I interviewed Marcus Arbelbide who discussed E-commerce Supply-Chain Challenges and Solutions.
Today we're speaking with Marcus Arbelbide, and the topic is e-commerce supply-chain challenges and solutions. Marcus, can you first provide an introduction to this topic and a brief background of yourself?
Absolutely, Dustin. I appreciate you having me on the show and giving me the ability to talk to your audience and add to your blog. I have about 14 years’ experience, in so far as the logistics/supply chain market. I currently am VP of supply chain solution at Gateway Supply Chain. And what we do is center on a lot of e-commerce kind of solutions for customers. What we're going to talk about today is kind of what the challenges are faced with somebody getting into the e-commerce supply chain and what the market kind of looks like right now.
Right now, the market is really... Today's e-commerce market is only 9% of the whole retail market. The other 91% is still brick and mortar — people going to stores, actually buying the product right there and driving it home. So what's happening right now, because of the possibility of a trillion-dollar market right now, you have the Amazon.com of the world. You have the The Home Depot starting to get into e-commerce. You have Lowes starting to get into e-commerce. You have Wal-Mart. You have Jet Delivery. You have all these companies that want to gobble up that other 91% because it's over a trillion-dollar market. The market is ripe, and people want to get into that market because it's fast; it’s growing; it's innovative. Andit costs you less to set up an e-commerce kind of solution than it would be to set up a Wal-Mart with 3200 stores at that point.
And that’s where the challenge is. What's happening right now is people are going out there, developing a website, developing a product, and they don't know how. So they have a website. They have basically a user interface right there. The customer is saying, "Hey. I want to buy that product." Now what happens is you're talking to somebody that's more technical and they built the website. They got a product innovation. They don't know how to ship it.
So the challenges you're faced with right now is being able to, because you buy a product online, now it's a different kind of channel of shipping and different avenue of how to get that product to that customer. We call it an omnichannel because what happens at that point is you have parcel; you have truckloads with larger trucks delivering the product. You have smaller trucks. You have cargo vans. You have, basically, parcel. So you have the USPS parcel service delivering this product to that door. So how do you integrate a website into a supply chain? So that's one of the big challenges we're faced with right now of people being innovative but they don't know how to do all the ins and outs and all the way from cradle to grave, as a lot of people like to say.
In today's market, the challenge is trying to get that. Amazon is disrupting that market, because they are coming up with innovative ways of two-hour deliveries, setting up Uber driver, setting up all these different avenues, trying to get to the customer quicker to swim away from going to brick-and-mortar store of having that immediate satisfaction is what they've been getting for so many years, and now they're looking at it saying, "Hey, I've got that craving. I want to go to Amazon, hit the button right there, have a notification, and I want that same two-hour delivery —not two-day delivery — I want two-hour delivery at that point. I want the dominoes kind of experience where I can go there and it says, ‘It's hot, fresh. I want it now.’”And that's where they're disrupting the market right now.
The challenges are going to continue facing is now you're going to move away the standard supply chain model. In the US — use an example — you bring in a container from China. You're going to bring it in there. You're going to pull that product off that container. You're going to set it up and put it other another truck. That other truck is going to go from the port of Los Angeles. It's going to go over to a distribution center of, say, we're going to use BestBuy as an example. It's going to go to Fresno right there. From Fresno, it's going to get deconsolidated right there and so in smaller delivery trucks and delivered to those stores.
What happens there at that point, now you've got all these regular lanes that are shipping this way, and they're shipping pallet-size orders to stores. Now you're going to have to change that model that Best Buy has perfected over the last 20 years of developing that product, make it more efficient, having their suppliers ship to their DCs. Now they were to say, "I gotta ship that DVD player from my DC or from my supplier to that end customer. How do I do that? How do I do that, maintain the same customer service and same visibility?" That's the biggest challenge that people are faced with.
It's not just the DVD player now because now it's going to be an elliptical machine. It's going to be a TV. It's going to be somebody wants to order tile online. They go to BuildDirect.com, and they order a pallet of tile, and they need to get it at their house. How do you do that? The supply chain right now is getting disrupted because the typical LTL carriers, less than truckload carriers, are used to going pallet-in-pallet-out and doing a 15-minute delivery. A typical household delivery is an hour and 35 minutes. So at that point, the cost effectiveness of going that way, your cost to deliver that one pallet is three times it would have been the cost if it would have been just to-pallet-to-pallet, to-DC-to-DC.
Do you have any recommendations for companies who want to move into the omnichannel retail market?
Absolutely.There are a few solutions out there right now. And I would say what they really have to do is look at what their supply chain and how their product is developed and how it's moving. I always suggest looking at it from the start is where their product is getting developed and where they're actually going to be shipping it, and where they're going to be housing it. There are a few partners out there. There's not a lot of partners that have really perfected the final mile, the white-glove-delivery kind of solution at that point. So you need to really go out there, do your research, and say, "Hey, what third-party logistics has this down right now? What company can give them an end-to-end solution, give me the visibility, can give me, basically, the omnichannel from parcel to samples to LTL, to truckload, to global, to the final mile, to white-glove delivery/assembly?"
You have to do your research and partner up with the company that has the technology that can integrate into your shopping cart. Because if you can do more automation, streamline your product, your product-purchase power, basically from your customers hitting the button, they know what it's going to cost for shipping to the final mile it's delivered, that's going to create more conversions. If you have to do a manual process where they have to call back and get a quote for shipping or they don't know what the tracking is, you're going to lose that customer. You may get one or two shipments out of them or purchases out of that customer, but the [inaudible 00:07:10] experience, they want the Amazon experience where everything is automated. Everything is getting a text. Everything is going fully bore to automation to end-to-end.
Well, thanks, Marcus, for sharing today. Did we cover all the points you wanted to discuss today?
We did. We did. And I think the one topic I would say that a lot of these companies getting into e-commerce that have a supply chain, they've really got to look at it and say, “Hey, we've got to look at the full picture instead of just developing a website.” Think about the end-to-end and partner with a company that's going to partner with you.
Great. Thank you.
Thank you so much, Dustin.