Manufacturers, E-commerce, and their logistics challenges
Published on 2 April 2019
With an increase in purchases made directly with manufacturers and on marketplaces, the industrial value chain is changing rapidly. This sales digitalization is at the crux of a fundamental paradigm change for the industry. What online sales development challenges remain today for manufacturers? And under what conditions will this transformation be successful? We’ve detailed future bumps in the road for industrial e-commerce.
Industrial e-commerce site development: the challenges
Manufacturers today are increasingly prone to make sales directly to consumers, either on their website or via a marketplace. This strategy works particularly well for manufacturers whose brand is already well known to the public. In addition to this, they may also operate an online store and offer private sales at attractive rates.
Internal website or marketplace?
To enter the e-commerce space, manufacturers have two solutions at their disposal: create their own online store or register on a marketplace. Marketplaces are often used to start and test an economic model before rolling it out on a dedicated website. Sometimes, both online sales vectors are maintained in the end.
Internal logistics or external services?
For logistics operations involved in order storage and preparation, manufacturers can choose to have their management done internally or externally. If they choose in-house management, they must be able to reserve a space near to storage areas to prepare industrial e-commerce envoys. Should they opt for subcontracting, marketplace services such as those offered by Amazon are a common choice for storage, order preparation, and transportation.
Be forewarned: package routing is not subject to the same limitations as merchandise transportation procedures ordinarily used across the industry. To supply mass distribution, manufacturers usually charter transporters that work on a full lot or half lot, since they route merchandise on a palette or in bulk. On the contrary, with e-commerce, shipping most often involves packages of less than 66 lbs (30 kg) that are sent directly to individuals or to a pick-up point.
Manufacturers getting started in e-commerce sales are not necessarily aware of all the limitations of selling online. They usually opt for external logistics management in the beginning. Doing so lets them offer services that best meet the needs of end consumers.
Impact of an industrial e-commerce division on company operation
New organization to devise
When selling products to distributors, manufacturers deliver in bulk (boxes, palettes, etc.). To reach an end customer, however, they must be able to sell individually. This is a major limitation given that an e-commerce order generally contains fewer than three products and, for the most part, a single article per package.
To prepare orders, storage zones must be reorganized or regular merchandise pick-up must be planned to pull together an inventory exclusively for industrial e-commerce. Order preparation also means managing several types of product packaging and installing weighing equipment so that last-mile delivery transportation departments can ensure package weight is accurate.
Trimmed profit margins
With an average of 1.4 products per package, preparation time for shipping per product sold is much greater in B2C. That’s not including the absolutely vital upkeep of online sales platforms to attract customers and the launch of sales offerings to compete with more traditional mass distribution.
If sellers slash prices despite additional logistics costs, manufacturers will struggle to sustain a steady profit margin for their e-commerce. This explains why those with infrequently purchased, better known brands and products are the first to reap the rewards of the system.
A new kind of human resource management
Personnel training poses new obstacles for HR departments. Seasonal activity peaks means hiring interim workers who need to quickly become operational. In this case, single envoy preparation reliability is paramount, for instance with LED lamp areas to limit error margins.
An IS to take into account
As a final step in the transformation, the information system must merit particular attention when moving to an industrial e-commerce model. Transporters who charter merchandise to the last mile must be connected to the manufacturer’s IS in order to manage EDI messages and print shipping labels.
Managing e-commerce sales is a project with major impact on IT configuration. If manufacturers have a WMS in place, they must also ensure that the system can handle such a transformation, something that hasn’t always been the case with infrastructures in the past.