News / Logistics needs ‘fulfilment accelerators’ to help merchants scale up

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While there are ample fulfilment solutions for small and large e-commerce providers, brands that try to outgrow their initial market reach are hamstrung by a dearth of logistics firms that can help them navigate the transition into a bigger player, according to RMW Commerce Consulting.

The firm has published a paper that calls for a new type of logistics partner – a ‘fulfilment accelerator’.

“Scaling has always been difficult,” said RMW founder and CEO Rick Watson. Growing brands require medium-term scalability options that offer high throughput and capability for customisation while meeting low capital requirements.

Without logistics partners to help them, brands struggle to accommodate higher volumes and expand into new markets; they get stuck in a growth plateau, the RMW study argues.

To facilitate expansion beyond 10,000 monthly orders, growing merchants need from their logistics providers accurate inventory and date-definite delivery capabilities, and differentiated omni-channel services that maintain a high focus on customer experience, it says.

They also need access to discounted shipping rates – especially in today’s slower market that has forced brands to shelve rapid expansion plans and focus more on ebitda.

For these companies, the RMW study says, in-house solutions or local 3PLs don’t suffice any longer, given their limited reach and scope; they lack the capability to provide supply chain visibility in international markets and the muscle to obtain significant discounts for international logistics.

International 3PLs, on the other hand, work best for large brands; they are best suited to handle high volumes with limited need for customisation, Mr Watson argued. He sees the biggest shortcomings of these 3PLs in lack of customisation ability and in challenges associated with integration.

“With 3PLs integration is never a given, especially legacy 3PLs. They are great at handling throughput, but tech integration is different matter,” he said, but added there can be a way to overcome this issue.

“There is a growing layer of companies that help SMEs integrate with 3PLs,” he noted.

To meet the logistics needs associated with scaling up a brand’s business, pure technology providers are not the answer, the RMW study suggests. Nor does it advocate the installation of an enterprise warehouse management system, citing cost, time required for implementation and training and a high risk of failure. It points to a report by Ernst & Young suggesting as many as 70% of supply chain technology implementations fail.

According to RMW: “Current market solutions fall short of preventing a growth plateau,” its paper concludes.

The ideal solution would combine the good parts of a 3PL’s capabilities without the segment’s typical limitations. It would enable customers to scale without compromising the ability to customise solutions that cover all channels and can satisfy the customer experience.

RMW argues that a ‘fulfillment accelerator can accommodate different structures (such as a combination of in-house and outsourced warehousing). It has to have the requisite software, facilities, workforce and expertise, and it must have human expertise. It offers low up-front costs and short implementation times to reduce the risk of failure.

At the moment Mr Watson does not see any company on the scene that fully meets this profile, although “there are a couple of fulfilment providers that are in the neighbourhood”.

Until the perfect fulfilment accelerator comes along, brands have to balance their requirements and the capabilities of logistics providers. One area where most e-commerce fulfilment providers fall short is international coverage.

And, increasingly, brands also want to include returns in the arrangements. Mr Watson is intrigued by UPS’s recent move to acquire Happy Returns from PayPal.

“First-mile return is increasingly important.,” he noted. “There are a number of providers for that. It helps with the web user interface, but not necessarily with the customer experience.”

He added that this aspect was another Achilles heel for the typical 3PL. He said: “Most 3PLs are not good at returns. They don’t give you much data on incoming returns.”