Fulfillment Is the Biggest Barrier To Exceptional Customer Experiences in 2020: New Data Reveals

Fulfillment emerges as a key barrier to customer experience as ecommerce demand spikes.

New research by Blue Yonder finds that retailers continue to face fulfillment challenges as ecommerce sales increase. The Future of Fulfillment StudyOpens a new window conducted in October 2020 revealed that ecommerce revenues grew by 33%. To meet the increasing demand, 27% of retailers added new fulfillment centers. However, retailers are still struggling with issues such as inventory (51%), profitability, visibility, labor shortages (34%), and manual processes.

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While the vast majority of executives (81%) believe their order management solution meets their omnichannel fulfillment requirements, only three out of ten (29%) rate those solutions as excellent. Given the growth in ecommerce, the automation of fulfillment networks continues as well, with 14% having automation across their networks today.

Key Fulfillment Challenges Facing Retailers

• The typical logistic network has 2-4 fulfillment centers. This has increased since March for 27% of firms, remained steady for 66% of firms, and decreased for 7%.
• For those organizations that increased the size of their network, the main reason was to respond to increased demand (71%), while nearly half needed to be closer to the consumer (46%) to reduce the cost to fulfill and enable delivery speed and convenience. Only a quarter was worried about meeting omnichannel needs (24%).
• The median proportion of online orders filled in full is 90-95%, while just under half (42%) indicated that over 95% of their orders are filled in full as received online.
• Most of the responding organizations were founded on or after 2000 (59%), with 17% being startups (in business for fewer than five years).
• Some respondents (40%) who indicated “All sales are from ecommerce” note that they have no plans in the next 12 months to add automation in their fulfillment locations.
• Companies with only one fulfillment center in their logistics network are almost three times more likely to indicate no ecommerce fulfillment challenges as a result of the COVID-19 pandemic.
• The biggest reported challenge faced when it comes to the last mile of the supply chain was “Increasing delivery costs.” But the significance was found in the choice “Reliable order fulfillment” at 45% vs. 32-42% of other respondents.

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Regional Chains vs. National Chains: How Do They Fare When It Comes To Fulfillment?

• Regional chains are more likely to fulfill orders in full: 53% vs. 39% (National) reported 95% or higher fulfillment.
• Regional chains are more likely to have only one fulfillment center: 56% vs. 31%.
• National chains are more likely to have Ecom Fulfillment Centers as an option in their fulfillment network: 58% vs. 39% (Regional).
• Regional chains are less likely to select “Yes” to the question “Does your existing Order Management System fulfill your omni-channel fulfillment requirements?” 76% vs. 86% for national chains.
• Regional chains are more likely to have none of their fulfillment centers automated: 41% vs. 16% of national chains reporting similarly.
• Regional chains reported less ecommerce fulfillment challenges with worker scarcity (27% vs. 42% for national chains) and out of stocks (43% vs. 59%).
• Regional chains manually reduced the number of SKUs in product categories to simplify the supply chain at a lesser rate (22%) than national chains (34%).
• National chains indicated that they plan to continue to use 3rd party partners to assist with the growth of e-commerce into the future at 55% vs. 40% of Regional chains.

How Can Retailers Improve Customer Experiences With Omnichannel Fulfillment Heading Into 2021?

Retailers must deploy intelligent distributed order management (DOM) solutions to predict and fulfill demand better. Traditional DOM approaches are no longer relevant as shoppers converge on ecommerce platforms. Retailers need to expand automation, inventory accuracy, and real-time visibility to get products to customers on time, profitably. Retailers need to think beyond traditional order management and embrace omnichannel fulfillment capabilities, which help them become more agile and respond to changes faster while delivering personalized experiences that customers have come to expect.

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“The explosion of ecommerce orders, in conjunction with consumer expectations for rapid fulfillment, has resulted in an unprecedented need for more digital, automated fulfillment solutions,” said Ed Wong, senior vice president, Global Retail Sector, Blue Yonder. “Retailers, especially those in essential goods, are ramping up their online fulfillment operations and footprints to meet growing customer expectations and to better position inventory more strategically. While this is a short-term solution, they must consider how to profitably manage this growth in ecommerce revenue in the long term. That is where automated back-end commerce and fulfillment solutions, coupled with machine learning-led demand planning solutions on the front-end, can ensure retailers are most profitably meeting these demands.”