New research from Blue Yonder, conducted by Researchscape International, reveals major fulfillment challenges are continuing for retailers given the rise in e-commerce as a result of the COVID-19 pandemic. Blue Yonder’s Future of Fulfillment Research Report conducted in October 2020, revealed that retailers saw e-commerce revenue as a percentage of total revenue increase by 33%, and 27% of retailers added fulfillment centers to meet this shift. However, the survey found that many retailers are still challenged by stock availability, profitability ,visibility and accuracy, as well as labor scarcity and a lack of fulfillment automation.
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Future of Fulfillment Research Report Infographic (Graphic: Business Wire)
The research report, to be released in two parts, analyzed responses from 300 senior executives across retail and e-commerce with responsibility for logistics and fulfillment operations in the U.S.
Micro-Fulfillment and Large Fulfillment Centers Surge as E-commerce Revenue Rises
Retailers are expanding their logistics network with more fulfillment and micro-fulfillment centers to meet the surge in e-commerce orders and customer preferences. Drug store/health & beauty retailers, and grocery retailers in particular increased the number of fulfillment centers to meet e-commerce needs than other vertical categories.
- Retailers surveyed saw e-commerce revenue as a percentage of total revenue increase by 33% from before the COVID-19 lockdowns to today.
- Since March, more than a quarter (27%) of retailers increased the number of fulfillment centers in their logistics networks, and half (50%) have centers dedicated to e-commerce order fulfillment.
- Roughly three-quarters (71%) cited that they expanded their logistics network to meet increased e-commerce demand and nearly half (46%) cited that they needed to be closer to the consumer to reduce cost to fulfill and enable delivery speed and convenience.
- 41% of drug store/health & beauty retailers and 40% of grocery retailers increased the number of fulfillment centers to meet e-commerce needs and maintain a consistent customer and brand experience – more than any other vertical.
- Despite the recent rise in the use of micro-fulfillment centers amongst certain retailers, only 15% of all retailers surveyed claimed to have leveraged micro-fulfillment centers in their logistics network.
“The explosion of e-commerce 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 e-commerce 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.”
Out-of-Stocks Continue to Persist Amidst Demand Spikes
Stock availability, social distancing and worker scarcity continue to challenge retailers.
More than half (51%) of retailers cited out-of-stocks as their biggest fulfillment challenge driven by the pandemic. Inventory accuracy is critical, along with the ability to view enterprise and third-party vendor inventory across locations and suppliers.
- This aligns with recent consumer research from Blue Yonder that found 55% of consumers are currently stockpiling because they want to avoid the issue of out-of-stock products.
Maintaining mandated social distancing practices or safety protocols (36%) and worker scarcity (34%) were other prominent challenges that retailers cited. Social distancing has propelled traditional brick and mortar retailers to adapt by offering curbside, pickup and contactless shopping experiences.
- Grocery retailers were more likely to cite out-of-stocks (66%) and worker scarcity (43%) than any other product category.
- Drug store/health & beauty retailers were also more likely to be challenged with maintaining mandated social distancing practices or safety protocols (43%) than any other product category.
- When it comes to the last mile of the supply chain, most retailers stated they are struggling with increasing delivery costs (54%) and reliable order fulfillment (36%).
A Clear Need for More Automated, Orchestrated Omni-Channel Fulfillment
- Only 29% of retailers rate their current order management solution as ‘excellent’ for meeting omni-channel fulfillment needs, citing a big need in the market for more intelligent solutions to help predict and fulfill demand vs. existing DOM solutions
- When managing product assortment to meet demand spikes, nearly 40% of retailers stated they were forced to manually prioritized high demand SKUs to maximize production capacity.
- Only 14% of retailers stated that their fulfillment locations are automated today. Notably, nearly half of retailers (49%) who cite all revenue is from e-commerce have automated fulfillment locations today.
“Traditional DOM approaches are dead. As retailers grapple with the new reality of shopper convergence on one shopping channel – e-commerce – they must also expand automation, inventory accuracy and real-time visibility, as well as order promising intelligence to profitably get products to customers on time,” said Eugene Amigud, group vice president, Product Management, Blue Yonder. “Retailers must go beyond traditional order promising to advanced, omni-fulfillment capabilities embedded with automation and artificial intelligence to instantly pivot, adapt and refocus to deliver the personalized experience consumers expect – all critical to success.”
Blue Yonder will release the second installment of the Future of Fulfillment Research Report in January 2021 and in conjunction with the NRF 2021: Retail’s Big Show – Chapter 1. The second phase will focus on e-commerce fulfillment priorities and investments for 2021.
The Future of Fulfillment Research Report was fielded by Researchscape International from October 6 to 13, 2020. The online survey collected responses from 300 senior executives in omni-channel retail and e-commerce firms with responsibility for logistics and fulfillment in the U.S.
Learn more about the Future of Fulfillment Research Report:
- Part 1 of the Future of Fulfillment Report
- Read the “Riding the E-Commerce Surge: 3 Key Takeaways from our Future of Fulfillment Report” Blog
- Learn more about how Luminate Commerce delivers responsive, integrated business planning and operations, inventory visibility and orchestration
- Get a free 30-day free trial of E-Commerce Fulfillment!
- Attend our Webinar: December 9th at 11:00 a.m. E.T. to see Personalized Fulfillment in Action
About Blue Yonder
Blue Yonder is the world leader in digital supply chain and omni-channel commerce fulfillment. Our intelligent, end-to-end platform enables retailers, manufacturers and logistics providers to seamlessly predict, pivot and fulfill customer demand. With Blue Yonder, you can make more automated, profitable business decisions that deliver greater growth and re-imagined customer experiences. Blue Yonder – Fulfill your Potential™ blueyonder.com
“Blue Yonder” is a trademark or registered trademark of Blue Yonder Group, Inc. Any trade, product or service name referenced in this document using the name “Blue Yonder” is a trademark and/or property of Blue Yonder Group, Inc.
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