Christmas – meaning they can avoid paying for unused space at the times of year when demand is low.

By utilising shared warehousing, firms can also tap into new expertise, investment and economies of scale to help them operate more efficiently. For example, our partners have been able to benefit from investment in new technologies, such as automated despatch sorting, stock profiling systems, ergonomic packing solutions and pick-by-voice, which have increased the accuracy and speed of picking and packing and the number of parcels that can be despatched each day.

In addition, this approach can also provide retailers with access to an established network of international distribution partners, enabling them to provide a greater choice of delivery options for consumers and profit from economies of scale of scale that cannot be achieved stand alone. Flexibility to introduce later cut-off times for next day delivery during peak season, for example, can enable retailers to improve customer satisfaction. A network with a larger number of carriers also means businesses can mitigate against delivery issues should one distribution partner run into difficulties, ensuring the reliability that today’s consumers have come to expect.

Rethink staffing levels

The third and final point revolves around how to ramp up staffing effectively. Increasing employee levels for peak seasons can be a costly and time-consuming exercise, requiring careful planning and training for short-term, temporary staff. Incorporating a flexible staffing model is crucial for handling the new sales peaks, and by working with an external logistics partner, retailers can access a pool of experienced people that have the right skills and knowledge and can be brought in at short notice.

As many more businesses look to follow their customers online, they must look towards introducing an increased level of elasticity in their supply chains to successfully manage sales peaks. In doing this, companies can avoid placing strain on their distribution facilities and be in a better position to meet customer delivery expectations.

Tony Matthews

Tony Matthews

Tony is arvato’s ecommerce key account manager and has successfully managed ecommerce clients in the UK since 2011, working with brands including Firebox, Universal, Sony, Beats by Dr Dre and Beachbody. He is also responsible for developing arvato’s ecommerce business in the UK and supporting arvato’s global ecommerce activities. Before joining arvato, Tony spent 10 years as operations director of Digital Stores limited where he ran ecommerce services for over 40 different entertainment websites. He is also an experienced consultant, having launched ecommerce services for brands including Selfridges.com, Firetrap and Secretsales.

January 15, 2016

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