E-commerce has a few challenges that other formats do not have. A consumer sees a product in store and walks out with it. There ie no time for a re-think. In e-commerce, there is a lag between the order palcement and fulfillment. If the gap is wide, chances are the consumer may change her mind. To minimize this chance, firms need to get the goods out of their warehose and on to the customer fast. This calls for a high degree of automation. Anuj Kapuria and Kunal Pruthi of Hi-Tech Robotic Systemz Ltd. write about the challenges in e-tailing.
With the ever-increasing reach of Internet, e-commerce is also growing at an unprecedented pace. We are all witnessing a major confluence of traditional commerce & e-commerce. In 2016, retail e-commerce sales worldwide amounted to 1.91 trillion USD which is just 8% of worldwide retail spending. Multifold growth is expected and by 2020 e-tail revenues are projected to cross 4 trillion figure. Over 40% of the world population now has internet access and everyone in the industry wants to expand their online presence to capture this market. Every retailer is making a foray into becoming a leading “e-Tailer”.“Omni-channel” is the buzzword now. The vast majority of the population prefer an experience where they can browse and compare multi-brand products in digital as well as physical stores and whoever succeds in offering this experience will win the customer.
In order to take a lead in this fast pace market, it isn't enough to just have access to customer through an online presence. Success of an e-commerce player specifically an e-Tailer is determined by the efficiency of its supply chain, which is much harder to manage than it sounds. There’s a plethora of issues which a company in this space must tackle to take the lead.
Order Fulfilment Time: Speed of delivery is the key in this instant gratification world. Unlike in old fables, where tortoise beats the hare, speed is money in the e-commerce industry and tortoises lose. Whoever can offer speedy delivery to the customers will have a strong competitive advantage over others. With the latest concepts like “Same-Day Delivery” & “3 Hour Delivery”, fight to decrease order fulfilment time is turning out to be fiercer than ever. Also, expectations of customers from e-tailers are much higher than brick-and-mortar stores with an online presence.
Seasonal Variations: Throughout the year, demand for the products keeps on varying, majorly because of consumer purchasing habits which fluctuates with time because of holidays, festivals, seasons and many other reasons. These peaks & valleys in business demand throw up various challenges for operational efficiencies.
Shipping Accuracy: With the increase in order volumes, accuracy of goods shipped is also becoming a challenge. Even with relatively mature QA processes, mistakes do take place especially in the companies where large volumes of packages are shipped daily. One mismatched label or invoice can lead to the wrong product being sent to the wrong customer. Alongwith customer dissatisfaction it will also lead to huge monetary loss. Situation becomes worse when the customer opts for Cash on Delivery (COD) payment option, where the companies losses compound due to the additional logistics costs.
Space Constraint: Factors like rapid growth, large discount buying, seasonal peaks, planned inventory builds, facility consolidation, or even a slow sales period often leads to shortage of available space. This problem turns out to be the biggest hurdle in growth story of any upcoming e-tailer because of the huge cost related to real estate. In such a scenario, whether the available space is wisely used or not becomes very critical and every possible effort should be made to improve per sq.ft storage efficiency.
Managing Workforce: Variety of processes which are carried in a DC/FC lead to increased operator dependency. With more human involvement issues like absenteeism, attrition and unpredictable quality also magnify. As per a 2016 report, for an average employer combined cost of absenteeism is 8.9% of payroll which includes cost of replacement labor and lost productivity. Another study shows that most businesses who have done any efforts to reduce defects are still at 4 sigma level and for them Cost of Poor Quality (COPQ) is as high as 15% of revenues.
Continual SKU proliferation: The huge proliferation of SKUs to fulfil endless “Wishlist” of consumers further amplifies above mentioned issues. When retailers are able to accurately predict which items they need and the correct quantity, they will be better suited to meet the expectations of their customers without having surplus stock. Just doing the ABC analysis using the archaic techniques or using an inventory management tool will not resolve these issues. Warehouse managers should realize the fact that designing and implementing lean warehouse operations can have a great impact on the total supply chain output and for that they must look towards Data-Driven Forecasting Tools.Forecasting can go a long way in lowering costs and ensuring the success of inventory management efforts.
The above mentioned challenges lead to inefficiency in the overall supply chain and are a constant pain point for the operations and Supply Chain Managers.
A team, a fusion of Solution Architects, Data Scientists, AI Scientists, Hardware Designers and& Software Experts need to work together to understand the nitty-gritties of the complete e-commerce ecosystem. From material storage in the warehouse to material delivery at customer doorsteps, there is a need to increase the productivity at every stage of supply chain by developing a product range which includes mobile robotic solutions for Goods to Man “Omni-Channel Storage/Retrieval Systems”, “Driverless Logistic Vehicles”, and “Last-Mile Delivery robots”. A deeper understanding of the nuances and challenges of present day supply chain processes means the systems should be modular, with plug and play capabilities. Consider a DC for FMCG products where new SKUs are introduced very frequently and inventory is directly affected by seasonal variations. It is very hard to predict and track exact SKU movement and in such scenario, it’s very critical to have systems which are easy to scale. In such a scenario, a next-gen warehousing system which uses “Swarm Robotics” technology and is suitable for high throughput warehouses. On an average by implementing such a system, head-Count can be reduced to 25 from an existing workforce of 150 people and shipping accuracy is also increased to almost 100%.
The core of all these products is Artificial Intelligence (AI) specifically Deep Learning enabled. The ultimate objective of having such self learning capabilities in machines is to develop systems which have human-like thought process but are much more efficient in deriving the “Small Data” i.e. timely and meaningful insights from the “Big Data” generated in the surroundings. These insights are like gold mine of solutions for all the current as well as upcoming problems. The increased complexities of the Omni-channel age requires supply chain operations to run at peak efficiency for 24x7. Novus analytics equips companies to manage this increased complexity by allowing users to monitor real time critical events and KPI’s through all possible touch points. It gives a broader view on supply chain costs and also helps in realizing strong ROI improvements through analytics driven planning activities. Users can quickly respond to supply chain issues and can create a synergy between their warehouse and supply chain operations.
With all the e-commerce players offering very similar pricing for comparison goods, the ability to deliver orders to customers rapidly is now a major point of competition and the biggest challenge. To survive this competition, e-tailers need to put more focus on the ‘sell’ side of the chain. A complete overhauling of supply chain is required and whoever innovates in this direction and finds out a long term solution for the problems will win this “e-Tail Challenge.”