New fulfilment intermediaries will help the UK’s online merchants confront problems of increasing competition and painful economics, according to a recent report by Forrester Research (Nasdaq: FORR). These players will transform home delivery by managing integrated fulfilment networks and contributing to an enhanced consumer confidence in shopping online.
“As retailers struggle to make existing fulfilment operations work consistently, competitive pressure and accelerating customer expectations require them to graduate to a more sophisticated model,” commented Mike Honor, analyst at Forrester Research. “Retailers need a fulfilment operation that is responsive to customer needs. To pull this off, they must integrate their front ends with diverse product suppliers, traditional warehouse operations and third-party logistics firms. For most retailers, this is too much of a challenge. Intermediaries will help merchants with this and give them the advantage over competitors that deal with carriers directly.”
Component integrators will become the new intermediaries with the scale and scope to redefine fulfilment for the largest online retailers. These specialists will help retailers build customised fulfilment propositions that work backwards from customer needs, yet are economically feasible.
Component integrators will combine all the players in a retailer’s supply chain into a fulfilment network. They will rationalise complex and inefficient fulfilment operations and enable retailers to benefit from significant cost savings, reduced stock holding and increased product availability.
“Having rationalised the process of delivering single packages to doorsteps, component integrators will seek to replicate the communities of their business-to-business logistics cousins,” Honor said. “They will do away with long-term contracts between retailers and carriers and adopt the role of market-makers in order to balance supply and demand across the fulfilment network, manage relationships between retailers and carriers, and operate dynamic, responsive demand chains.”
“Intermediaries will thrive in the fulfilment business — their integration of diverse parties into broad networks is to the advantage of all. Retailers get a broader and faster fulfilment infrastructure, carriers access a more economically viable model, and consumers get convenient and responsive delivery. As merchants offer consumers quicker gratification of their demands, more consumers will buy online.”