"I feel the need . . . the need for speed!"
Today’s online shoppers certainly agree with the sentiment of Tom Cruise’s character in the 1986 movie “Top Gun.”
Thanks to the “Amazon effect,” consumers have a nearly insatiable appetite for speedy delivery. In fact, according to Elastic Path’s recent survey, 75 percent of consumers expect to enjoy same day delivery by early this year.
Other than Amazon, Target, and Walmart – and even then, only in certain markets – most online retailers aren’t there yet. And consumer expectations probably won’t slow down any time either. That means Consumer Packaged Goods manufacturers venturing into e-commerce have no choice but accelerate their delivery performance.
Overcoming the Transportation Cost Challenge
Consumer products manufacturers that aren’t yet immersed in e-commerce face numerous obstacles when striving to meet expectations for prompt delivery. The most obvious: companies that aren’t drop shipping online orders for retail clients already don’t have the systems, processes and procedures in place for piece order processing and fulfillment.
Still, even the digitally native vertical brands built on an e-commerce model must address one of the biggest issues affecting online order fulfillment: high transportation costs. The “State of Logistics in 2019” report from Logistics Management notes that freight transportation costs comprise the biggest share of U.S. business logistics expenses.
Companies struggle to reduce that expense. In fact, Inbound Logistics magazine’s 2019 “3PL Perspectives” report reveals that nearly two-thirds of shippers surveyed said that cutting transportation costs is their top challenge.
Location, location, location
For many, strategic location of the fulfillment center is a dual-purpose solution: It helps manage shipping costs while meeting consumer “need for speed.”
E-commerce brands are seeking fulfillment options in carefully selected locations that can provide same- or next-day delivery where needed. Solutions include:
- Opening new fulfillment centers
- Acquiring businesses that are already doing it successfully
- Contracting with experienced third-party or enterprise logistics providers
- Filling orders from brand-owned brick-and-mortar retail outlets
The latter option was just one solution a global, omni-channel retailer used when it partnered with our team to reduce its transportation budget. Leveraging brick-and-mortar stores as e-commerce fulfillment centers was one element of a multi-faceted strategy that cut transportation spending by 18 percent – $10 million – in just six months.
Fulfillment Center Checklist
With each solution, consumer packaged goods manufacturers need to ask questions regarding each fulfillment center’s capabilities. The list of questions breaks down into three areas – location, facility suitability, and access to talent.
Key questions include:
- Does the facility have adequate access to transportation and logistics partners?
- What market(s) can you serve from there?
- Most importantly, will you be able to meet customer delivery expectations from there affordably?
Transportation Insight has a comprehensive network of warehousing and distribution partners with facilities throughout North America. We serve clients across the continent and overseas from our headquarters in Hickory, NC, and operating centers strategically located throughout the United States.
Access to the right workers can be as important as physical location. Among other things, you want to know:
- Is there an available, trained workforce?
- In markets where competition is tight for skilled workers, what processes do your partners have in place to attract and retain the right people?
- In less-competitive markets, what training opportunities are available?
How prepared the facility or partner is to being able to serve your customers has an impact on how quickly you’ll be able to start filling orders from there. Asking the right questions helps determine the best fit. They include:
- If you need special handling such as cold storage, is it available or will you need to add it?
- Are there enough loading docks to handle bulk deliveries and parcel shipments?
- Do racking and materials handling processes in place already meet your direct-to-consumer order needs?
- Is the building wired for the technology you’ll use?
The final step is using data analytics and other resources to determine the right inventory mix in each location.
With the right combination of resources, fulfillment center locations, and inventory management, consumer packaged goods manufacturers can serve shoppers in population-dense markets just as quickly as the big box retailers can.
Ready to learn how manufacturers can evolve an effective e-commerce program? Download Transportation Insight’s guide, “Start the Cart: A Manufacturer’s Guide to Achieving E-Commerce Fulfillment Excellence.”