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Achieving Revenue Gains from Distributed Logistics

By Tompkins International Staff

Global Supply Chain

The rapid growth and expansion of eCommerce has raised and highlighted important questions for all companies involved in online sales, including:

  • Do efficient or effective supply chains really contribute to more sales and revenue gains?
  • Are there established connections between the proximity of inventories to online sales?
  • Do any such connections change the criteria for deciding on the right supply chains for eCommerce and order fulfillment?

Three senior-level executives from MonarchFx and Finlistics have just produced an important white paper Achieving Revenue Gains from Distributed Logistics that addresses these questions in the context of today’s challenging Omnichannel fulfillment requirements.  In as much as all industries have evolved their supply chains based largely on the minimization of costs, while moving and distributing large volumes of replenishments to stores and other outlets, the majority of supply chain and merchandising leaders have understandable concerns about the additional costs associated with multiple stocking locations.  Sales forecasting has driven demand and supply of larger-scale shipments and replenishments to points of sale.  Further, customer service has been driven by organizations retailers, wholesalers, and other outlets, insuring high levels of shelf stock, product availability, and customer order cycle time.  In fact, the minimization of total logistics costs has been the predominant objective for decades.

The rapid expansion of eCommerce, however, is changing the landscape and the critical factors for business success.  Among the most significant of these is the change to smaller, more frequent orders, dealing with “eaches”, or items, as opposed to container loads, pallet loads, cartons, or other larger boxes. 

“The New Retail” is requiring sellers with online ordering channels to adapt to the significant changes, quickly and effectively.  These changes include, for example:

  • Customers are now seeking connection, personalization, and efficiency in the entire shipping, receiving, and returning process.
  • Customers are demanding an experience and comprehensive services to go with it; thus, brands are especially challenged to gain and retain loyalty.
  • The New Retail goes way beyond new and interesting shopping formats; it is re-defining the customer experience, starting with shopping and not ending with delivery.
  • Customers are placing more value on the entire shipment and delivery process because most products are available on numerous websites, stores, marketplaces, and other channels.

It also involves the increasing use of data analytics to discover and track customer buying behaviors.  Demand forecasting, service levels, “free” shipping, and ease of returns, if not well thought out, will increase costs.  It is critical, then, that companies must think more about increasing profitable growth.

So, what are the leaders doing to cope with The New Retail, the new fulfillment requirements, and the new eCommerce world?

  • First, they are recognizing that speed of delivery, and product availability, along with the quality of services, are contributing factors to customers buying behaviors.
  • Second, they are expanding their thinking regarding revenue generation and the value of locating inventories closer to customers.
  • Third, they are building into their business cases and value propositions some estimates of sales growth anticipated from increasing the speed of deliveries and the more effective management of shipping costs and quality of services.

Through anecdotes, interviews, personal experiences, and reputable surveys, the white paper estimates sales growth impacts from the proximity of inventories to customers.  These estimates range from 6% in 2018 to 15% or higher in 2020.  Depending on the product categories, these estimates could well be conservative.

It is time for decision-makers to add expected revenue gains to their business cases for deploying and allocating inventories to multiple locations to compete in the new world of eCommerce.  Each company selling products online needs a roadmap to achieve distributed logistics in order to be successful in today’s business environment.

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