E-commerce and the Supply Chain

The Impace is affecting sourcing, transportation, fulfillment and more.


Electronic commerce is on fire. Whether it’s B2C or B2B, buyers from around the world are using computers and smartphones to purchase everything from consumer goods and groceries to airplane parts and more.

The early pioneers of e-tailing and recent entrants alike are creating new services to appeal to consumers who demand speedy delivery, easy returns, and an abundance of selection. Behind the scenes, the pressure is on to figure out where to locate distribution and fulfillment centers, how to manage the transportation requirements, and what kind of IT systems and software is needed to support it all.

 

Amazon.com—the mother of e-com

No e-commerce conversation is complete without Amazon.com. The online retailer launched in 1995 and now dominates global e-commerce. Amazon.com is furiously building up its infrastructure to handle booming Internet sales.

One of its most recent additions is a 950,000 square-foot fulfillment center in San Bernardino, California (just east of the Los Angeles-Long Beach port complex), that opened in October. According to the facility’s owners, Hillwood Development Co. and Clarion Partners LLC, Amazon.com is adding another 515,000 square feet of space at a nearby facility. Together, the facilities will serve the Central Coast region of California all the way down to San Diego and into southern Nevada. Aside from its close proximity to the ports, Amazon.com’s facilities benefit from the area’s transportation network, including transcontinental rail links and major airfreight hubs.

In the coming months, Amazon.com plans to open a second, huge distribution and fulfillment center in Patterson, California, located southeast of San Francisco. The company is already trying out its Amazon Lockers in San Francisco, which allows consumers to pick up merchandise at a supermarket or other store where the lockers are installed—a highly desirable option for consumers who aren’t home to accept deliveries. Amazon Lockers are also in several other major metro areas in the U.S., including New York, Los Angeles, Washington, D.C. and Seattle.

Although Amazon.com’s B2C business in the U.S. is worth an impressive $186 billion, the company is also making inroads in the B2B space with AmazonSupply, which it launched a year ago. The site offers about 600,000 SKUs now, but Amazon.com is beefing it up to gain a stronger position in the maintenance, repair, and operations (MRO) segment, whose overall sales are expected to reach $559 billion in sales this year.

AmazonSupply’s biggest competitor is W.W. Grainger, which boasts over 1 million parts online and another 400,000+ in its catalogue. In April, Grainger reported its first quarter profits hit a record high. The company is expanding its product offerings this year and focusing on new global markets, particularly Asia and Latin America.

Approximately 25 percent of Grainger’s current sales are attributed to e-commerce, although the company projects that will grow to between 40 and 50 percent by 2015, which is certainly achievable considering that e-commerce is the fastest growing channel for Grainger today. Recently, Grainger’s CEO Jim Ryan stated that, “Over the balance of the year, we will invest in e-commerce, our sales force, our distribution center network and our enterprise systems that will provide value to our customers and help us gain additional market share longer term.”

 

The online grocery wars

Conventional grocers have a hard enough time battling slim margins, shorter shelf life, food safety concerns and other challenges, so it’s not surprising that early forays into online grocery mostly failed.

A lot has changed over the last decade or so, however. The online grocery segment is gaining ground fast. Research firm IBISWorld predicts the online grocery segment will grow 9.5 percent annually to become a $9.4 billion industry by 2017.

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