Retailers need to balance the cost of fast deliveries with the desire to meet customers’ expectations.

Amazon.com Inc. wants to drive consumers to the opinion that two-day delivery is no longer fast enough.

The retail giant recently announced that it would begin offering one-day delivery to most of its Prime customers over the course of the next year. Offering this level of fast delivery to customers may be a reasonable step for Amazon—with its wealth of resources, experts say.

“Amazon knows how to leverage its inventory sources,” says Justin Cramer, global product management director at ProShip Inc., a multi-carrier shipping software company he co-founded. “Over the years, it has beefed up its warehouses and leveraged its Fulfillment by Amazon program to allow other retailers, manufacturers and distributors to sell to consumers through Amazon. It’s way ahead of the rest of the market.”

Justin Cramer ProShip

Justin Cramer, global product management director and co-founder, ProShip

But Amazon’s one-day delivery announcement may be difficult news for other retailers, many of which have already been struggling to compete with the ecommerce giant on its two-day delivery promise for Prime customers. “Retailers are having a very difficult time finding a cost-effective way to execute fast delivery to meet customers’ expectations,” Cramer says. “That’s because many of them are simply not tackling the hard problems.”

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Leverage inventory sources

Retailers need to incorporate the right enterprise technology stack into their operations, fulfillment and delivery strategies that allows them to leverage all of their inventory sources—their warehouses, store locations, manufacturers and third-party logistics providers. Then they need to combine those inventory sources with delivery solutions that allow them to offer free or low-cost shipping options.
That’s where retailers often run into challenges.

Shipping from a store, for example, is complex,” he says. “There are problems of shelf space for products, hardware to support ship-from-store functionality, training associates to execute those orders correctly and incentivizing them for the additional responsibilities. How does the retailer strike that balance of providing good service to walk-in customers while still getting enough parcels out the door to meet the requirements for same-day or low-cost postal deliveries?”

While it’s not easy, retailers that sort those issues out often find that stores can be very valuable inventory sources, Cramer says. Retailers are also missing the mark on balancing the cost of fast deliveries with the desire to meet customers’ expectations. “Rather than seeing the big picture when accounting for the cost of a transaction to fulfill an expectation, they often default to what they think might be the lowest-cost option—even if it really isn’t,” he says.

For example, the labor costs for an in-store associate to manually pick, pack and ship an order from that location are higher because that associate is less efficient than a warehouse with automated solutions that execute those functions much more quickly. “But when it comes to fast delivery, that store may be the best inventory source for a particular order because it’s located closer to the customer,” Cramer says.

“So even if labor costs are slightly higher, it might cost less in actual delivery costs. And that faster delivery also allows the retailer to meet or exceed that customer’s expectations.”

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Help data flow through systems

Automated shipping technology can help retailers overcome these challenges, Cramer says. This requires retailers to have an enterprise software stack that allows data to flow through the entire system efficiently and various retail solutions to communicate with each other.

“Ecommerce suites should talk to the order management system (OMS) and the OMS should talk to multi-carrier shipping software, such as ProShip,” he says. “When those systems communicate, the retailer will understand the cost of each transaction—which gives the OMS the ability to make the best, most cost-effective decision on how to actually source the goods for each order.”

Once that decision is made, the order is pushed down to the appropriate inventory source system: point-of-sale software for a store, warehouse management software for a warehouse, or electronic data interchange software for an external inventory source. “Once all these executions happen, all the data comes back together to provide customer preference insights and tracking capabilities,” Cramer says.

Getting all those elements to work together is challenging. For example, a large retailer recently struggled to offer affordable and fast shipping options to its customers because its shipping system couldn’t handle its increasing order volume and only offered a limited shipping carrier mix. The system also lacked the tools it needed to use its stores as mini distribution centers to lower shipping costs while increasing options for their customers. Additionally, it didn’t integrate well with its other enterprise software systems, such as IBM Sterling Commerce, a popular OMS, and Manhattan Warehouse Management Solution (WMS).

Increase carrier mix

To overcome these challenges, the company implemented ProShip Multi-Carrier Shipping Software, which integrated with IBM Sterling Commerce and Manhattan WMS, as well as the rest of its other enterprise systems. In doing so, it increased its carrier mix—allowing it to use ProShip’s rate and Advanced Date Shopping functionality, as well as leverage its more than 150 stores with ship-from-store capabilities. Since it began working with ProShip, the company has reduced its shipping costs, improved its customer experience with its new diverse mix of shipping options and access to regional and local carriers, increased its carrier compliance and compatibility, and boosted its warehouse efficiencies.

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“ProShip shipping software has allowed us to scale our ecommerce fulfillment network within our distribution center and ship-from-store network with ease,” says the company’s manager of omnichannel fulfillment and supply chain optimization. “The flexibility and speed to rate and service-shop multiple carriers instantaneously has allowed us to reliably ship tens of thousands of packages daily through multiple channels.”

Any retailer can offer fast and cost-effective delivery with automated technology, such as ProShip’s Multi-Carrier Shipping Software, that not only makes delivery decisions on orders in milliseconds, but also offers much more diversity in shipping options, Cramer says.

“With automated shipping software, retailers can execute transactions in a high-speed, low-touch manner,” he says. “Now, what they really need to think about is the experience they want their customers to have, and then ask themselves: ‘Do we have the enterprise software stack to do that?’”

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