Around the world, people have been forced to cut back on in-store purchases (or even eliminate them altogether) due to COVID-19. As a result, we have seen an extreme increase in online ordering, particularly for essential items, such as household products and groceries. While a sudden uptick in online sales presents an opportunity for retailers to recoup lost in-store sales, it also poses a significant operational and logistical challenge.
In markets where brick-and-mortar shops have been closed by local mandate, our customers have seen near-immediate spikes in ecommerce of over 100%. The strain on the supply chain alone is a challenge, but when compounded with logistical and ecommerce platform performance issues, we expect many retailers are struggling to fulfill online orders.
Retailers unable to meet this new demand risk inventory shortages, further lost sales, and unhappy customers who’ve grown used to fast delivery windows. Above all, a business’s short-term priorities should be to ensure availability of products through online channels and to fulfill all online orders efficiently. What follows are some best practices to help handle an uptick of online orders in the short term.
Best Short-term Practices: Forecast and Fulfill
Start securing availability and supply by simply ensuring that your demand forecast and replenishment accounts for the online sales in all levels of the supply chain.
However, honing all of your planning processes requires a reliable online-specific forecast that can deliver a granular level of visibility into online demand. In some cases, this can even mean a daily online demand forecast for each product in each fulfillment location (whether that is an open store, a dark store, or a DC).
This type of detailed forecast will help guide any necessary process changes, including optimization of space, adjusted stocking decisions, assortment optimization, virtual ringfencing, and workforce updates to account for increased picking. A daily forecast will also give insight into the planning of delivery services or, in the case of click-and-collect, customer pickup slots.
You will get the best visibility into and understanding of online-specific daily demand by having open online customer orders available in the planning system. This will allow the data to be viewed and analyzed side by side with the system-calculated forecast. Make sure to include the open online orders in the planning systems’ final forecast so that it can accurately determine order quantities for each store, dark store, and DC. Automation is a must to manage this process effectively.
Use this forecast to optimize inventory levels to ensure the needs of online customers are met separately from demand coming through any other channel. Many retailers pick online orders directly from a distribution center or dark store — this may be the best option if your stores are already closed. If your stores are still open and accessible, though, you may choose to fulfill online orders by picking directly from store shelves. Either way, if you’re picking for multiple channels from a single source — whether a distribution center or a store — you must have accurate forecasting by channel to ensure adequate inventory for order fulfillment.
The uptick in online ordering may be a silver lining for retailers who are otherwise suffering severe or even complete in-store losses during the coronavirus crisis. By identifying the best source of stock for online order fulfillment and then optimizing that inventory by channel, retailers will be better equipped to manage this unprecedented demand spike. In a future post, I will cover longer-term strategies for developing an infrastructure to support what is likely to be a continued and sustained increase in online ordering for all retailers.
