In case you missed it, Amazon recently announced that the company is shifting to one-day shipping for Prime deliveries. This move should come as no surprise to online retailers and manufacturers looking to increase supply chain efficiency while striving to meet increasingly urgent customer expectations. DiCentral recently partnered with the Lehigh University Center for Supply Chain Research to conduct a study of modern consumer buying behaviors – and how global retailers and manufacturers are adapting to these behaviors.
The resulting whitepaper, “Supply Chain Collaboration in Transformative Vertical Industries: Implications of Omnichannel and Dropshipping,” is a first-of-its-kind study that examines the motivations, challenges, benefits, and implications of online shopping and home delivery. In all, over 180 retail and manufacturing C-level executives, VPs, and senior managers were surveyed on the operational and financial impacts of consumer buying behaviors. The data from the study can serve as valuable lessons for both retailers and manufacturers and should be considered by businesses of all sizes looking to maximize omnichannel opportunities.
Lesson #1: Dropship is Essential to Long-Term Retail Success
The research paints a vivid picture of the journey from brick and mortar stores to online e-commerce, with an emphasis on the dropshipping model to deliver on the omnichannel promise. Dropshipping is an order fulfillment model in which products are typically shipped directly from the manufacturers while the retailers no longer handle the physical inventory. The survey results indicated that a whopping 88% of participating U.S. retailers see dropship as inevitable for their long-term success, with 73% of respondents reported to have more than two years of dropshipping experience. This fast-emerging delivery option is ideal for e-commerce and a vital component in the retail landscape of the future.
Lesson #2: Dropship Leads to Increased Revenue
One of the most critical questions driving business today is how to demonstrate return on investment (ROI). The question was of particular interest to respondents, with 87% of the retailers surveyed experiencing increased revenue as a result of the dropshipping order fulfillment model. Additionally, 66% of manufacturers experienced an increase in revenue when integrating dropship capabilities.
Lesson #3: Retailers & Manufacturers Agree that Dropship Improves Customer Service
Among other trends identified in the research, both retailers and manufacturers reported that customer service benefits from dropshipping. A massive 84% of retailers saw improved customer service after adopting dropshipping. On the manufacturer side, 71% reported a significantly improved relationship with retailers who integrated dropship into the order fulfillment processes.
Lesson #4: The More Collaboration, the Greater the Benefits
Another valuable detail revealed by the study was that retailers and manufacturers who have adopted a high degree of electronic collaboration have benefited the most from dropshipping. Retailers gain increased visibility into the manufacturers’ behaviors, which in turn increases the retailers’ confidence that products reach the right destination in good time. And on-time deliveries make for satisfied and repeat customers.
Obstacles to collaboration include a lack of executive involvement, budget constraints, and a lack of systems integration (EDI, ERP, WMS, etc.) – the most common challenge identified by the respondents. The greatest pressures manufacturers face today are supporting volume growth and fulfilling orders in a timely and accurate manner.
Lesson #5: Transparency is Key to Successful Collaboration
Systems integration remains the main challenge to omnichannel retailers and manufacturers. However, respondents pointed to transparency as being key to successful collaboration. While retailers and manufacturers share similar goals, the research showed that 46% of retailers are reluctant or unable to share e-commerce sales forecasts with manufacturers.
Further complicating the systems integration challenge is the fact that manufacturers work with many different retailers, each with hundreds of unique business rules. These rules vary by retailers and can create a number of challenges for manufacturers when it comes to managing data and fulfilling orders. However, when both ends of the supply chain invest in systems integration the ROI is clearly demonstrated by the survey results.
The Amazon one-day delivery news should come as no surprise for those of us familiar with emerging omnichannel trends. Customers want flexible delivery options and they want it now. Dropshipping is a proven tool for e-commerce and, with the proper investment, should be considered for businesses to maximize omnichannel ROI.