A new report from Fidelity Fulfilment has just been released, and it includes several insights from ecommerce leaders about all things fulfillment. Specifically, the report takes a closer look at the future of ecommerce supply chains and how businesses are redesigning logistics in an uncertain and volatile time.
Changing Manufacturing and Production Strategies
The report, which was based on survey responses from 1,500 ecommerce decision-makers from across the USA, UK, and Europe, goes over plenty of useful information about the present and future of ecommerce supply chains.
First, the results found that many companies are moving from a concentrated production strategy to one that’s more distributed. While concentrated and clustered production may boost your margins, it also introduces a lot of risk.
If some sort of disruption strikes the place where your concentrated production is located, it slows down your entire supply chain. As a result, many companies are spreading sourcing and production to distribute risk.
In fact, 87% of ecommerce businesses are likely to change their primary manufacturing location within the next few years.
The Growing Adoption of Distributed Fulfillment Networks
The report also found that ecommerce brands are increasingly using distributed fulfillment networks. Specifically, it finds that 86% of ecommerce companies are likely to open additional fulfillment centers within the next three years.
This growth is echoed by other research, such as a report that found that the number of companies shipping from two fulfillment centers is up 17% year-over-year.
While centralized warehousing helps to consolidate inventory and improve cost efficiency at scale, it also introduces risk. If you handle all of your fulfillment from a single location, just one disruption could lead to your entire fulfillment strategy failing.
Also, as customer demand for rapid deliveries increases, having inventory positioned closer to consumers at strategic locations ensures you can meet these demands.
As a result, a distributed fulfillment network not only helps ecommerce businesses reduce risk but also improves the customer experience by offering faster and more consistent deliveries, lower shipping costs, and improved returns processing efficiency.
The Importance of Technology in Supply Chains
As supply chains become more diverse and distributed, operational complexity increases. According to the report, technology plays a huge role in helping manage this rise in complexity. In fact, 99% of respondents say that fulfillment technology is important in strengthening supply chain resilience.
Many types of technology can aid in supply chain management, such as warehouse automation, AI-driven forecasting, and real-time visibility platforms.
When it comes to technology, there are some regional differences among respondents. In the USA, respondents have a particularly strong focus on using automation for optimal speed and precision. But in Europe and the UK, technology adoption is aligned with broader transformation agendas like sustainability integration and innovation.
While digital tools are still being used here to improve operational efficiency, they also support things like transparency and governance.
Sustainability is a Strategic Priority
Once simply a concern and something for companies to consider, sustainability has evolved into a strategic priority and is no longer something to ignore. Environmental accountability is becoming a part of many companies’ value proposition and is influencing all parts of the supply chain strategy.
Many customers also care about being eco-friendly, and more than 80% of consumers are willing to buy sustainably-made or sourced goods, even if they’re more expensive. But in addition to improving a company’s reputation among customers and remaining compliant, being sustainable also makes sense operationally and financially.
Being energy efficient can reduce long-term costs, optimize packaging, keep fuel usage in check, improve routing, and so much more. Globally, 89% of ecommerce businesses report positive business impact from sustainability initiatives. In the UK, this figure rises to 92%, and in Europe, it goes up to 93%.
Customer Experience at the Center of Supply Chain Strategies
The report also found that customer experience is often at the center of a company’s supply chain strategy. In fact, when respondents were asked to prioritize a single strategic focus area for the next three years, 23% said customer experience, which is above things like sustainability and cost savings, which both got 19%.
Many of the changes being made in the supply chain and fulfillment space, such as diversifying manufacturing, distributing networks, and investing in technology, are ultimately done in an effort to provide the best, fastest, and most reliable experience to customers.
When some part of your supply chain or fulfillment strategy fails, customers ultimately place the blame on you, even if the failure was caused by something you had no control over. As a result, many companies are doing what they can to reduce the risk of something catastrophic happening, even if it adds additional costs and complexity.
Confidence is Returning to Ecommerce Supply Chains
Finally, the report ends by saying that confidence is returning to supply chains. Instead of retreating amongst the volatility and uncertainty of today’s supply chain landscape, companies are adapting. In fact, 87% of respondents report that they are more confident in managing supply chain shocks now than they were three years ago.
Ecommerce leaders aren’t worrying themselves about whether disruptions or other issues may occur, they’re designing networks that assume they will. Some other reasons why confidence has returned include the fact that complexity is being better managed, operational visibility has improved, and diversified supplier networks reduce dependency on a single region.
I believe the insights included in this report are crucial for every ecommerce brand to be aware of, as they give a detailed look at what many leaders are focusing on, what they’re prioritizing, and where the market is shifting going forward.
