Chris Clowes is executive director at global supply chain and logistics consultancy, SCALA, and today discusses the crucial considerations that businesses should make before updating or overhauling any part of their supply chain and logistics operations:
The past decade has seen substantial e-commerce growth, with internet sales as a percentage of total retail sales increasing from 2.5% in December 2006 to a staggering 29.3% in December 2024. Despite this rapid expansion, retailers now face an increasingly challenging landscape. Economic uncertainty, supply chain disruptions, extreme weather events, and global conflicts continue to impact logistics operations. Additionally, intensifying competition, rising consumer expectations, and evolving sustainability regulations are forcing businesses to rethink their supply chain strategies.
Unlike many bricks-and-mortar retailers, e-commerce businesses must handle complex logistics operations, including managing high return rates, last-mile delivery efficiency, and the need for hyper-fast order fulfilment. To remain competitive, retailers must continuously refine their supply chains by optimising inventory management, leveraging automation, and developing more agile fulfilment networks – not to mention ensuring their consumer-facing tech is up-to-date and efficient. However, failing to invest wisely and strategically can lead to severe financial losses and operational breakdowns.
Learning from major e-commerce supply chain missteps
Unfortunately, recent supply chain challenges have resulted in substantial losses for some of the industry’s biggest e-commerce players. For example, ASOS faced a £190 million impairment charge after it was forced to mothball a large US fulfilment centre due to slower-than-expected regional growth. The retailer had initially invested in US-based fulfilment to enhance delivery speeds, but fierce competition from fast-fashion rivals like Shein and Temu made it challenging to justify the costs. ASOS has since moved operations back to the UK, focusing on optimising inventory management rather than expanding warehouse infrastructure – a move which has resulted in significant up-front costs.
While supply chain transformation is necessary, these examples highlight the risks of making large-scale changes without rigorous testing and contingency planning. SCALA typically recommends taking a phased approach, allowing businesses to test new fulfilment strategies gradually, optimise workflows, and adapt to evolving market demands. By conducting large-scale evaluations like centre-of-gravity studies, businesses can align their supply chain networks with demand and achieve significant savings in operational costs.
Key considerations before making e-commerce supply chain changes
Overhauling any part of the supply chain requires e-commerce retailers to take a strategic, data-driven, evidence-led approach. Rushing into large-scale transformations—whether through automation, new fulfilment centres, or revised sourcing strategies—can lead to costly mistakes.
Here are six essential supply chain considerations for e-commerce retailers looking to implement significant changes.
1. Evaluation of fulfilment infrastructure
E-commerce retailers must first assess whether their current warehousing and fulfilment capabilities are serving their purpose and continue to align with business goals. Unlike traditional retail, e-commerce operations require high-speed pick-and-pack processes, real-time inventory tracking, and efficient last-mile logistics – making the strategic location of warehousing and distribution estate paramount.
2. Scalability and flexibility
Secondly, a strong e-commerce supply chain must be able to flex and scale to accommodate fluctuations in demand. Seasonal peaks like Black Friday, Cyber Monday, and Christmas can overwhelm fulfilment centres that lack sufficient flexibility. Distributed inventory networks, micro-fulfilment centres, and third-party logistics (3PL) partnerships can help retailers scale effectively without overinvesting in fixed infrastructure.
3. Cost structure and return on investment (ROI)
Cost is a crucial factor when making supply chain changes. While automating fulfilment centres or expanding warehouse footprints can increase efficiency, businesses must assess whether long-term savings justify the initial investment. Many e-commerce retailers fail to account for hidden costs, including integration challenges, downtime, staff training, and international shipping complexities. A seemingly cost-effective solution can quickly become a financial burden without proper planning. Considering the scale of the change and the potential for phasing investment and implementation can help ensure costs are managed effectively.
4. Sustainability and regulatory compliance
With growing pressure from consumers and regulators, e-commerce retailers must be good corporate citizens and make sustainability a core consideration in any supply chain upgrade. Retailers may consider adopting more eco-friendly practices such as carbon-neutral shipping options, reusable packaging, andethical sourcing strategies to help deliver against environment, social, and governance (ESG) commitments and play their part in industry’s efforts to combat climate change.
Additionally, shifting fulfilment locations can impact how import/export regulations, tax obligations, and local compliance requirements affect the business. Retailers must stay ahead of these changes to avoid legal and financial setbacks and remain compliant.
5. Robotics and automation in e-commerce fulfilment
Automation can be an enabler of faster, more accurate order fulfilment, but it must be implemented strategically. Retailers must evaluate the suitability of automation for different stages of fulfilment; for example, identifying the right pick-and-pack or sorting processes is critical. New robotics systems must work seamlessly with existing software and workflows.
Automation should also seek to enhance efficiency and free up employees to focus on bigger, more strategic tasks that deliver greater value. That being said, staff training on new technologies is essential to prevent and rectify system failures and avoid costly disruptions.
6. Risk mitigation and phased implementation
A good risk mitigation strategy should include implementing phased rollouts, making use of pilot programmes, and rigorous stress testing to prevent costly disruptions. Partnering with logistics experts and external consultants early on can also provide an objective view on potential risks and opportunities, helping e-commerce retailers to navigate complex supply chain transitions.
A strategic approach to e-commerce supply chain transformation
While supply chain evolution is necessary for long-term success in e-commerce, businesses must approach change cautiously. Unlike many traditional retailers, online businesses operate in a fast-moving, competitive environment, where customer expectations for speed, quality, and sustainability are constantly rising.
Those who take a strategic, phased approach to supply chain transformation will avoid costly disruptions, improve efficiency, and strengthen their ability to scale-up. Learning from past industry missteps and leveraging data-driven decision-making will ensure businesses stay ahead in an ever-evolving digital commerce landscape.
