Optimising the Ecommerce Supply Chain for Faster Deliveries and Higher Profits

The rise of ecommerce has revolutionised supply chain strategies across industries. Online shopping now accounts for over 20% of total retail sales. Moreover, the COVID-19 pandemic has accelerated ecommerce adoption by three to five years. This rapid shift provides immense opportunities for retailers willing to optimize their supply chains for the world of omnichannel commerce.

Ecommerce requires greater responsiveness and customer centricity from supply chains. Consumer expectations have soared - from same day delivery options to free returns and everything in between. While meeting these expectations improves both revenue and customer loyalty, doing so profitably demands supply chain excellence. The good news is that emerging technologies and data strategies enable tremendous improvements.

This article explores the modern practices and solutions that leading retailers leverage to build agile, efficient supply chains that deliver exceptional customer experiences. Key focus areas include inventory management, forecasting, warehouse automation, last mile delivery, and advanced data analytics.

New Challenges of Ecommerce Customer Expectations

The broad shift to online shopping presents retailers with new complexities throughout the supply chain:

Delivery Speed: Customers expect shorter delivery times, from fast shipping to same-day delivery. Meeting speed expectations improves conversion and loyalty.

Easy Returns: Lenient return policies and seamless reverse logistics are now table stakes. Optimising returns improves customer experience.

Real-time Visibility: Consumers want shipment tracking and easy access to order status at all times via mobile apps and updates.

Personalization: Customers increasingly expect personalised recommendations and tailored content across channels.

Omnichannel Access: Customers demand flexible fulfilment options like buy online pickup in-store (BOPIS) and easy returns by mail.

Reliability: Competitive advantage goes to retailers that consistently meet delivery promises and provide reliable order accuracy.

These new expectations dramatically impact fulfilment workflows, transportation, inventory planning and more. Legacy supply chain models struggle to keep pace resulting in poor customer experiences, high costs and missed revenue. Fortunately, emerging technologies provide powerful solutions to address these ecommerce challenges.

Inventory Management and Demand Forecasting

Inventory management and demand forecasting are foundational supply chain capabilities that enable responsive fulfilment and optimal stock levels.

Historically, forecasting relied on gut feel, simple time series models, and basic demand planning software. But modern machine learning algorithms now enable far more accurate demand sensing by analysing countless internal and external variables. These may include past sales data, seasonal trends, promotions, competitor activity, market conditions, weather forecasts, geopolitical events, and more. Sophisticated AI models from companies like Blue Yonder and Demandtec continuously ingest these inputs to produce very precise demand forecasts. This reduces excess inventory and stockouts.

Granular inventory tracking is also essential. Retailers like Walmart and Amazon pioneered warehouse management systems (WMS) that leverage barcode scanning and RFID to gain item-level visibility. This detailed inventory transparency across the network minimises write-offs and supports efficient omnichannel fulfilment.

Emerging technologies like computer vision and IoT sensors enable even tighter inventory visibility with less manual scanning. This prevents misplacements and reduces cycle counting needs. Drones and robots can also handle inventory monitoring to free up staff for more value-add tasks.

Warehouse Automation and Material Handling

Ecommerce requires greater warehouse throughput and order turnaround times. Automating fulfilment processes is key to enabling speed and accuracy while controlling labour costs.

Sophisticated picking robots, like those offered by Locus Robotics and RightHand Robotics can handle hundreds of ecommerce orders per hour. They can dynamically route to optimise batch picking. Voice directed systems from Vocollect, a Honeywell company, also optimise human order picking using speech recognition.

Automated storage and retrieval systems (ASRS), like those from KNAPP, provide high-density storage and automatic replenishment to pick stations. This maximises productivity per square foot. Micro-fulfillment centres placed close to consumers also support faster fulfilment.

Frictionless checkout technologies, such as Amazon Go, help customers bypass checkout lines. Similarly, machine vision solutions can now automatically scan items as workers handle them to accelerate processing and cut labeling needs.

All these technologies integrate with warehouse management systems and order management platforms to form holistic fulfilment solutions. This enables optimised ecommerce workflows.

Agile Transportation Management

Managing transportation efficiently has become harder with ecommerce. Small parcel shipments have surged while expectations for fast, affordable delivery have increased. Retailers must balance cost, speed, and reliability when selecting carriers and optimising transportation plans.

Many leading retailers like Manhattan Associates and Blue Yonder utilise transportation management systems (TMS) to optimise routing and execute shipments. These systems synthesise data on costs, transit times, volumes and constraints to optimise delivery plans across providers. Advanced TMS solutions also incorporate real-time tracking data to enable dynamic rerouting when disruptions occur. This minimises delays that frustrate customers.

Increased volumes make carrier negotiations and transportation spend management more crucial. Freight audit solutions help retailers benchmark costs and optimise agreements. Retailers should diversify carriers and consider encompassing models like Uber-style crowdsourced delivery to manage fluctuations in demand.

Omnichannel integration enables capabilities like BOPIS and ship-to-store. Distributed order management systems (DOM) play a key role in determining the optimal fulfilment source and shipping method per order. This balances speed and cost.

Last Mile Delivery and Returns

The "last mile" leg to customers poses major challenges for ecommerce supply chains. Delivery density is lower compared to store replenishment, and customer windows are narrower. Most retailers must partner with parcel carriers, like UPS and FedEx, to provide white glove home delivery.

However, outsourcing last mile logistics relinquishes control over the customer experience. Retailers should maximise information sharing and data connectivity with carriers to enable shipment tracking and dynamic delivery updates for consumers. Many leading retailers are also exploring autonomous last mile delivery, drones, and other emerging solutions to gain greater control over last mile service quality and costs.

Managing product returns is also integral. Customers expect easy, prepaid return options. Optimising reverse logistics improves the customer journey while minimising unnecessary transportation and inspection costs. Analytics helps retailers identify root causes of returns and take preventative actions, such as improving product pages.

Some retailers operate their own return centers to consolidate volumes before redistributing items back to inventory or secondary channels. This hub-and-spoke model improves efficiency. Emerging technologies, like smart package sensors and 3D imaging, also help automate returns processing to reduce costs.

Harnessing the Power of Data Analytics

Connecting and optimising all the supply chain elements above requires exploiting the power of data analytics. Leading retailers rely on solutions like:

Control towers that integrate information across systems for end-to-end visibility

Supply chain data lakes that consolidate volumes of structured and unstructured data

Optimisation algorithms that efficiently plan workflows, inventory, and transportation

Machine learning models that uncover hidden insights to improve forecasting and decision making

Predictive analytics that identify risks, anticipate disruptions, and prescribe corrective actions

IoT sensors and telematics that provide rich data on inventory, assets, shipments, and equipment

Performance dashboards that monitor key supply chain metrics in real-time

By leveraging these data capabilities, retailers can transform their end-to-end supply chains into intelligent, integrated ecosystems. This is essential for excelling at modern omnichannel commerce.

The Future of Ecommerce Supply Chains

Ecommerce will continue growing, and customer expectations around speed, convenience, and service will rise in tandem. Retailers that take a tech-driven, data-centric approach to optimising inventory, fulfilment, logistics and returns will maintain a sustained edge.

Automation, advanced analytics, AI, and IoT will continue disrupting supply chain strategies. Retailers must foster a culture of flexibility and innovation to adapt. Those who do so will be rewarded with  faster, more precise, and more profitable supply chain operations that exceed customer expectations both today and in the future. Companies that modernise their supply chains will gain competitive advantage, while those who refuse will be left behind.