The evolving world of e-commerce fulfillment

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Australia Post-backed startup Fulfilio is launching a warehousing and fulfillment service – including returns – targeted at small and medium-sized Australian businesses.

Delivery from Fulfilio warehouses will be via Australia Post. Fulfilio currently has fulfillment centers in Melbourne, Sydney, Brisbane and Perth, offering same-day deliveries in metropolitan areas.

This is the latest example of last-mile operators getting into the e-commerce fulfilment world. DHL e-commerce has a network of fulfillment centers around the globe, Singapore Post operates a massive regional e-commerce logistics hub, and FedEx has its FedEx Fulfillment solution.

There’s more to this than simply making money from e-commerce fulfillment – there’s the potential to lock in last-mile delivery, offer seamless warehouse-to-delivery integration, and leverage the operational and cost advantages of taking stock from your own location.

Location, location, location
E-commerce merchants are looking to locate forward-stocking fulfillment centers close to dense markets, allowing for scale and profitability in the last mile, as well as same-day delivery. As letter volumes continue to fall, do posts have smaller distribution centers in key locations that can be repurposed as e-commerce fulfillment centers? Or have previous generations of management sold off prime real estate?

Right now, Amazon is the only player that can reliably offer a wide range of SKUs (stock keeping unit) for two-day ground delivery. The question for other e-commerce players is whether they should even try to compete with Amazon’s SKU availability. Amazon’s competitors don’t have its size, so they only carry a limited number of SKUs compared to Amazon centers. The only real challenger here could be someone like eBay, which is reportedly already planning its own fulfillment service.

Carrier-specific?
FedEx Fulfillment got off to a slow start because customers could only use FedEx transportation services, and fulfillment had to be connected to a FedEx rate program. This meant companies with big parcel volumes were forced to use standard rates instead of their custom shipping rates. In the last six months, FedEx has changed the rules to allow companies to piggyback fulfillment services on existing highly discounted rate programs.

DHL allows its US e-commerce customers to use any parcel shipping service. E-commerce fulfillment might be a key stepping stone for DHL to expand its nascent Parcel Metro service in the USA, in particular in offering same-day or next-day delivery.

Offering a carrier-agnostic e-commerce fulfillment solution might sound counterintuitive, but it may be a more attractive solution to e-commerce retailers whose product range includes bulky or heavy items the post can’t carry.

By offering carrier-agnostic fulfillment solutions, the post or parcel company is putting faith in its own delivery services to offer the best value for money.

Managing delivery centers
Managing delivery centers isn’t the same as managing supply chain and e-commerce fulfillment centers.

In an attempt to compete with market leaders UPS and DHL, FedEx acquired supply chain and fulfillment companies to build up its capabilities in this space. It struggled to integrate those companies under the FedEx umbrella.

FedEx recently reorganized its supply chain division under FedEx Trade Networks, which was historically a brokerage organization. By putting these companies under one business unit, FedEx can consolidate resources, save money on supply chain and fulfillment, and go to market with services that customers will use.

Are marketplaces next?
Some posts – including Austrian Post and Croatian Post – have already set up their own online marketplaces. E-commerce retailers who don’t want to be part of FBA (Fulfilment by Amazon) may prefer to list on the post’s marketplace.

Full integration between marketplaces, e-commerce fulfillment, and last-mile delivery is the next step. Amazon is already heading toward this, so the time is right for delivery companies to come up with their own seamless, customer-focused fulfillment and delivery solutions.

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About Author

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Ian Kerr is the founder and host of the Postal Hub Podcast, the weekly podcast for the postal and delivery sectors. He has a deep knowledge of the Australian postal network, both in retail and delivery, through his many years working for the Post Office Agents Association Limited – the national association for small business owners in the Australian postal sector.

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