PSK20/05: Managing Stock During E-Commerce Boom (30 July 2020)

Issue Date: 30 July 2020
Ref: PSK20/05

Managing Stock During E-Commerce Boom
By Alex Mills, Sales & Marketing Director at ProSKU

With so many “high street” shops closed during the coronavirus emergency it is little surprise that e-commerce businesses have seen something of a boom. Online retailers and delivery service providers have reported significant increases in demand since March. This has placed unprecedented pressure on supply chains – including stock control and warehouse management. The challenge is to ensure existing systems work or replace them with something that does. Cloud-based solutions could offer the fastest and simplest solution for many businesses.

Customers turned to online in part because they had no alternative. But many customers have also been reluctant to visit conventional stores. Research analyst Kantar reports that only half of shoppers feel safe when visiting a supermarket or convenience store. Kantar also found around one in five British households bought groceries online during May-June 2020, boosting home delivery volumes by over 90 per cent. Tesco recently reported that its online sales rose 48.5% in the three months to the end of May, although sales at its established stores and convenience outlets also increased, by about a tenth.

Smaller and independent stores have seen the biggest gains: Kantar’s figures show these increased sales by 69% in the three months after the mid-March lockdown. This growth is reflected by the experience of the Cheshire Cheese Company, a Macclesfield-based online retailer. Its turnover during the first three months of the lockdown exceeded its entire 2019 total. Orders grew to 600 a day.

According to Simon Spurrell, the owner of the Cheshire Cheese Company, there were two phases to this peak: “Initially there was a panic buy situation where people were bulk buying purely for hoarding. For example, we had a run on multi-buy 6 x cheese packs with a 1000% increase of sales compared to the same period last year. Within six weeks of the lockdown and the approach of Easter this pattern changed to gift buying. This created a large increase in gift purchasing, delivered direct to a friend or relative. Growth in sales remained on average 240% up on the previous year until the passing of Father’s day in June. The inability to purchase and gift personally made people search for an alternative way to deliver a present.”

The UK Office for National Statistics (ONS) reported that what it calls “non-store sales” represented a third of all retail in Britain during May, up 19.7% on April. Some of this increase was in food sales (11.3% of total, up from 9.4% in April) but bigger increases were seen elsewhere. Nearly half of all clothing, textile and footwear sales were non-store and 25.2% higher than in April. Other sources suggest that in the week immediately following the lockdown announcement, online home and leisure retail increased by 200% compared to the previous year and that this trend was maintained during April and May.

It is not just online retailers who have seen a surge in business. Unsurprisingly, home delivery businesses have also seen growth. Hermes reported a 100% year-on-year increase in volumes for its SME customers and was delivering around 700,000 parcels a week for those customers during June. DPD recently announced 6,000 new UK jobs and £200 million investment in infrastructure to cope with added volumes. As part of this it will create 15 new regional depots, ten more than originally planned for 2020. The company says parcel volumes have been more like festive seasonal peak - Easter volumes were double those of last year. ParcelHero forecasts that the closure of conventional businesses could drive a 95% increase demand for new products discovered on social media compared with 2017.

There have, of course, been some high-profile retail casualties during the emergency. Research organisation Opinium and e-commerce consultancy LiveArea suggest 70% of retailers have seen the drop in demand impact their business. The same research revealed retailers plan to respond by revising their supply chains after the pandemic: digital commerce (72%) and IT infrastructure (60%) were named as investment priorities.

Many online retailers will have been able to carry on throughout the emergency with little or no significant disruption to their business. But they will have had to cope with significant increases in volumes, perhaps for the first time. This not only imposes significant burdens on sales and order processing but creates significant challenges for the warehouse. Businesses that could cope with minimal stock control when only selling a few dozen items a week may not be able to manage so easily when volumes surge to hundreds a day.

The Cheshire Cheese Company, for example, doubled the number of staff to six at the beginning of its lockdown surge. Despite the team working 12-hour shifts across a seven-day week the company still needed to recruit a second shift to cope with demand. The company uses the built-in functions of its integrated e-commerce package to manage stock control across all its channels and this continued to work well during its peaks during spring 2020. 

For many businesses, however, the limitations of paper-based processes or lack of support for standard warehouse processes in the applications they use leads them to consider more warehouse-focused stock solutions. These will offer core functions central to a business’s ability to maintain their operations, fulfil orders and meet customer expectations. But implemented correctly a WMS can interface with online marketplaces, customer ordering systems, carrier management and accounting functions to create an integrated business solution delivering efficiency, accuracy and better oversight of the physical stock control function.

The traditional response by a growing business has been a WMS configured to their own unique business requirements, usually running on inhouse managed servers. These can ultimately be good solutions but take time to specify, configure and implement, typically with a large upfront cost. This is a less suitable option for a rapidly growing business where taking advantage of new opportunities quickly is key to sustained success. Businesses like this need a more immediate yet scalable solution, to help achieve quick wins in relation to handling higher workload. They also need one that can be easily adopted by new and existing personnel because time for in depth training is often limited.

Because of this, progressive businesses are turning to cloud-based WMS. The best of these offer a well-defined set of core features that cover most users’ requirements. That means they can be deployed with little or no additional configuration. Nor do they require the local infrastructure of conventional systems. In particular, there is no need to install, configure and “go live” a dedicated on-premises computer to host the application.

Cloud-based solutions are highly scalable and can generally be up and running more quickly than conventional systems. This can be useful when setting up temporary supply chains or new routes to market in response to rapidly changing demands, such as during the crisis. They have industry-standard API interfaces to integrate easily with existing business applications and the ability to import data simply from a range of sources. Solution providers generally charge monthly by user numbers of order volume, but are not usually subject to long term contracts, so costs only increase when justified by the business growth.
 

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