UPS exec addresses how e-commerce has changed logistics and supply chain operations

Back in October, transportation and logistics bellwether UPS said it expected volumes on Cyber Monday, December 2, the most active online shopping day of the year, to be up ten percent annually at 32 million packages.

This impressive statistic speaks not only to how rapidly e-commerce is growing but also to how it is changing supply chain and logistics operations and processes, too. E-commerce upticks are not singular to UPS by any stretch to be sure, as FedEx , its biggest competitor, called for Cyber Monday volumes to be up 11 percent compared to 2012, when it anticipated volumes to be topping 22 million shipments (final Cyber Monday tallies for each company were unavailable at press time).

On his company’s third quarter earnings call, Alan Gershenhorn, senior vice president of Worldwide Sales, Marketing and Strategy for UPS, explained that the dramatic rise of e-commerce continues to alter consumer behavior and shipping patterns.

And in an interview with LM he took it a step further, providing a thorough explanation of how that is resulting in retailers, in a sense, rewriting their playbooks in terms of how they address their fulfillment and supply chain models.

“E-commerce has significantly changed how retailers fulfill orders and replenish stock—whether at the store, an online storefront or from a distribution center,” said Gershenhorn. “Consumers’ expectations are rising, and online shoppers want to come as close as possible to getting the same kind of one-to-one personal attention they would receive at their favorite brick and mortar store.”

As a result of this, he noted how UPS becomes an extension of the retailer and can help fulfill this role in an ever increasing omnichannel world, adding that UPS conducts extensive research in the form of a study to gain insights into buying behavior and consumer expectations when purchasing online and in store to help retailers understand where they need to focus their efforts to differentiate themselves from their competitors.  The study, UPS Pulse of the Online Shopper, is conducted in the U.S. and globally, and receives input from more than 14,000 frequent online shoppers.

One of the main takeaways of the study, he said, was that on a global basis consumers want greater control over their online shopping experience, including more information, more choices, and more convenience across channels, and he explained that logistics plays a key role in delivering a positive retail customer experience and can make the difference in driving customer loyalty and increased sales.

“This shift in consumer buying behavior is really forcing retailers to rethink their entire fulfillment and supply chain model,” said Gershenhorn. “This can mean investing in enterprise-wide inventory visibility, providing the opportunity to leverage select stores to ship directly to consumers. This will allow for greater product selection and availability, speed to consumer and better inventory balancing. UPS works with retailers to optimize their networks to help reduce costs and find the optimal number of fulfillment locations given current or future supply and demand.  UPS has a set of solutions that will help retailers execute their omnichannel strategies.”

With Thanksgiving falling later this year and leaving consumers with six fewer shopping days until Christmas, Gershenhorn said the shorter holiday shopping season is definitely a factor this year, as there are 26 shopping days between Thanksgiving and Christmas this year, making it the shortest holiday shopping season on record.

Even with fewer days to ship packages during the holiday season, he cited how UPS has the ability to proactively manage its network and match capacity to the needs of its customers.