It is no exaggeration to say that the COVID-19 pandemic caused an upheaval in order fulfillment processes. The question today is to what degree did these changes occur and how will processes change in the future. Will they revert back to the prior state as if the pandemic never occurred? Will they continue along the same trajectory brought about during the pandemic? Or will the processes be a mix of both, and how so?
An understanding of these dynamics was the goal of ARC’s survey-based research conducted with DC Velocity earlier this year (see DC Velocity Infographic in June 2021 issue). Order fulfillment changes were widespread and exerted effects on fulfillment channels, resource requirements, throughput, merchandise, investments, and more. Today let’s focus on the dynamic combination of order placement and fulfillment processes – also known as omni-channel.
Our survey was conducted with respondents across manufacturing, wholesale, retail, and logistics service provider (3PL) sectors. So certain channel activity is less prevalent in wholesale or manufacturing than in retail. With that said, we asked respondents about the degree to which their organizations processed and filled specific order types in 2019 to serve as a baseline to measure forthcoming changes, and to understand the profile of respondents in the survey sample (image 1). Traditional e-commerce (ship from warehouse), followed by traditional retail (in person) were the most prevalent order process and fulfillment channels used by our survey respondents. The other processes that utilize a combination of online ordering and retail store inventory were less prevalent, as expected.
The interesting findings begin with the changes our respondents experienced in their fulfillment operations during 2020 – a tumultuous year to say the least. The survey sample experienced a net decrease in activity within the traditional retail channel as retail locations were restricted to customers or closely entirely for much of the year. And the majority of those that experienced decreased activity in traditional retail stated that it decreased extensively. In contrast, the survey sample experienced a net increase in activity across other channels including online order, customer pick-up at store; online order, shipped from retail store. Publicly noted examples (external to the ARC survey) include the increase of online order, pick up at store from retailers such as Target and the use of stores as fulfillment centers. The increase in activity was especially pronounced for traditional e-commerce (shipped from warehouse) with the majority of those experiencing increased activity stating that it increased extensively. The direction of these findings for 2020 was to be expected. Less clear are the changes that will occur in 2021.
Our sample of survey respondents are expecting widespread increases in business activity for 2021, with net increases expected across all listed channels. The majority of those expecting increases within the traditional retail channel are expecting moderate, rather than extensive increases. This was unexpected. It is possible that the moderate increase is due to an underrepresentation of traditional retailers (whom I expect to experience extensive increases in traditional retail) such as grocery, sporting goods, and department stores in our sample. I am also surprised by expected increases in online order, pick-up at store and online order, ship from retail store. Again, it is possible that this is due to the profile of our respondents being skewed toward manufacturing and durable goods, as opposed to nondurables (CPG, apparel, etc.). It is also possible that I have underestimated the degree to which processes such as picking up online orders at stores will “stick”. I have reduced my personal use of these practices as I am enjoying the renewed novelty of entering stores. However, it is possible that this novelty will fade and give way to the convenience of pick-up in the near future. I am also surprised by the expected net increase in shipment from stores. I am interested in learning more about the reasoning behind this decision (as it is more of a supplier rather than a consumer preference). Finally, the broad-based expectation of increases in traditional e-commerce supports the perspective that the pandemic accelerated an existing trend and much of that change will “stick”.
The findings from our survey-based research of logistics practitioners shows the degree of change that occurred in 2020 and the likely progression of these changes in 2021. In general, the changes will partially revert back to pre-pandemic order processing and fulfillment practices. However, the e-commerce shift was in process prior to the pandemic and there are financial and convenience benefits to these practices that are likely to encourage their continuation. Finally, our findings are consistent with some broader economic measures. For example, the US Census Bureau reported a 32 percent increase in 2020 e-commerce sales – a strong acceleration from 2019. I expect this increase will decelerate markedly in 2021. Furthermore, the change in monthly sales by kind of business suggest both a rebound for businesses that declined during the pandemic (apparel, automotive) and a continuation of pandemic-related growth trends (home furnishings and sporting goods). This indicates that consumer purchasing preferences may have shifted somewhat, as well.