Better analytics could help improve economics of customer order fulfillment
This year, the US witnessed one of the longest and harshest winters in recent history. This has caused worrisome implications on the supply chain economics of the Consumer Electronic Industry since many customers resorted to shopping for products from the warmth of their homes. Manufacturers who were focused on omni-channel sales lost out on margins due to the increase in fulfilment costs, sometimes as high as 7-10% of sales.
This has unlocked a huge opportunity to use ongoing analytics to streamline fulfillment economics.
In general, there are 3 ways in which customers can chose to purchase their electronic gadgets
- 1. Direct purchase by walking into company owned or reseller stores
- 2. Ordering (or reserving) online and picking up their wares from a store of their choice
- 3. Ordering online and opting for home delivery
Creation of the right fulfillment incentive for each channel is paramount since costs, consumer experience and opportunity tradeoff for companies depend on the channel choice made by the consumer.
For instance, today we see the extensive use of online channels to sell long tail products. Whereas, smaller products are sold through stores due to lesser storage costs. Although online configuration and cross-sales sophistication is improving, products with higher sales complexity would require the customer to visit the store sometime during the sales cycle.
So why should companies look for the right analytic tools?
Fulfilment costs, based on parameters like real-estate, shipment, retail floor traffic, SLA compliance rates of third party logistics providers, are prone to fluctuation throughout the year somewhat predictably during the holiday season, but unpredictably during unforeseen weather conditions. This is what happened this winter, when the tradeoffs between the various parameters changed. The affected companies were still latched onto static and simplistic approaches for pricing online fulfillment of products. This is where 'right analytics' comes into play in order to optimize consumer incentives and improve profitability.
The prize for such analytics extends beyond immediate fulfillment cost reduction. This will help plan fulfilment more efficiently and lead to better negotiations with third party logistics providers. It will also help drive improved cross sales leading to enhanced customer lifetime value.