Customers’ expectations of more rapid and cost effective e-commerce delivery are increasing hand in hand with e-commerce growth.
In most cases e-tailers’ national fulfillment operations are either positioned in Toronto or Montreal, as well as some in Vancouver, which up until now have been totally acceptable solutions. However, it definitely appears the days are numbered for a single e-commerce fulfillment operation being a viable customer delivery experience solution for all of Canada.
Customers’ delivery service level goals, next-day metro markets or same-day, will determine the appropriate number of e-commerce fulfillment operations e-tailers will need coast to coast in Canada. For many what we call the ‘Power of Two’ will be the most logical next step with the addition of a second e-commerce fulfillment operation in either Eastern Canada or Western Canada, depending on location of the current national DC.
Implementing the ‘Power of Two’ solution will allow retailers and e-tailers to reach all major urban markets for next-day delivery. Many recent analyses for clients clearly indicate that a Greater Calgary Area and Greater Toronto Area model will provide the optimal service, coverage and cost.
Not only does the ‘Power of Two’ allow e-tailers to improve their service delivery levels, it also mitigates the risk of having a shutdown, strike, or other facility outage which could be fatal in a single site e-commerce fulfillment solution. By implementing a ‘Power of Two’ solution, the Canadian fulfillment operations will have redundancy built in to ensure that e-tailers remain in business should a disaster or other disruption strike one of their operations.
Those US retailers and etailers still servicing Canada from their US facilities are also in a great position to benefit by tapping into the ‘Power of Two.’ Not only do they pick up the improved service levels either East or West, depending on where they induct into Canada, they also mitigate the risk of being out of business in Canada should any untoward events or labour issues impact border crossings.
It’s also important to note that any retailer or e-tailer with more than 60,000 e-commerce deliveries a year in Canada still servicing from a US fulfillment center is incurring both a cost and service penalty for doing so.
Many retailers and e-tailers are also currently supporting their e-commerce fulfillment needs with an in-house operation. The question becomes, do they create another in-house operation East or West, or look to outsource a second e-commerce site in the East or West as needed? The ‘Power of Two’ is again at work: by having one in-house site and one outsourced is an effective step to benchmark your business, challenging both your own operations folks and the 3PL to perform at peak levels.
Over the long term, the outsourcing of one of e-tailer’s fulfillment operations may also directly demonstrate the actual benefit potential of using a third party for e-commerce fulfillment. These benefits accrue in both labour and space flexibility which are very difficult to replicate and achieve with dedicated in-house e-commerce operations, especially with the dramatic peaks in e-commerce demands. As well, advanced lean third party operators are incentivized to reduce operating costs, opposite to in-house operators often protecting current budgets in case of future needs.
In summary, the ‘Power of Two’ provides real, rapid results to retailers and e-tailers in customer delivery service, risk mitigation, flexibility and cost benchmarking. If you are still shipping e-commerce for Canada out of one location in Canada or the United States, you may be missing out on service and redundancy benefits. Finally, when you are challenged to improve on your e-commerce customer experience, know that the answer is to tap into the ‘Power of Two.’