I have met with many CPG manufacturers over the past 6 months. During those meetings, we talk about trends in the customer's business or in the marketplace. One that comes up over and over is the requirement for multi-channel distribution based on the growth of online sales. CPG companies that once focused solely on gaining shelf space at the retail store are, for a growing portion of their business, skipping the store shelf and going direct to the consumer.
eCommerce and multi-channel fulfillment are not new, but most vendors still struggle with the challenges of this unstoppable trend. From deciding on web/order management protocol, to SKU mix, to where to ship from, to whether to use an internet retailer, ecommerce raises many fulfillment-related questions and offers little history to guide these decisions.
Then there is the supply chain impact. Just when CPG companies thought they had the mixing center and transportation system fine-tuned to deliver the lowest cost solution and maximum profit for the company, along comes eCommerce. Direct fulfillment has certainly been a windfall for the final mile delivery folks. But it's been a real cost management challenge for supply chain professionals since online fulfillment requires 65% more labor per dollar shipped than store distribution.
How do CPG companies recoup these extra costs? As fulfillment specialists, we have an opportunity to think about new, alternate models that allow the direct purchase and consumption model to work while leveraging economies of scale from the business-to-business fulfillment infrastructure.
For instance, how about a drive-thru where consumers order ahead of time and pick up their retail order like you'd pick up a prescription at a pharmacy drive-thru?
Or how about retail consolidation centers that serve specific towns or regions? Vendors would ship there in bulk to satisfy orders from the region and individual consumers would stop by to pick up their specific orders while out doing errands.
These are just a couple of ideas. The list of alternative distribution models is large, and time is short. The current models for multi-channel fulfillment are costly and are not the long-term answer. New ideas are needed. Are we up for the challenge?