Study: E-commerce surge strains retailer supply chains

Dan Berthiaume
Senior Editor, Technology
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Retailers are adding fulfillment centers as e-commerce revenues rise, but not all are keeping pace with their supply chain infrastructure.

Major fulfillment challenges are continuing for retailers amid the sharp growth in e-commerce as a result of the COVID-19 pandemic, according to new research from enterprise technology provider Blue Yonder and conducted by Researchscape International. The survey revealed that e-commerce revenue as a percentage of total revenue increased by 33% from before initial COVID-19 lockdowns began in March 2020.

In Blue Yonder “Future of Fulfillment Research Report,” 27% of respondents have added fulfillment centers to meet this shift, and half operate centers dedicated to e-commerce order fulfillment. Roughly seven in 10 (71%) have expanded their logistics network to meet increased e-commerce demand and close to half (46%) said they need to be closer to the consumer to reduce cost to fulfill and enable delivery speed and convenience.

However, despite the recent rise in the use of micro-fulfillment centers amongst certain retailers, only 15% of all retailers surveyed claimed to have leveraged micro-fulfillment centers in their logistics network. 

Only 14% of respondents stated that their fulfillment locations are automated today. Notably, nearly half of respondents (49%) who cite all revenue is from e-commerce have automated fulfillment locations today.

Additional findings from the report are below.

• Four in 10 (41%) drug store/health & beauty retailers and 40% of grocery retailers have increased their number of fulfillment centers to meet e-commerce needs and maintain a consistent customer and brand experience, more than any other verticals.

• When it comes to the last mile of the supply chain, many respondents stated they are struggling with increasing delivery costs (54%) and reliable order fulfillment (36%). Only 29% of respondents rate their current order management solution as ‘excellent’ for meeting omnichannel fulfillment needs.

• When managing product assortment to meet demand spikes, nearly 40% of respondents stated they were forced to manually prioritize high-demand SKUs to maximize production capacity.

• Stock availability, social distancing and worker scarcity continue to challenge retailers. More than half (51%) of respondents cited out-of-stocks as their biggest fulfillment challenge driven by the pandemic. 

• Maintaining mandated social distancing practices or safety protocols (36%) and worker scarcity (34%) were other prominent COVID-19-related challenges. Grocery retailers were more likely to cite out-of-stocks (66%) and worker scarcity (43%) than any other product category. 

• Drug store/health & beauty retailers were also more likely to be challenged with maintaining mandated social distancing practices or safety protocols (43%) than any other product category.

The Future of Fulfillment Research Report, fielded by Researchscape International in October 2020, collected responses from 300 senior executives in omnichannel retail and e-commerce firms with responsibility for logistics and fulfillment in the U.S.