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Coronavirus Highlights Need for Diversification to Handle Fulfillment Disruption

As consumer shopping behavior shifts online during social distancing measures, having the right warehousing and fulfillment strategy is even more imperative for the fashion businesses that are banking on e-commerce during brick-and-mortar closures. And COVID-19 is offering lessons in crisis preparedness to both retailers and the fulfillment partners they rely on.

Amid the epidemic, some fashion retailers, including Net-A-Porter and Reformation, have temporarily closed distribution centers in hard-hit areas such as Los Angeles and New Jersey to protect their workers. Other warehouses are facing staff shortages as workers get sick or stay home to avoid spreading the virus. Even though apparel is arguably a less essential item than healthcare products or food, many retailers are looking to still drive business and shipments during these challenging times, which will require some strategic solutions.

“There’s this thought that certain kinds of service providers like lawyers, bankers and warehouseman shouldn’t be creative,” said Thom Campbell, chief strategy officer at fulfillment company Capacity. “And I think that times like this show how incredibly critical creativity is and how key it is to continuity in any unprecedented challenge. And this is an unprecedented challenge—there’s just no two ways about it. We’re not going to get through this without some very impressive out-of-the-box thinking.”

A CGS study found that about half of consumers have experienced an e-commerce delivery delay for non-essential items during the coronavirus, and 38 percent cite delays as the cause of disappointment in the past month. While most customers are willing to cut companies slack, optimizing fulfillment operations can help in lessening the extent of disruption.

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The top takeaway for fashion companies during this crisis has been diversification. Similarly to the need to expand beyond one sourcing country, having warehouses in multiple locations can provide more flexibility and backup plans. This can be tough for apparel companies to achieve because they typically carry a wide range of SKUs. Additionally, while this may be a solution for large labels’ and retailers’ direct-to-consumer businesses, holding stock in multiple warehouses likely isn’t the answer for smaller firms or fast-fashion brands that would put themselves more at risk for overstocks. However, if smaller brands work with a third-party logistics provider with multiple locations, they can achieve a similar effect without having to spread inventory thin.

For instance, Capacity stepped in when a CPG client’s direct-operated consumer-facing warehouse in San Francisco was closed due to the epidemic. The logistics firm, which typically only handles the company’s business-to-business shipments, moved supplemental product from the warehouse to its own facilities and temporarily took over the brand’s direct-to-consumer fulfillment.

According to Campbell, redundancy is another element that enables companies to fare better during a crisis. Having multiple internet connections, client communication platforms and facilities provides a backup if one fails. Redundancy in the workforce also unlocks the ability to better navigate crises. During COVID-19, the firm made the choice to assign workers from the same household into the same building on its campuses to lessen the spread of the virus, and staff work in two teams that are on for 14 days and off for 14 days. Having multiple facilities in the same place also means that should an outbreak occur at one building, it can be sanitized and unaffected workers can be moved to that warehouse.

Ben Eachus, founder and CEO of fulfillment technology platform Flowspace, noted that brands and retailers should even consider diversifying by working with multiple third-party partners. For instance, firms that are solely relying on Amazon for fulfillment might be running into problems if their orders are being put on the back burner.

As companies look to diversify their fulfillment footprint, another opportunity is the stores that are currently sitting idle with inventory. Transitioning these brick-and-mortar locations into dark stores could enable retailers to move this merchandise as well as get orders to local customers faster. However, for micro-fulfillment, there are health considerations during COVID-19, such as whether stores should be opening their doors to workers amid social distancing measures.

Concerns for worker and customers’ health as well as disruption to their fulfillment pipelines may also lead companies to adopt more automation and technology to navigate a crisis.

While companies often justify an investment in automation by looking at financial figures or efficiency gains, Jeff Moss, chief commercial officer at software and technology company Dematic, sees the potential for COVID-19 to highlight the need for automation from a health and safety perspective. Aside from enabling companies to do more with fewer workers, automation can also reduce the number of hands that touch a product or package before it gets to the customer.

“As a consumer, you’re sitting at home, and if you order something online, the question is who touched it,” Moss said. “And if it was automated, the answer is no one.” In general, Moss believes this crisis may see consumers wanting greater transparency about the journey a package took to get to them.

The caveat for everything from micro-fulfillment to automation is that COVID-19 is not the time to implement new systems. It also takes a long time to plan and implement new technology.

Further, if companies are lacking a direct-to-consumer strategy, they will likely be unable to establish an omnichannel operation mid-COVID. “It’s hard to spin up a channel you don’t have if you don’t have some of the bones and scaffolding in place at the outset of the crisis,” Campbell said.

However, companies can take this opportunity to learn now and adapt for later. Aside from needing a strong fulfillment plan in place to navigate disruption, it will be critical for companies after the health crisis to better deliver on heightened consumer expectations for e-commerce and expedited shipping.

“Any company that has significantly invested in their fulfillment capabilities, whether that’s internally or outsourced, will be in a stronger position than those who haven’t,” Eachus said. “Because if anything, this crisis has accelerated demand for ordering online and then in turn, you need a sophisticated fulfillment strategy in order to execute on that.”