The pandemic-fuelled e-commerce boom is proving to be a challenge for traditional retailers and business-to-business sellers alike. A trio of executives from 3PL Kenco discussed the challenges facing traditional B2B businesses in this environment, and offered suggestions for successful adaptation.
David Caines, Kenco’s COO; Dan Coll, vice-president for e-commerce; and Chris Hess, the director of supply chain solutions joined moderator Kristi Montomgery, Kenco’s vice-president of innovation in a panel at the Warehousing Education and Research Council’s (WERC) digital conference, WERC DX, on May 3.
To put the challenge in context, Caines pointed out the astonishing growth in e-commerce since the Covid-19 pandemic began. It has seen a 44 percent surge over the past year, with online retail now accounting for 23 percent of total sales. And with e-commerce dominated by Amazon, with its uncompetitive 27 percent spend on logistics costs, gaining market share has become an uphill battle.
B2B sellers also have to deal with a bifurcation of their inventory, Caines said. The question becomes how to serve both channels at the same time, when one wants orders comprising eaches and the other wants pallet loads.
Coll dug deeper into the situation, pointing out that B2C customer expectations are penetrating into B2B sales. E-commerce demands constant communications with customers, continuous updates about order status and location, he said. And, they expect their order the same day. Old school B2B, by contrast, was more leisurely, with a purchase order issued, and an order fulfilled in 24 to 72 hours.
With so much riding on meeting customer expectations, Coll noted that it is imperative to accurately forecast volumes and timing. Transportation capacity is tight, he said, and carriers will want those forecasts to be able to commit to your freight.
Caines agreed, adding that the big three package carriers – FedEx, UPS and DHL – have so much market control right now that they can pick and choose the freight that best suits their equipment and network. Shippers need to investigate alternative and niche solutions as well as ensuring they have forecasting capabilities, if they want to guarantee a carrier.
Chris Hess believes there are three main hurdles companies face in converting from pure B2B fulfillment to a retail e-commerce model. The first is warehouse management systems (WMS) capability. With “volume rising from hundreds to thousands of orders a day”, he said, systems need to be able to accommodate the sheer numbers or orders, as well as be able to manage packing and manifesting on a much larger scale. Likewise, with transportation capacity constrained, optimizing packaging to minimize cube is also vital. The WMS will also need to manage returns on an each level, something not required in B2B.
The second hurdle is labour. “Labour for e-commerce is very different from b2B,” Hess said. Not only are there the normal seasonal peaks, but there are weekly peaks –Monday and Tuesday, typically – and intraday peaks created by carrier pool times. This creates the need for a much more flexible workforce, one that is used to work being done in hourly increments.
Third on Hess’s list are space and equipment. E-commerce sprawls, he said, with poor cube utilization thanks to the need to pick and ship eaches. Items need to be kept within the reach of human pickers, for example, and packing tables take a lot of space that just isn’t required in a B2B environment.
Caines agreed with Hess’s assessment of the challenges, noting that the labour required to achieve the same revenue in e-commerce is significantly higher, thanks to the need to pick eaches and pack them.
Likewise, he pointed out that e-commerce takes up 250 percent more warehouse space than traditional bricks and mortar, and with real estate in tight supply, network design is becoming a real brake on some companies’ plans. To compete with the likes of Amazon a company will need four or five nodes, and finding real estate in the right markets is critical.
“E-commerce is a very different ballgame,” he said. “It really impacts the business model.”