The US is the largest market in the world for e-commerce and is growing at 10-15% per year. Not surprisingly, companies large and small are rushing to serve this opportunity. As companies build success, they also feel the pressure of high customer expectations. The question becomes: can they service these in-demand channels while managing and controlling costs? Despite the growth, no one expects their warehouses costs to be able to rise at a similar rate — in fact, expectations are typically to keep them flat! Let's take a look at some key issues, including:
• Various e-commerce channels and strategies
• Options on handling order management in new and growing e-commerce channels
• Impacts of growing e-commerce channels on parcel shipping
• The proactive steps to take to ensure successful growth and ability to address new e-commerce models
E-Commerce Models
New e-commerce channels add complexity to existing warehouse processes. They typically have their own specific requirements, such as real time status updates, packing and documentation requirements, and shipping cost options. What is critical to understand is that e-commerce itself breaks down into multiple models, each having specific needs. At a high level, there are three models that fit into the e-commerce channels:
1. A company branded e-commerce website — this is your web store. One trend in this model is companies setting up multiple stores to be extremely targeted.
2. Selling through marketplaces — selling goods through the major marketplaces such as eBay, Amazon, Sears.com, Etsy, Groupon, etc. This is one of the fastest growing segments and, even in this segment, there are multiple options. For example, Amazon has the most sophisticated options: (a) you can sell as a supplier on the Amazon network and fulfill orders yourself, (b) you can leverage fulfillment by Amazon, where they manage the logistics for each order on a consignment model, (c) you can become a supplier to Amazon for goods that they sell under their brand.
3. Selling through large retailers such as Lowe’s, Target, JC Penny, etc. — this is an older model of the marketplace model above, as it could require drop-ship or shipments into their warehouses and/or stores. The growth of the model has accelerated tremendously in the past five years based on e-commerce and the needs of the large retailers to retail their customers across the Omni Channel.
Order Management and Application Integration
As multiple e-commerce models get adopted, the order management process typically can get more complex. There are two approaches that are common: (1) Channel centric model; (2) an order centric model. This is shown in the following diagram:
The channel centric model is typically used by companies “born on e-commerce.” The origins of the business came from successfully leveraging a single model such as eBay, Amazon, Groupon, etc. The advantage it provides is a well-oiled process optimized for the channel, all while supporting tremendous growth. The disadvantages are that it is harder to add new channels and diversity. Also, inventory allocation becomes more challenging.
Order centric models provide a more scalable model and it can be easier to add new e-commerce channels. However, more often these models originated from more mature business models where orders came into salespeople via phone, fax, and email. Often in these scenarios, the emerging e-commerce channels are treated as “an exception,” which ultimately limits growth and causes more errors.
Impact of Growing e-commerce Channels on Parcel Shipping
Each different e-commerce model, as well as the partners within each model, will drive separate (and sometimes unique) requirements on the pick, pack, ship process. More mature companies that have grown through traditional sales channels but are now adding and rapidly growing their e-commerce channel, have to constantly assess the shipping options they provide their customers, balancing the marketing need for “free” shipping with the consumer expectations of delivery times. Since the recession of 2008, consumers have shown to be more patient, not to mention cost-conscious, resulting in the growth of services such as UPS SurePost, UPS Mail Innovations, and FedEx SmartPost. A consumer oriented e-commerce channel tends to drive higher order volume with more single item orders. If this is added into an existing traditional business, it has implications on the picking and packing process. For example, batch picking versus master picks by item, etc. Alternatively, companies “born on e-commerce” have mastered the fulfillment of e-commerce orders. However, as their brand is more recognized, their wholesale orders will increase, similarly adding to the complexity.
Marketplaces are one of the fastest growing segments, but can also be the most challenging for more mature businesses. Typically, there are mandated rules for being a supplier on these marketplaces, such as maximum shipping costs that can be charged, fulfilling orders and updating status and tracking in a timely fashion, or consumer feedback and ranking issues. Groupon is one of the newer models in this segment and they require a Groupon branded pack slip. While the order volumes are welcome, fulfilling a spike of 300-400 Groupon orders within two days can be daunting for a business that normally fulfills 100 orders per day.
Finally, while selling through large retailers can be a huge opportunity, the expectations and requirements can be intimidating. Advanced Shipment Notices are mandatory and, depending on the fulfillment model compliant labels, pack validation is often required. These requirements in and of themselves can be complex for a smaller business. However, when mixed in with all of the requirements across channels, they can lead to costly errors, delayed shipments, and additional labor costs.
4 Steps to Ensure Your E-Commerce Is Connected to Parcel Shipping
Given the options and requirements discussed above, the need to connect your Commerce processes with your parcel shipping will result in:
• Meeting your customers heightened expectations on delivery, tracking, and visibility
• Controlling shipping and warehouse costs while supporting e-commerce volume growth
• Scaling up for peak periods without extensive training
• Adding new e-commerce channels without major impact to existing sales channels
In order to attain these benefits, you should:
1. Make a list of all the channels you serve
2. Document whether there are there channels that you treat as exceptions and why
3. Review the channel exceptions to determine the manual steps (creation of branded Groupon pack slip, creation of an ASN, etc.) and process inefficiencies
4. Automate the manual steps by integrating your e-commerce orders and process into your ERP/accounting and shipping software
Focusing on the exceptions may seem counter intuitive, but while they may only make up 5-10% of your orders, they probably also make up 70-80% of your errors.
Brian Hodgson is VP Sales & Marketing, Oz Development Inc.
• Various e-commerce channels and strategies
• Options on handling order management in new and growing e-commerce channels
• Impacts of growing e-commerce channels on parcel shipping
• The proactive steps to take to ensure successful growth and ability to address new e-commerce models
E-Commerce Models
New e-commerce channels add complexity to existing warehouse processes. They typically have their own specific requirements, such as real time status updates, packing and documentation requirements, and shipping cost options. What is critical to understand is that e-commerce itself breaks down into multiple models, each having specific needs. At a high level, there are three models that fit into the e-commerce channels:
1. A company branded e-commerce website — this is your web store. One trend in this model is companies setting up multiple stores to be extremely targeted.
2. Selling through marketplaces — selling goods through the major marketplaces such as eBay, Amazon, Sears.com, Etsy, Groupon, etc. This is one of the fastest growing segments and, even in this segment, there are multiple options. For example, Amazon has the most sophisticated options: (a) you can sell as a supplier on the Amazon network and fulfill orders yourself, (b) you can leverage fulfillment by Amazon, where they manage the logistics for each order on a consignment model, (c) you can become a supplier to Amazon for goods that they sell under their brand.
3. Selling through large retailers such as Lowe’s, Target, JC Penny, etc. — this is an older model of the marketplace model above, as it could require drop-ship or shipments into their warehouses and/or stores. The growth of the model has accelerated tremendously in the past five years based on e-commerce and the needs of the large retailers to retail their customers across the Omni Channel.
Order Management and Application Integration
As multiple e-commerce models get adopted, the order management process typically can get more complex. There are two approaches that are common: (1) Channel centric model; (2) an order centric model. This is shown in the following diagram:
The channel centric model is typically used by companies “born on e-commerce.” The origins of the business came from successfully leveraging a single model such as eBay, Amazon, Groupon, etc. The advantage it provides is a well-oiled process optimized for the channel, all while supporting tremendous growth. The disadvantages are that it is harder to add new channels and diversity. Also, inventory allocation becomes more challenging.
Order centric models provide a more scalable model and it can be easier to add new e-commerce channels. However, more often these models originated from more mature business models where orders came into salespeople via phone, fax, and email. Often in these scenarios, the emerging e-commerce channels are treated as “an exception,” which ultimately limits growth and causes more errors.
Impact of Growing e-commerce Channels on Parcel Shipping
Each different e-commerce model, as well as the partners within each model, will drive separate (and sometimes unique) requirements on the pick, pack, ship process. More mature companies that have grown through traditional sales channels but are now adding and rapidly growing their e-commerce channel, have to constantly assess the shipping options they provide their customers, balancing the marketing need for “free” shipping with the consumer expectations of delivery times. Since the recession of 2008, consumers have shown to be more patient, not to mention cost-conscious, resulting in the growth of services such as UPS SurePost, UPS Mail Innovations, and FedEx SmartPost. A consumer oriented e-commerce channel tends to drive higher order volume with more single item orders. If this is added into an existing traditional business, it has implications on the picking and packing process. For example, batch picking versus master picks by item, etc. Alternatively, companies “born on e-commerce” have mastered the fulfillment of e-commerce orders. However, as their brand is more recognized, their wholesale orders will increase, similarly adding to the complexity.
Marketplaces are one of the fastest growing segments, but can also be the most challenging for more mature businesses. Typically, there are mandated rules for being a supplier on these marketplaces, such as maximum shipping costs that can be charged, fulfilling orders and updating status and tracking in a timely fashion, or consumer feedback and ranking issues. Groupon is one of the newer models in this segment and they require a Groupon branded pack slip. While the order volumes are welcome, fulfilling a spike of 300-400 Groupon orders within two days can be daunting for a business that normally fulfills 100 orders per day.
Finally, while selling through large retailers can be a huge opportunity, the expectations and requirements can be intimidating. Advanced Shipment Notices are mandatory and, depending on the fulfillment model compliant labels, pack validation is often required. These requirements in and of themselves can be complex for a smaller business. However, when mixed in with all of the requirements across channels, they can lead to costly errors, delayed shipments, and additional labor costs.
4 Steps to Ensure Your E-Commerce Is Connected to Parcel Shipping
Given the options and requirements discussed above, the need to connect your Commerce processes with your parcel shipping will result in:
• Meeting your customers heightened expectations on delivery, tracking, and visibility
• Controlling shipping and warehouse costs while supporting e-commerce volume growth
• Scaling up for peak periods without extensive training
• Adding new e-commerce channels without major impact to existing sales channels
In order to attain these benefits, you should:
1. Make a list of all the channels you serve
2. Document whether there are there channels that you treat as exceptions and why
3. Review the channel exceptions to determine the manual steps (creation of branded Groupon pack slip, creation of an ASN, etc.) and process inefficiencies
4. Automate the manual steps by integrating your e-commerce orders and process into your ERP/accounting and shipping software
Focusing on the exceptions may seem counter intuitive, but while they may only make up 5-10% of your orders, they probably also make up 70-80% of your errors.
Brian Hodgson is VP Sales & Marketing, Oz Development Inc.
