Ecommerce Fulfillment Challenges: Managing Overstock and Costs
To mitigate these costs, businesses are employing rate and transit shopping strategies, which can reduce shipping costs by up to 25% without sacrificing delivery speed. Fulfillment centers face significant challenges in managing overstock inventory and rising costs, with 20-25% of SKUs generating 70-80% of sales. Specifically, 20-25% of SKUs typically account for 70-80% of sales.
Fulfillment centers often face the challenge of managing overstock inventory while controlling costs. As ecommerce continues to grow, especially with the significant increase in demand for online shopping, the ability to efficiently manage inventory and logistics becomes crucial for businesses.
Overstock Inventory and Sales Dynamics
In many fulfillment centers, a significant portion of inventory remains overstocked. Despite this, a small range of stock keeping units (SKUs) generates the majority of sales. Specifically, 20-25% of SKUs typically account for 70-80% of sales. This disproportionate distribution of sales necessitates the development of a comprehensive inventory strategy that focuses on the most productive SKUs while efficiently managing overstock.
Technology and Automation in Fulfillment Operations
To address efficiency challenges, ecommerce fulfillment operations are increasingly turning to automation and robotics. The integration of autonomous mobile robots has shown to more than double productivity compared to traditional manual cart picking methods. Companies are also enhancing their technology capabilities by incorporating artificial intelligence, machine learning, and advanced vision systems into their operations.
Having the right infrastructure, such as a robust integration framework and a well-organized structure, is essential to handle the rapid growth in ecommerce. Strategic fulfillment center network configurations can significantly reduce transit times and costs by positioning products closer to end customers. With distribution facilities strategically located on the West Coast, East Coast, and a central location in the U.S., businesses can reach over 90% of the U.S. population within two business days using ground service.
Cost Management in a Competitive Landscape
Industrial warehouse space is facing rising costs driven by low vacancy rates and high ecommerce demand, a trend expected to persist through 2023. Parcel costs are also increasing, with carriers holding significant pricing power. This has led to the entrance of regional and local carriers in the competitive landscape. To mitigate these costs, businesses are employing rate and transit shopping strategies, which can reduce shipping costs by up to 25% without sacrificing delivery speed.
Micro-fulfillment centers (MFCs) and dark stores provide alternatives to store-level fulfillment for both B2B and direct-to-consumer (DTC) operations. These alternatives offer a flexible solution to manage rising costs while maintaining service levels.
Future Strategies and Technological Investments
As we approach 2025, ecommerce fulfillment centers are expected to play a pivotal role in global ecommerce strategies. The focus on improving fulfillment capabilities is essential, with a heightened emphasis on inventory visibility. Investing in technology for real-time inventory management can address this need, providing businesses with the tools to effectively manage stock levels and meet customer demand.
Third-party logistics providers (3PLs) are also leveraging high-touch returns as a point of differentiation. Meanwhile, goods-to-person e-fulfillment technology is being utilized to adapt to fluctuating demand. Additionally, foreign trade zones are being recognized for their potential in enhancing shipping capacity management.
The challenges identified for 2024 highlight the importance of these strategies. By improving fulfillment capabilities and investing in the right technologies, businesses can navigate the complexities of modern ecommerce fulfillment and maintain a competitive edge.
“Improving fulfillment capabilities is essential for addressing the challenges of 2024 and beyond. Investing in technology for real-time inventory management is crucial.”