2021 E-commerce: No rest for the weary

This is an excerpt of the original article. It was written for the January-February 2021 edition of Supply Chain Management Review. The full article is available to current subscribers.

January-February 2021

This morning, I turned on the television and watched the first stretch-wrapped pallets of the just-authorized vaccine being loaded onto a truck at a Pfizer plant in Michigan. From there, the pallets were headed to FedEx’s logistics hub in Memphis where they would be delivered to 153 locations across the 50 states. The event was both historic and mundane: Historic in that the shipments represent the hope of a nation that in the coming months, we’ll begin to put 2020—and COVID—in the rearview mirror; mundane in that this is a scene repeated millions of times a day, without fanfare, in plants and distribution centers across the country. Two of…

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Business leaders and consumers alike have observed the ubiquity of e-commerce brought on by the COVID-19 pandemic. At this juncture, that is not news. Well, how about this: According to IBM’s U.S. Retail Index, the coronavirus accelerated the shift toward online shopping—and away from brick-and-mortar—by about five years.

This news may be good for a company’s top line; however, many supply chain leaders are struggling to cope with the tremendous pressure this surge has put on their internal operations, customer service, and delivery partners. Both manufacturers and retailers, faced with e-commerce volumes that no one anticipated until 2025, are trying to meet this outsized demand with networks that were not prepared to handle this much volume this soon for such an extended period.

So then, the questions on many minds are these: How can existing supply chains rapidly mature to the same five-year future level? And how can a business rise to the current challenges with only the resources at hand?

Like most supply chain decisions, the answers to these questions are found at the intersection of speed and cost. In the realm of e-commerce, pioneers like Amazon relentlessly favored speed. That worked fine for brick-and-mortar retailers when their e-commerce volumes were in the single digits as a percentage of sales. However, given that today’s order volumes are likely here to stay, profitability is a mandatory consideration from here on out.

Last-mile delivery

A simple, back of the envelope SWOT analysis will tell you that retailers with brick-and-mortar stores have an obvious advantage over their direct-to-consumer (D2C) counterparts: their physical store footprint. Several last mile delivery innovations have spawned from this advantage, including buy online, pick-up in store and buy online, ship from store. Another model that is growing in popularity for both traditional and D2C retailers is the micro-fulfillment center (also referred to as an urban DC).

Buy online, pick-up in store (BOPIS) and the more social distancing-friendly adaptations like “curbside pickup” have seen wider adoption in recent years, but particularly since the start of the pandemic. BOPIS is relatively inexpensive for traditional retailers as the last mile delivery cost is split with the customer.

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