From Reuters Events
By Alex Hadwick
Meeting e-commerce demand without crippling costs is a huge challenge for logistics but a fundamental shift in how we build, position and operate fulfillment systems might change all of that. Reuters Events: Supply Chain investigates
It’s no secret that e-commerce has been a challenge for a huge number of brands, a challenge that has grown since the advent of COVID-19. The tension is between competing in a way that matches consumers’ desires whilst maintaining margins, with even brands as huge and powerful as Nike and Amazon reporting or expecting quarterly losses even as e-commerce operations boom in 2020. This is because consumer’s desires to buy online and send deliveries to their homes have accelerated far beyond forecasts made for three or even five years in the future in the space of just six months
Organisations can’t just keep bulking up operations in a conventional way. There isn’t enough warehouse space near key markets. There aren’t enough available workers who can help when demand peaks. There isn’t the transportation capacity in the last mile. Critically, there isn’t the cash available to keep scaling up our current way of doing things given the expected trajectory of e-commerce.
The only real solution is a radical rethink that puts more automation into fulfillment centres and distributes those fulfillment operations closer to the consumer in smaller spaces than have been attempted before.
Macro change – micro-fulfillment
Put simply, the current mode of fulfillment is unsustainable for many. The costs of delivering goods to consumers were already burdensome for a host of retailers in 2019. Skip forward to 2020 and we are looking at a whole different ballpark for those expenses, particularly in the last mile.
The massive and sudden demand for goods to be delivered direct to consumer’s homes, as well as changes in consumption patterns has sent many scrambling for capacity and delivery capability. As we covered in part one of our series on automation, there is also the need to account for worker safety, reducing the capacity for many facilities. On top of this, warehouse space is at a premium right now, adding additional expense. It is therefore an incredibly tough environment where companies are trying to squeeze every ounce of productivity out of their facilities and workers.