Commentary

Opinion: “Direct” has road blocks – overcoming the D2C logistics challenge

D2C logistics

Johannes Panzer, head of industry solutions for ecommerce at Descartes, discusses best practices for taking on D2C logistics.

Today’s modern shopping experience no longer relies upon a supplier, retailer and customer. Nespresso, for instance, has built its brand based on cutting out the middleman and selling coffee pods directly to customers and, in recent years, other organisations are starting to follow suit. In 2019, the direct-to-consumer (D2C) market is growing exponentially, with products from mattresses, to eyeglasses, to razors and shampoo all available to be ordered online and shipped directly to the customer. As a result, consumers want more convenience in the purchasing process, and have developed ever-increasing expectations and demands of producers, suppliers and retailers.

As D2C allows brands to bypass external selling parties and cut costs, the shift to this model already has and will continue to significantly impact the market, especially as more and more businesses move to an entirely ecommerce strategy, While Nespresso has successfully sold its coffee pods directly to consumers for years, D2C can pose uncertainties and challenges for many organisations when it comes to the supply chain and logistics operations they need to finesse to drive the right results.

 

Out with the old to embrace the new

For years, agreements between manufacturers and suppliers have relied heavily upon fixed deliveries in large numbers in order to guarantee sales and income. When working in a D2C model, however, sales can be significantly less predictable—and, because of the increasing number of retailers picking up on this trend, the market is growing increasingly fragmented. But it’s not as simple as just adding an “ecommerce” channel to the business. Supporting D2C requires a change of mindset, a change of strategy and a change of supply chain processes and technologies.

For example, many suppliers have not designed their supply chain processes to sell an individual package, which significantly hinders a transition to ecommerce. As many lack systems that cater to small batch deliveries, getting products into the hands of consumers can be incredibly expensive. In addition, existing technology platforms may not be capable of supporting connections to sales channels like Amazon, Shopify or eBay, which leads to different disconnects within ordering and delivery practices. As a result, it’s important for organisations to return to the foundations of their processes and identify technology solutions that help them to thrive under new constraints. From warehousing to fulfillment to delivery, organisations may have to uproot their existing processes, and systems, in order to find success.

 

Getting it right every time

In addition to a growing appetite in the availability of products that can be ordered online, consumers are primed to expect accuracy from the ecommerce world. Outdated systems, however, can exacerbate order inaccuracies and, in the “want it now” economy, have dire consequences on customer relationships if expectations are not adequately met.

To combat this challenge, it’s vital that organisations consider systems designed specifically for the ecommerce model. This requires consumer-facing adjustments, such as ensuring that what is shown as “in-stock” on a website reflects actual stock in a warehouse, as well as logistical shifts such as an updated sales forecasting methodology. An easy solution to these issues is to tap key cloud-based technologies that leverage automation to ensure an integrated, multichannel warehouse and virtually 100% order accuracy, in addition to a streamlined order-to-delivery process.

 

The countdown is on

The Amazon effect has influenced consumers to want what they order online as soon as possible and they may not be willing to wait for it. In an environment where customers can often expect shipments in 48 hours or less, it’s critical that companies are equipped to meet these requirements. For many different types and sizes of companies, this means incorporating technologies that optimise the pick, pack and shipping processes for more agile fulfillment to ensure that customer expectations are met.

While speed does remain a top priority, even more important is transparency. In order to develop a strong, lasting relationship with customers, companies must implement the right communication strategies to update consumers about the status of deliveries in real-time. Consumers expect to be kept informed on where their package is located through every step of its delivery journey—and the companies that can’t or don’t meet this need will likely experience sales challenges and a negative impact on the bottom line.

 

Finding your rhythm

An organisation doesn’t just pick up ecommerce as a line of business. Rather, companies must be attuned to a series of technological and logistical hurdles to find success with the D2C model. The good news is: complicated doesn’t mean impossible. Above all, change management is key to making the direct-to-consumer business model a success, and that’s why it’s critical for suppliers to develop a well-thought-out strategy that is specifically designed to support ecommerce processes. With the right technologies, strategy and direct communication with consumers, organisations will be more strongly positioned to succeed in the ecommerce world.

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