In February 2023, GlobeNewswire shared news from Fortune Business Insights, which estimated the supply chain management market size to be 19.23 billion in 2021. Going forward, the market is anticipated to have phenomenal growth, with a value of USD 47.29 billion by 2029, exhibiting a CAGR of 12.1%.
The Parcel and Postal Technology International, in May 2023, reported about the prominent adoption of advanced technologies in the US e-commerce logistics domain. It is said to cut down costs, improve efficiency and enhance the overall customer experience. Automation integration in distribution centers and warehouses stand out amongst these innovations. It has led to striking advancements in the accuracy and swiftness of the order fulfillment processes.
The year 2022 witnessed contrasting dynamics within the eCommerce industry. On the one hand, there was a significant surge in the proliferation of direct-to-consumer (D2C) brands known for their customer-centric approach.
On the other hand, traditional in-store shopping made a comeback, along with an increased emphasis on omnichannel and social commerce strategies. The data available suggests that eCommerce retail is all set for a sustained expansion, as global sales are projected to go beyond $6 trillion by 2024.
However, the consequences of the Russia-Ukraine war are visible. Keeping in mind the rise of inflation, the International Monetary Fund predicted a receding growth rate of 2.7% in October 2022.
The reduction in investments from both venture capitalists and the government, along with the declining valuation multiples from 8-10 times revenue in 2021 to 3-5 times in 2022, impacted the growth trajectory of eCommerce businesses profoundly.
Additionally, the escalating cost of customer acquisition has compelled brands to refocus their efforts on customer retention and meaningful branding strategies.
Top Supply Chain Trends for eCommerce Industry in 2023
Supply chain disruptions as a result of the global pandemic highlighted that businesses were not well prepared to respond to the crisis. The Association for Supply Chain Management (SCM) shared that about 66% of respondents shared that they witnessed major or minor problems in their supply chain.
Today, eCommerce brands are working to improve their supply chain planning. Hence, they must consider the emerging SCM trends to thrive better in the years to come.
The popular trends for 2023 are:
Micro-Fulfilment for Optimizing the Last Mile
Optimizing the “last mile” is the objective for supply chains. It is a known fact that last-mile costs contribute to 41% of overall shipping costs in supply chains. Recently, this fact has been further aggravated, with shippers raising prices for the last mile.
To respond to these rising last-mile costs, retail and grocery brands are taking charge of the issue.
They have started to adopt a strategy known as “micro-fulfillment” for managing fulfillment, making use of supplies sourced from the local warehouses. It helps retailers to provide choices like online purchases with in-store pick-up or delivery. Brands need to count on 3PL service providers for this.
Red Stag Fulfillment states that incorrect packages or late orders can ruin an eCommerce business. When managed inappropriately, companies can lose out on their customers. Therefore, the 3PL providers need to pay attention to online order fulfillment and make it their core focus. Same-day fulfillment with precision will help to gain several advantages.
Even though micro-fulfillment is a new trend, in 2021, brands like Target implemented it by adding local distribution centers. As a result, their drive-up pickup orders increased by 45%.
Incorporating Flexible Contracts
In 2020, companies dealing with huge, inflexible orders realized the relevance of adding flexibility to their operations. With flexible contracts, it is possible to divide the supply orders into small blocks, enabling the buyers to make changes in the orders based on the changing demand. Choosing lesser tight commitment, via long-term, fixed contracts with suppliers, provides increased adaptability.
Jeff Langley from KPMG Australia asserted that flexible contracts enable companies to substitute a huge chunk of their fixed cost structure with variable costs. It helps them to respond to changing demands effectively.
In a KPMG-commissioned Forrester Consulting study, 80% of companies shared about better operations and supply chain responsiveness, which are their focus points.
Making the eCommerce Supply Chain Green
In February 2023, Twill stated that though customers prefer the adaptability and convenience of eCommerce, there is an adverse environmental impact. Returns pose a challenge. Approximately 30% of online orders are returned, significantly higher than the 9% return rate in brick-and-mortar stores. It results in a substantial carbon footprint because of the transportation of returns back and forth.
In the US the returns transportation emits nearly 15 million metric tons of carbon dioxide annually. Hence, eCommerce businesses must focus on decarbonization as a core strategy for reducing emissions in their supply chain. Improving reverse logistics sustainability is a useful action.
By providing more compact product data and high-resolution images they can help the customers to make informed choices. It will bring down the need to return a product. Emissions can also be reduced by using recyclable packages and using local warehouses. It can avert the transportation of returns to a centralized facility.
Additionally, using returns management software can also improve supply chain visibility. It helps to throw light on the inefficiencies like increased return rates for particular products.
A survey conducted among US supply chain executives suggested that most executives think things will reach the ‘pre-pandemic’ normal by early 2024. However, about 22% of the executives anticipate ongoing disruptions until the second half of 2023.
Attaining a 100% fool-proof SCM is challenging. But with the industry’s digital advancements and resilience today, such preparedness might not be required.
However, developing strong associations with a wide range of SCM partners and local logistics providers can prove to be of help during any future crisis. It helps in increased resilience and flexibility during a crisis.