Handling the Pandemic’s E-Commerce Boom

By April 5, 2021 No Comments

The COVID-19 pandemic has squeezed many years of growth in online sales and e-commerce fulfillment into a single 12-month period.

Confronted with business closures, restrictions on large gatherings, physical distancing guidelines and the fear of catching the novel coronavirus, consumers turned their computers and phones into shopping malls, spending $861 billion online with U.S. merchants in 2020, a 44% increase over the prior year, according to estimates by Digital Commerce 360.

In fact, e-commerce accounted for more than 21% of total retail sales last year, up from less than 16% in 2019, the research firm reported. That increase of more than five percentage points far eclipsed previous annual gains in online shopping.

“People are bored sitting at home and have extra money that would have been spent on a vacation,” said Cathy Morrow Roberson, an industry consultant who heads Logistics Trends & Insights.

They are spending that money on their homes, including buying exercise equipment and office furniture and equipment for remote work, and they are doing much of that spending online, Roberson said.

What was expected to happen in seven years happened in one year last year,” said Kraig Foreman, president of eCommerce at DHL Supply Chain Americas.

Westerville, Ohio-based DHL Supply Chain ranks No. 7 on the Transport Topics Top 50 list of the largest third-party logistics companies in North America. The contract logistics provider is a business unit of Germany-based Deutsche Post DHL Group.

It wasn’t an easy transition as retailers and logistics providers had to adapt to dramatic changes

in the marketplace quickly, said Sean Henry, CEO and co-founder of Stord, an Atlanta-­based supply-chain visibility and e-commerce fulfillment company.

First, companies had to reorganize their operations to implement social distancing and other health safety protocols.

“Our operations were not built for social distance,” Foreman said. “Before the pandemic you tried to get as much done in as little space as possible because optimizing space is efficient.”

And then they had to deal with massive supply chain disruptions as entire economies slid into limp mode in the initial months of the pandemic while the virus spread. Depending on the business, the fulfillment centers had to help clients deal with massive demand as shoppers flocked to stores or started ordering online.

Other logistics companies had clients that were forced to close as lockdowns set in and now wanted to develop e-commerce capability quickly.

At the same time, some companies found their ability to restock hampered by lengthy delays at the nation’s largest ports, a result of the massive amount of inventory coming to U.S. shores.

Along the way, they also had to adjust to the general increase in e-commerce demand.

“The volume increase we are seeing means that we have to work differently than in the past. Manual operations can’t keep up with the activity,” said Malcolm Wilson, slated to become CEO of a new global contract logistics company, GXO Logistics, following its planned spinoff from XPO Logistics later this year. He currently heads XPO’s European operations.

XPO’s split into two separate companies is expected to close in the second half of 2021. XPO will retain its less-than-truckload and freight brokerage business while its logistics segment becomes GXO.

Greenwich, Conn.-based XPO ranks No. 2 on the TT Top 50 list of logistics companies prior to the planned spinoff.

Another complicating factor is that the rapid growth in the volume of goods is mirrored by an increasing number of discrete items — including furniture and appliances — being shipped, Wilson said.

“We have to work even harder to make our warehouses more efficient,” he said. “Consumers don’t want to wait weeks or even days for their product to arrive. Organizations like XPO have to be able to shorten lead times against a bigger volume of orders.”

Logistics and e-commerce fulfillment executives said the pan­demic demonstrated how companies need to rapidly build capabilities to deal with the changing business environment.

Agility is at the top of the list.


Read full article at Transport Topics

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