E-Commerce Growth: Staying Agile in Order Fulfillment

With more and more consumers ordering food online—thanks in large part to COVID-19—food & beverage manufacturers need to take note. Certainly, in the early days of the pandemic, consumers ordered food online in record numbers. This was somewhat expected, due to closed restaurants, social distancing, and mask requirements. But even now, the trend doesn’t show any signs of stopping.

All signs indicate that e-commerce is becoming the new normal in how Americans shop for food—from groceries to home-delivered meal kits to restaurant favorites. According to an outlook report published by Statista Research Department, revenue from the e-commerce food & beverage industry in the U.S. was approximately $34 billion in 2021—an increase of more than $8 billion from 2020. The company estimates this figure will rise to almost $50 billion by 2025.

 

Growth has certainly been swift, and as a result, regulatory issues loom. Food Engineering noted that the FDA has already partnered with federal, state, and local governments, and industry leaders worldwide, as well as with consumer advocates, with the goal to “ensure that consumers aren’t unwittingly trading food safety for convenience.” The FDA even held a virtual three-day summit in its efforts to pave a way toward that goal.

 

Impact on Order Fulfillment & Distribution

 

Grocers as well as food & beverage manufacturers have been quick to recognize the need to sell where customers are buying. In response, they quickly expanded their offerings and market reach by building web stores and mobile apps, providing grocery delivery and curbside pickup, and adding subscription services and third-party marketplace sales.

 

The inclusion of e-commerce channels is appealing, but according to a recent article from Food Logistics, it is crucial for companies to understand and prepare for the challenges and complexities of new modes of order fulfillment. While it can be easy to assume that traditional warehousing and distribution operations are equipped to handle online orders, this can be a costly miscalculation.

 

The article names several ways to prepare for the increase in e-commerce order fulfillment. The first involves individual order profiles, which can come as a surprise to companies accustomed to more traditional warehousing operations. “Picking single items is far more labor-intensive than cases or pallets; the challenge is compounded when items must be picked strategically due to concerns for shelf life,” according to the article.

 

Fluctuating volume presents an additional challenge. Order volume is difficult (often impossible) to predict with online orders, with changes occurring month-to-month or even daily. This makes planning for space or labor needs difficult to forecast.

 

Consumers’ high expectations are also hurdles for e-commerce order fulfillment. Today’s consumers expect responsive service: fast, free deliveries, and updated, accurate information about order status. “This level of service requires greater visibility, efficient (preferably same day) order processing, and careful attention to parcel management,” according to Food Logistics.

 

Expectations for lower margins and the availability of omnichannel capabilities round out the challenges of e-commerce fulfillment. Space and labor costs for e-commerce operations tend to run two-to-three times higher than traditional warehouses. It is, therefore, important to create efficiency and control costs—all while keeping customer service standards high. Even so, managing the needs of multiple sales channels can be daunting, especially when consumers expect a stress-free experience, regardless of whether they’ve ordered online, by phone, or in store.

"This level of service requires greater visibility, efficient (preferably same day) order processing, and careful attention to parcel management."
Food Logistics

Strategies for Successful E-commerce

 

Suggestions from Food Logistics include using multiple distribution centers in key locations—which helps meet consumer expectations for fast shipping. Product that is closer to consumers can be delivered more economically. This can include using facilities for labeling and assembly, as well as other customized tasks. Such “micro-fulfillment” centers can be an effective solution to using a traditional grocery store to fulfill orders, which can result in delays and a congested in-store customer experience.

 

Inventory control via an order management system (OMS) is a good way to improve inventory maintenance and visibility. It can also help to determine where sources are, as well as product availability, in order to provide the best service.

 

The right facility design and best delivery options are also important. Fulfillment operations must have the ability to handle potentially massive order volumes. This makes flexible staffing (and space) crucial. The facility should also be designed with the right shelving/aisle width to accommodate peak processing times. With shipping, there must be a balance between service and bottom line cost. Analytic software can assist in finding efficient shipping options that still meet customers’ expectations.

 

Looking to the Future

 

In the immediate term as well as long into the future, there will be abundant opportunity for further development of e-commerce order fulfillment in the food & beverage industry. As such, it behooves companies exploring a new order fulfillment approach to be aware of the technological, financial, and logistical challenges that such a shift can pose and to develop strategies to mitigate risk and enable long-term success.  Practices such as greater segmentation of distinct fulfillment methods like in-store shopping and online order pickup can lead to smoother, more pleasant customer experiences, while investing in solutions such as warehouse automation and a suitable OMS can improve operational efficiency and boost throughput. As with any major change in practice, research and careful planning are necessary challenges, but well worth the effort; implementing the right mix of technology, support, and imagination for your business is bound to have a positive impact on any order fulfillment strategy, modern or traditional.

Some opinions expressed in this article may be those of a contributing author and not necessarily Gray.

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