Whether you’re a growing e-commerce brand or a mature omnichannel retailer, you’re likely evaluating your e-commerce delivery network design as consumer expectations, competitive forces, technology, and the carrier marketplace continue to rapidly evolve. Accelerating advancements in new breed order fulfillment, delivery, and returns technology coupled with the rapid expansion of the carrier marketplace and associated capacity present many challenges, but also a unique opportunity for shippers. That opportunity is the design and implementation of the next generation of e-commerce delivery networks.
Where to Start?
An effective design process begins with an e-commerce delivery strategy clearly defining goals and objectives related to fulfillment footprint, service, carriers, and cost. Shippers will need to evaluate the current state and assess a multitude of options to create a roadmap leading to optimal results. Furthermore, shippers will need to be prepared with big data analytic capabilities and know-how to model complex multi-variable “what-if” scenarios to support the fulfillment footprint design and carrier service decision-making process.
Next, shippers should evaluate their current network to identify opportunities to fulfill their customer promise goals at the least cost. To perform this assessment, develop a baseline cost and transit time data analytic model. This model will identify gaps in achieving optimal fulfillment facility and carrier service selection. The greater the number of fulfillment facilities, carriers, and service options, the greater the potential for sub-optimal selections. This evaluation will allow for the identification of symptoms and root causes of sub-optimization for correction in the current network design and to be addressed in the future state design.
Then, shippers should evaluate their fulfillment facility and technical capabilities along with their associated constraints. This evaluation will serve as the basis for developing a strategy and roadmap to remove constraints for unlocking the full potential for delivery and returns optimization. For example, if a shippers’ parcel rate shop TMS is limited in its rate shop capabilities to optimize carrier transit and costs, then a business case should be made for removing this limitation. Additionally, locations from which inventory is allocated for order fulfillment may also have physical constraints for processing throughput or volume, and these must be addressed.
When designing an optimal e-commerce delivery network, it’s also essential to understand the current carrier market and the solutions available. Many shippers depend on an order fulfillment strategy that requires the ability to ship from a high number of origin points in their network. This dependency presents opportunities for established national and regional carriers to provide solutions. At the same time, there are new gig-economy delivery and service innovations in the market, which are evolving rapidly. Many national, regional, and local/gig-economy carriers and traditional parcel carriers may be incorporated to provide and further an optimized solution in both cost and service.
In addition, e-commerce delivery has expanded beyond the traditional small parcel to oversize and bulky items such as barbeque grills and treadmills. LTL or specialty carriers are expanding capabilities to capture the needs of shippers for these product types with cost-acceptable solutions. There is a good chance that many of these carriers and providers can meet the needs of shippers for a portion of their network based on their volume and package profile. Best of all, these carriers are eager to win business by partnering to leverage their unique value proposition. From this evaluation of the carrier market, an initial carrier service strategy can be derived.
Beyond delivery capabilities, shippers need to understand the invoicing and tracking data quality capabilities of any new carrier before implementation. This data is critical for managing budgets, understanding gaps in expected costs and transit time, refining network optimization through modeling, and managing the customer experience. If a shipper’s network design will include less-established carriers, look to engage an experienced and quality advisor with a full view of the carrier market and deep knowledge of the data considerations to assist in the evaluation and provide recommendations.
Looking Forward
What’s next after shippers have researched and aligned potential carriers and providers with their strategies? Shippers can engage these providers in procurement events to gain pricing and transit time expectations for evaluation in their digital twin model. This exercise will be an iterative one, running various “what-if” scenarios through the model. Shippers will use the provided carrier pricing proposals, volume requirements, and transit times during the procurement process to arrive at the ideal mix of carriers and providers with the most optimal carrier cost and terms. In most cases, it is a best practice to source a national carrier network for both small parcel and LTL shipments followed by working closely with the specialized carriers to optimize areas of the network that require more specialization whether based on distance, special handling, or SKU profile.
Along with the carrier procurement process, shippers should evaluate, procure, and implement the best-in-breed providers to optimize and manage the selected carriers they choose as partners to service them and their customers. Focus on e-commerce delivery execution and management systems such as transportation management, packaging optimization, delivery experience management, and returns. This process can be daunting for shippers. However, closed-loop ecosystems of best-in-breed technology and technology-enabled services are entering the market to provide a streamlined access point to data-share, analytic, and advisory capabilities for small and large shippers alike. A closed-loop ecosystem of these solutions provides the best means for optimizing an e-commerce delivery network on an ongoing basis at the required speed to value.
Designing an optimized e-commerce network is fundamental to achieving a firm’s brand strategy, meeting consumer expectations, and staying competitive. The process requires thoughtful evaluation of the current state delivery network, future network requirements, fulfillment location constraints, execution systems, and the carrier marketplace to develop a strategy and roadmap plan. The ability to model big data as a digital twin of a shipper’s network and to iterate through countless multi-variable “what-if” scenarios is required to make decisions that will lead to the optimal state. Execution systems must be able to execute in near real time or real time upon making optimal cost and service decisions. The process of designing and implementing an optimized e-commerce delivery network is complex. However, a quality industry advisor with big data analytic capabilities and closed-loop ecosystem knowledge can streamline, expedite, and get the greatest value possible out of the process.
Mike Lambert is Chief Operating Officer, Green Mountain, the leading e-commerce delivery, parcel, and LTL spend management provider in the world. Mike can be reached at mlambert@greenmt.com.
This article originally appeared in the July/August, 2024 issue of PARCEL.
