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Slowdown or Meltdown? Ukraine Conflict Pushes E-Commerce to the Brink

By Shipping

The conflict in Ukraine is driving economic destabilization not only in Ukraine and for Russia, but also, around the world.  An already soft global economy will likely be driven into a full-blown recession resulting from unmanageable inflation being led by record fuel prices, and potential, war driven, food shortages.

The war taking place across the ocean will impact supply chains and ecommerce here in the United States. However, I also want to take a reality-check and acknowledge that an economic downturn here in the US is inconsequential to the casualties, human suffering and disruption being experienced by the people of Ukraine.

Current Supply Chain Impact (US)

The offshore supply chains feeding ecommerce here in the US are still relatively stable.

In Europe, this is not the case. Russian forces are reportedly shutting off shipping routes, causing logistics firms to suspend services, and leading to skyrocketing freight and tanker rates.

However, Asian supply chains are not feeling the same level of disruption as in Europe, so ecommerce consumer goods are still moving to the US, although US-bound ocean shipping rates are not stable.

Future Supply Chain Impact (US)

The expected global recession, being advanced more quickly by the Ukraine conflict, will slow down US consumer spending and result in either flat or down ecommerce sales.  In turn, this should free up capacity on US bound cargo ships and result in lower container ship transport rates. Finally, there has been much speculation on how the war and resulting supply chain disruption could permanently change global supply chains and impact the flow of ecommerce goods to the US.

US Ecommerce Merchant Product Availability

Assuming the war in Ukraine does not expand, and does not directly involve NATO members, European consumer product availability to the US should be mostly unaffected.  However, there has been a strong effort by US based ecommerce merchants to expand cross border sales to Europe, and this initiative will be negatively impacted by an extended conflict, that would drive a deep recession across Europe.

Ecommerce Merchant/Logistics Service Provider Profitability

A war-enhanced US recession, coupled with out-of-control inflation, could cripple the US consumer, which will obviously drive down online purchasing and merchant profitability.  Parcel carriers, ecommerce tech platforms and fulfillment service providers will also feel the pain resulting from lower ecommerce merchant sales.  The profitability of ecommerce related businesses feeds on higher volume and improved scale—which will be compromised in a war-driven, global recession.

US Port Delays

Albeit for reasons we should not celebrate, geopolitical instability in Europe compounded by a global economic downturn spells relief for congestion and delays at our US west coast ports.

In Conclusion

US-based ecommerce and everything related to it has been on a roll for over 15 years. It is due for a slowdown, and we were already headed in that direction. The war in Ukraine could potentially trigger a temporary economic meltdown, and the recovery for US based ecommerce and our economy could be slow and painful.  Ecommerce is not bulletproof and will be negatively impacted by the war in Ukraine, but the legacy ecommerce-related service providers will emerge stronger because of it.

Growth and Consolidation Is Running Rampant in E-Commerce Order Fulfilment

By Shipping

The e-commerce phenomenon has changed the world of fulfillment, driving growth and consolidation throughout the industry. The legacy 3PL service provider, once focused on supporting B2B distribution via an LTL transportation model, has had to morph into a B2C service provider that supports parcel-based, residential delivery solutions.

Now with boatloads of investment dollars flowing into the segment, e-commerce order fulfilment is the place to be right now. Not only are we seeing the development of new, fully automated, parcel fulfillment centers, but we are also seeing the consolidation of legacy 3PL organizations. So, what is driving all the change and disruption?

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Inventory Management

Ecommerce JIT Inventory Management in an Era of Supply Chain Disorder

By Supply Chain Management

It was back in the ‘70s when Toyota was one of the first manufacturers to adopt a Just-in Time (JIT) inventory management strategy and the world followed. Back then, the strategy mostly applied to manufacturing by strictly managing the arrival of raw materials just prior to the production process. JIT decreased inventory carrying costs for the manufacturer which drove improved profitability.

Today, JIT applies to all segments of product distribution, including ecommerce, and not just the manufacturing process. JIT is an assumed product management process and is rarely referenced today as a cost savings differentiator.

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Port Delays 2022: A Light at the End of the Tunnel

By Shipping

For businesses and merchants that import products from Asia via ocean freight, 2021 was a challenging year: 

  • Ocean Freight Transportation costs continued to rise. 
  • Ecommerce Merchants realized a significantly higher rate of out-of-stock website listings as reported by Adobe, and much of that condition can be attributed to port delays.
  • Adobe reported that during October 2021, over 2 billion messages were sent to online shoppers advising of out-of-stock products.
  • Less-Than-Truckload and Truckload capacity constraints further delayed product shipments to fulfillment centers once ships were unloaded. 
  • Port delays and the resulting supply chain disorder fueled the upward climb of inflation as it became more expensive to move freight inland once it cleared the ports of LA and Long Beach. 

8 Reasons for Optimism

So, the question begs, where do we stand today with relation to port delays, and what conditions will positively or negatively impact port delays moving forward into 2022?

  • Container Dwell Time: This is down nearly by half from October, telling us that fewer containers are sitting around waiting to be put on trucks for delivery, as reported by Courthouse News Service. 
  • Fewer Anchored Ships: Prior to the most current wave of COVID, the number of anchored ships had decreased at the ports of LA and Long Beach.  However, this level increased during January due to COVID-related absenteeism. However, this should be temporary as COVID infections are on the decline. 
  • Asia Imports Levels: These were at record levels during 2021. If our out-of-control inflation continues, consumer purchasing should slow, which will help to slow imports and resulting port congestion.  However, there is still no direct sign that consumers are significantly modifying their purchasing behavior, even with higher prices on merchant websites and in the stores. 
  • COVID Impact: The negative impact of covid related absenteeism across port workers and truck drivers should lessen in the coming months.  
  • Supply Chain Reliability:  This should improve, which will help to relieve port congestion and improve the container ship offload process.  However, the Financial Times is reporting that supply chain-related delays are not improving as quickly as hoped for. 
  • Alternative Port Usage: While not in a huge way, importers and merchants that switched to alternative ports like Seattle may continue to use these ports with the hope of avoiding seasonal port congestion related to merchants stocking up for the holiday season purchasing frenzy. 
  • Holiday Related Products Shipping Earlier: Merchants will be ordering merchandise earlier to avoid the late summer/early fall ocean freight capacity crunch. 
  • Improved Port Container Offload Process Management:  The port operators learned some very important lessons during 2021 and as a result, port efficiency and offload processes should improve in 2022. 

Impact on Parcel Fulfillment Service Providers: 

Generally, these conditions and factors should result in fewer “out-of-stock” messages on merchant websites as the fulfillment service providers should receive merchandise earlier in 2022, allowing for a happy holiday season for the consumer, merchants, and product fulfillment service providers. 

Delivery 2 Day

Long Live 2-day Ground E-Commerce Distribution

By Shipping

Everything related to e-commerce is constantly experiencing monumental change.  Some of the “change trends” include:

  • New Service providers and improved service offerings directed at the consumer seem to be announced daily and you can’t deny that new technology and seemingly unlimited investment dollars are driving most of the change.
  • Going vertical with the intent of controlling all parts of the e-commerce customer experience is driving competitors to enter-into services where they have limited or no direct expertise.
  • Merchants, fulfillment, and delivery service providers suggesting that consumers are demanding ultra-fast solutions—such as 15-minute to 2-hour same-day delivery. This is about differentiating their offering to survive in the marketplace. However, the question begs, how practical are some of these service offerings that drive increased cost and seemingly endless losses for most of the new, VC-funded providers?
  • Recent reports are telling us that, generally, e-commerce merchant profitability is trending downwards. While part of that condition is the result of intense competition, it is also driven by costly new service offerings that the consumer is not necessarily demanding.

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Fulfillment 3PLs: The New Product Managers of Global Commerce

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We know that technology is making the world a smaller place.  Today, any e-commerce merchant in virtually any country can sell their products in other countries across the globe, without possessing a physical presence in those countries.

Formerly domestic-only merchants can now directly offer their products for sale in numerous other countries via the support of e-commerce platforms like Shopify Plus, which can localize the customer’s online buying experience for the country of the merchant’s choice. Domestic online marketplaces like Newegg also offer support to international merchants to provide a near-seamless buying experience for the international consumer. While borders are not disappearing, they are getting easier to navigate for both the international merchant and consumer.

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Holiday Fulfillment Center

How 3PLs Work Year-Round for the Holiday Season

By Supply Chain Management

Starting in October, national media is focused on the parcel carriers and their efforts towards preparing for the busy holiday-shipping-season. However, we hear very little about the e-commerce fulfillment service providers (3PLs) and how they prepare for their busiest time of the year.

The consumer tends to assume that the e-commerce merchants fulfill their own online orders and have little understanding of how merchants, both large and small, work closely with 3rd party e-commerce order fulfilment service providers. The e-commerce specific 3PL plays a major role in warehousing, processing orders for shipment, and handing off those orders to the parcel carriers.

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Micro-Fulfillment Facility

E-Commerce Forward Stocking Micro Fulfillment Solutions

By Shipping

The unabated growth of e-commerce is driving innovation across the supply chain, which is obviously a good thing.  Nevertheless, along with that innovation comes failure, as many of the new start-up supply chain solutions will flounder or fail.

However, you can’t have innovation without failure, so we are experiencing a natural course of events, with both successes and business failures. Some of the differences today versus legacy trends in supply chain innovation are the roles of the following 3 dominating and influencing forces:

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Fulfillment Center Image

Best-In-Class E-commerce Order Fulfillment: A Focus on Both Pick & Pack and Shipping

By Shipping

E-commerce merchants in search of fulfillment vendors, do not necessarily look at a fulfillment solution in the context of both the pick & pack process and delivery solution. Sometimes, the solution is integrated and covers both primary functions of the fulfillment process. Other times, the merchant can be left to determine on their own, how they choose to distribute their product and which carriers and services to use once the products are picked and packed.

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