Over the next five years, the global e-commerce market is expected to grow at a compound annual growth rate of 14.7%, which, although not quite matching the spectacular growth seen at the outset of the pandemic, is still a respectable pace.
However, despite this expansion, e-commerce firms are struggling to stay up. Many firms realized that setting up websites to accept online orders is only half the battle. Delivering those orders to customers is a very separate endeavor.
Fulfillment has emerged as one of the most significant, if not the most, challenges confronting e-commerce enterprises dealing with a flood of new online orders.
And failing to deliver can have major ramifications for brands seeking to acquire new customers and keep existing ones: According to a FarEye survey, 85% of respondents claimed they would switch merchants after experiencing just one bad delivery experience.
“To gain and maintain customer loyalty, brands must deliver on their consumer promises.” Every time. Excellent customer service is insufficient. It’s a game of chance. “To truly stand out and develop, you must win your customers’ trust and, eventually, their loyalty,” Mike Simpson, vice president of e-commerce at 3PL NFI Industries, noted.
“The capacity to precisely and rapidly get things into the hands of end consumers ultimately affects the perception of your brand.” Incorrect orders and/or slow deliveries will reduce customer pleasure and, eventually, consumer loyalty,” he explained.
Simpson and NFI’s e-commerce section wants to know why brands struggle with fulfillment. The firm recently produced research outlining the most common issues businesses experience when attempting to outsource fulfillment to a third-party partner.
The poll indicated that scaling fulfillment to meet demand is the most difficult challenge, but it was far from the only one identified by respondents. Here’s a complete breakdown of the study.
The vast majority of brands are unable to scale.
Unsurprisingly, more than 9 in 10 (90.91%) respondents identified scaling as one of their top three fulfillment challenges. Brands, in particular, expressed difficulty in locating a scalable partner.
“We evaluate fulfillment suppliers based on their potential to help us scale into new markets,” one company noted.
Many respondents indicated they had to change fulfillment providers since they didn’t have the expected market reach. That is also true for the worldwide market – more than 75% of brands saw reaching overseas customers as a serious difficulty.
“We are excited to expand into international markets.” “We need a fulfillment source who can help us,” one respondent stated.
Brands looking for automation and labor
Though the report did not specify the percentage of respondents who identified automation as a pain point, it did indicate that many businesses are shifting to fulfillment suppliers who have optimized their networks through technology.
“We outsourced our fulfillment to a different provider since we needed someone who had already invested in fulfillment technology as we intended to scale,” one company noted.
“We want to work with a brand that is investing in increasing its technology and automation,” another said.
Warehouse automation is becoming a hot sector, with fulfillment companies bringing in technology such as machine learning, AI, and autonomous mobile robots (AMRs) to speed up the process.
While the adoption of newer technology, such as AMRs, remains low (around 20% by most estimates), according to a Peerless Research Group survey, more than half (56%) of materials handling companies use warehouse management software (WMS), and another 36% use supply chain management and planning software.
Understanding what you’re paying for
More than 8 out of 10 brands believe their outsourced fulfillment vendor has taken advantage of them. According to the poll, 85% of respondents cited a lack of transparency in pricing as one of the top three issues they had with fulfillment suppliers.
According to the study, a lack of transparency often relates to unexpected expenses or hidden expenditures levied during invoicing without the brand’s previous awareness. Due to the lack of a standard price structure for 3PLs, some partners may charge a flat fee for services such as pick and pack, while others may divide that category into smaller payments.
Companies cited “fair pricing, transparency, and competitive rates” as critical decision-making factors. They prefer providers with a “clear pricing structure that considers the nature of our business.”
Customer service could be improved.
In this day and age of supply chain interruptions, agility and adaptability are critical to prevent delays. However, 7 out of 10 e-commerce firms cited poor customer service from 3PLs as their fourth-largest problem when outsourcing fulfillment.
Bad customer service is more than just putting a company’s supply chain manager on hold for an hour – it can eventually lead to negative experiences for the end consumer since the brand cannot act promptly.
“One of our biggest fears is losing a longtime customer owing to a fulfillment provider’s poor service,” one respondent expressed concern.
“We chose our current fulfillment service provider because they helped us better serve our clients,” said another.
The best ability, as they say in athletics, is availability. Does it matter if a 3PL has all the capability in the world if no one answers the phone when a problem arises?
As one e-commerce company noted, “we changed fulfillment suppliers because our current provider is meticulous and provides options to access open order records daily.” They pay attention to demands and wants and are available to speak via phone or email anytime.”
More education and knowledge sharing are required.
While not as pressing as some of the other issues on the list, a lack of fulfillment education was a concern for more than half (55%) of respondents. Navigating the e-commerce sector, especially for developing businesses, may be difficult without understanding the complexities of fulfillment.
Little advice can go a long way for many new and veteran players. Brands, for example, stated that an article or tutorial on correctly labeling their items before sending them to a 3PL would be beneficial.
One responder stated that “fulfillment providers should give client coaching in terms of what brands can do differently or better to help them succeed, save on inbound and production expenses, streamline the receiving or put away process, and so on.”
This also includes data and analytics sharing. E-commerce brands and 3PLs must be able to convey which sections of the network are underperforming and why. Consistent access to that information can be the difference between success and failure.
