Published: 16 Apr 2013
In a technology-saturated world, we've come to expect instant gratification from split-second texting, immediate answers from Google and speedy online shopping from home.
Now manufacturers are at the mercy of the "right here, right now" impatience of consumers. A decade ago, waiting a week or longer for an order to arrive on the doorstep was par for the course, but today it seems downright archaic. Where is the real convenience in shopping online if shopping in person yields exponentially faster results?
In response, same-day shipping is quickly becoming standard procedure. E-commerce titans Amazon and eBay are leading the charge by offering it -- and, increasingly, same-day delivery -- for much of their stock. As a result, manufacturers that sell their products online -- on sites like Amazon or their own -- are feeling the pressure to ship and deliver faster.
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In my recent SearchManufacturingERP.com story on boosting manufacturing shipping times, I found that strategies vary depending on the size and structure of the organization. At The Braun Corp., a maker of commercial wheelchair lifts and vehicles, speedy shipping is essential. The Winamac, Ind., company made same-day shipping a reality by adopting warehouse and inventory management software that can manage thousands of stock-keeping units, or SKUs, cutting lag time between order and fulfillment.
Savvi, a Tucson, Ariz., manufacturer of novelty tattoos, deals in less time-sensitive products but faces the challenge of filling three very different order models: large shipments to retail stores and e-commerce outfits like Amazon, custom-made orders and vending machine stock orders. The company has ramped up shipping by pairing different order types with the shipping channels and modes of transportation that best suit them, from overseas freight ship loads to trucks for large domestic orders and FedEx and UPS for smaller orders.
As more companies offer same-day shipping, the long-term changes won't just be logistical -- the shipping wars could profoundly alter the production side of things. One manifestation could be greater product diversity, according to Steve Banker, a supply chain management analyst at ARC Advisory Group in Dedham, Mass. "In the old days, there was this mass-production approach to manufacturing," he said. "Manufacturing has become more flexible, and now because those goods can be displayed on Amazon, you can make a larger number of different SKUs -- some of them targeted at a much smaller market of customers than you ever could in the past."
If manufacturers are feeling pressured by same-day shipping, retailers are experiencing it tenfold, according to Banker. "Amazon is eating into the market share of many retailers, so the retailers are responding with omni-channel logistics." That's a fancy phrase for giving retail customers more flexibility in how they shop -- for example, letting them order online and pick up in the store, or order in the store and have the product delivered to their homes. Omni-channel logistics also extends to return policies, Banker added, with more stores allowing customers to return online orders at a retail location.
Faster-moving all around
While customers might not always want same-day service, a recent study by Amazon shows that they are coming to expect it. The survey of the retailer's Amazon Prime premium-service customers found that letting people know that same-day delivery was available -- Amazon does this by placing an icon next to items -- resulted in more completed sales. In fact, conversion rates -- the proportion of site visitors who buy something from the site -- increased 20% to 25% even though most of the customers ended up not choosing same-day delivery at checkout.
All these numbers and shifting trends point to one undeniable conclusion: E-commerce will set the pace for product delivery, and manufacturers must find a way to keep up. Large organizations will have no trouble meeting the standards, but small and midsize manufacturers may soon have to make an evolve-or-die decision. Option one means radically rethinking the way they handle production, stocking and logistics; option two means clinging to the past -- and becoming part of it.