The rise of Direct-to-Consumer

Direct-to-Consumer (DTC) is the business model of selling products directly to customers and thereby bypassing any retailers, wholesalers, or any other middlemen to connect directly to consumers. DTC is rapidly becoming a major part of global eCommerce sales. In the US alone, according to eMarketer, DTC e-commerce sales have more than tripled in the past six years. The market has grown from $36.08 billion in 2016 to $128.33 billion in 2021 - a gain of nearly $100 billion in just five years. The research indicates it will add almost another $100 billion in the 2021-2024 period, reaching $212.90 billion by the end of that timeframe.

The challenge is that many warehouse facilities have not caught up with this trend as yet. Look at the design of many large warehouses today and you’ll see large racks of pallets, and automated forklift trucks whizzing around dropping off pallets at staging points. The operation is focused on efficiency and moving inventory in bulk. It is pretty much a ‘lights off’ undertaking, working like clockwork, with as much of the operation fully automated as possible.

Imagine then if one individual orders a single packet of Oreo cookies from the middle of this hive of activity. It should be simple but how do warehouses change their approach to facilitate it? That is a key question now with the move to DTC business models picking up pace.

Many warehouses are simply not configured or ready to operate in that way. If working practices and flows through the warehouse are configured for a retail business-to-business (B2B) approach, then looking after DTC is no insignificant challenge. It is not possible to pick a single with a forklift truck, for instance. 

Ultimately many of these warehouse businesses are running DTC options alongside retail B2B product deliveries, of course. They might have bulk operations well under control but at the same time be running a rudimentary DTC operation in a corner of the facility or squeezed onto a mezzanine floor.

The inventory question

Critically too, the introduction of DTC workflows into the process mix within the warehouse makes it even more important that the business has the right inventory identified for each separate channel. Processes that were traditionally set up primarily for manufacturing efficiency or wholesale-centric operations must now be re-examined to handle DTC workflows.

Maintaining and segmenting available inventory across different channels is extremely difficult because each channel’s inventory needs to be considered individually. Legacy order fulfilment and ERP workflows have the potential to keep your staff in spreadsheets all day, joining up the dots, while still turning up errors and poor decisions. In addition to the disjointed channel issues, these traditional processes typically only offer visibility at a case or pallet level, while today’s consumer needs are satisfied at a single-unit (EACH) level.

Orchestrating orders with a manual, user-driven, non-real-time process will breed inaccuracies, risk overselling (the same inventory sold simultaneously in multiple channels), backorders and customer frustration. When you consider a recent BRP report, which found that 63% of consumers are likely to stop shopping for a brand after just ONE unsatisfactory experience, the risk is too costly.

Finding a solution

The best way e-commerce companies can provide a positive experience across the whole DTC cycle, especially when it is running alongside other distribution and fulfilment processes, is through optimising warehouse operations. That means choosing a Warehouse Management System (WMS) that has the rich functionality to fulfil the organisation’s current needs but also has the flexibility to scale and grow as the business expands and moves into new areas.

Retailers, wholesalers and e-commerce organisations alike, together with their 3PL service providers, will all need the agility to fulfil through pick and pack processes with accuracy and speed whatever the nature of the order. Optimising customer direct shipping, in contrast to the full vehicle transport optimisation mindset of the traditional supply chain, a system that directly integrates with parcel carriers and calculates dimensional weights, and rate shops from available carriers will save time and money and offer additional service options to the customer.

It is equally important that warehouse management and order fulfilment systems support operational efficiency and enhanced productivity.  In this context, scanning technology with system directives, validation, across all warehouse processes creates a clear fulfilment process for teams to work efficiently. Organisations can achieve further productivity and efficiency gains by integrating in real-time to automation systems such as fulfilment robotics, pick-to-light, and sortation systems. That, in turn, allows them to process higher volumes of orders per day, avoiding worker cost increases as the business grows.

Once again, having absolute network-wide inventory visibility is very important here. Organisations need systems that enable them to manage all inventory processes inside their warehouse, including cycle and physical counting, tracking, and replenishment. To drive efficiencies across their modern warehouse and store operations, they need 100% visibility and an understanding of where all inventory is located at all times across all locations

These kinds of Warehouse Management Solution and Order Management capabilities are increasingly important today, with high service fulfilment now more than ever an essential part of the brand experience for e-commerce organisations and retailers alike. Today, best-in-class organisations need to serve their customers in real time. from any available source of inventory, at the warehouse, from retail store or stock located at 3rd party locations. 

This need will only become ever more urgent as the move to Direct-to-Consumer models plays out. In this new DTC environment, organisations need to find new ways to drive operational efficiencies across increasingly complex warehouse environments. Furthermore, to be able to scale to embrace the new DTC model, it is key that the business ensures it is running high-quality Warehouse Management and Order Management Systems that are flexible, scalable and capable of bringing in added functionality as and when required.

- The author, Will Lovatt, is General Manager and Vice President at Deposco.

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