12 Order Fulfillment Along the Supply Chain

Improved Communication. Better commu- nication between shippers and receivers is needed during peak periods and when disrup- tions occur in the network. Better communica- tions will enable their customers to not only respond to disruptions but also proactively plan for the peaks.

IMPACT OF SHIP FROM STORE

Many of the EC orders that UPS handles involve shipments that travel long distances from one of their or the retailer’s distribution center to the cus- tomer. Obviously, this results in a higher cost to

either the customer or the retailer or both. Although UPS has adjusted their shipment costs so that the margin percent is essentially the same regardless of distance, longer distances mean higher revenues.
In an effort to reduce shipping costs, some of the specialty retailers like the Gap are service online orders by shipping directly from the store to the customer (Nilsson 2013). Similarly, larger retailers, who have been shipping directly from their stores for quite some time, have substantially increased these shipments. For example, in the past year Walmart has doubled the number of their stores using direct from store shipments. In essence, the store nearest the customer becomes a distribution center. While UPS and their main competitor FedEx are still used for a majority of these deliveries, the fact that the distances are shorter means that their revenues are also reduced. In the short run this is not likely to have a major impact on UPS’ overall revenues. However, over the next few years, as alternative EC distri- bution methods emerge (e.g., order online and ship from store and pick up in store), and as Amazon.com’s distribution network expands (see opening case), UPS and FedEx will have to come up with alternative strategies to address the
potential revenue impacts.


Sources: Based on Nilsson (2013), Konrad (2013), UPS (2014), and ups.com (access April 2014).

Questions

1. 
   What sort of outsourcing services does UPS provide besides package delivery?
   
2. 
   Why would a shipper, such as UPS, expand to other logistics services?
   
3. 
   What changes is UPS contemplating to avoid the problems encountered during the 2013 holiday season?
   
4. 
   Why does “ship from store” EC delivery rep- resent a threat to UPS’ business?
   

Using Robots in Warehouses

Robots have been used in warehouses to fetch parts stored in bins for many years. What is new

is using them on a large scale in EC. According to Lobosco (2014) Amazon plans to use 10,000 robots in its warehouses by the end of 2014. You can watch the video titled “Robot Army Helps Run Warehouse” (3:10 minutes) cited by Lobosco (2014) to see what the robots are doing.