Retailers face further supply chain disruption, soaring prices and an increased focus on environmental commitments in 2022, according to Emma Dempsey, CEO, James and James Fulfilment.
Pressure on fulfilment models
With the 2021 peak season over, there will be a significant rebalancing of the supply chain. The past two years have been turbulent for online retailers and the frailties of just-in-time models have been exposed. Fulfilment models remain under unprecedented pressure, and with global supply chain disruption expected to extend throughout 2022, companies are realising the importance of adding contingency to ensure customer commitments can be met.
Increasing stock holdings, though, risks further pressure on already stretched warehouse space. Retailers should therefore think carefully about where best to locate resources. We can expect to see an increase in micro-warehouses in towns and cities across the UK; while larger companies are also likely to reconsider their global distribution strategies, as they strive to overcome disruption issues with products fulfilled closer to the customer.
Unlocking global trade
Another factor leading companies to reassess their global strategy is the simplification and automation of charges relating to duties and taxes. Unnecessary friction in fulfilment services as a result of customs confusion has been exposed by Brexit. Cross-border trade is increasingly costly, with high overheads caused by products held up at customs and goods being returned to suppliers, leaving businesses deterred from global operations.
This year, systems to automate this process and add clarity will become more widespread. This will not only enable retailers to overcome the barrier to global trade, but also unlock the local fulfilment model.
Utilising artificial intelligence
While micro-warehouses and extending global fulfilment models demand additional capital investment, they also bring new opportunities to service the customer.
Capitalising on these opportunities requires access to accurate, real-time data. Information on rates of sale and stock turnover, combined with global patterns of customer demand, will inform initial warehouse location strategies, subsequently feeding into replenishment models. Machine learning and artificial intelligence (AI) will increasingly be used to optimise these distributed fulfilment models: intelligent warehouse allocation rules will enable different customer offers to be made based on stock location and quantity, as well as cost and speed of shipping, and the rate of sale of stock in each area.
Following COP26, and amid calls for businesses to commit to hitting net zero, no company can ignore the need to better understand its environmental footprint. For eCommerce retailers, this means a greater understanding of every stage of the supply chain, starting at manufacture, through to delivery and returns. The move towards local fulfilment can also reduce delivery mileage and associated carbon footprint, but in order to fully understand the implications, companies will need to have in depth information.
Effective, efficient supply chains are already driven by data ‘ the onus is now on companies, and fulfilment providers, to surface new data points that shed light on environmental impact. AI will also be essential in the drive towards net zero, using environmental impact metrics such as carbon footprint to enable companies to gain an in-depth understanding of their environmental performance, to meet both government requirements and consumer expectations.
Now is the time to address the perennial problem of returns ‘ not only to counterbalance rising inflation but to reduce the environmental impact of additional, unnecessary journeys. If analysed correctly, the significant amounts of data collected throughout the supply chain can provide real insight into returns trends.
We are beginning to see some vendors use returns data to inform strategy. Identifying why certain products are repeatedly returned enables issues to be addressed and information is also fed back into the manufacture process. AI, machine learning and detailed returns data will also bring new insights that allow companies to better understand customer behaviour and performance by SKU. It will be important for companies to proactively explore this insight over the next 12 months, to gain an understanding of returns and develop new policies to reduce the financial and environmental impact.
2022 is set to be another challenging year for online retailers, but those who capitalise on opportunities provided by new technology and data will continue to thrive.