How AI Optimizes Networks in 3P Supply Chains

Retailers are facing tighter margins that can hinder profitability. According to Alix Partners, margins have compressed 60% over the last decade, so it’s important for retailers to understand how best to optimize their supply chain. Rithum can help retailers increase profitability while enhancing fulfillment and shipment transparency with artificial intelligence and machine learning. AI-driven and machine learning technology can simplify complex inventory management and shipping logistics systems so retailers can cut margins while providing a positive customer experience.

Consumers want accurate delivery date promises – or they’re likely to go to a competitor if disappointed. 47% of consumers are likely to stop purchasing from a retailer if they miss a promised delivery date by two or more days, according to the 2023 Online Consumer Behavior Global Report by Rithum and research firm Dynata.

To provide reliable delivery date promises, it is necessary to understand transit time. Rithum’s technology uses AI models trained with years of shipping data. Retailers can use this information to identify the ideal fulfillment location and forecast the warehouse processing time.

Using technology to support buy online, pick up in store (BOPIS)

As consumers demand flexibility in how they receive their merchandise, Rithum’s tools also support buy online, pick up in store (BOPIS) as an omnichannel solution. This allows retailers to unlock 3P inventory to offer more assortment to important local markets with BOPIS. This technology identifies which suppliers are eligible to support retailers offering BOPIS.

Rithum’s ecommerce technology runs dropship and marketplace programs. This is also known as third party, 3P or unowned inventory. Suppliers can also use Rithum to connect and sell on global marketplaces like Amazon, eBay, Zalando, and others. Rithum also provides 3P supply chain solutions.

Rithum’s global commerce network includes more than 40,000 brands, suppliers and retailers representing $50 billion in annual sales. Through a single e-commerce platform, Rithum connects hundreds of channels and more than 420 marketplaces and retail sites.

How 3P models are more complex vs. 1P models

To explain how Rithum can leverage AI technology to help optimize networks in 3P supply chains, it is necessary to identify why 3P models are more complex compared with 1P models.

Third-party models have more fulfillment center shipment origins to navigate.

• 3P: A robust 3P program at a medium to large retailer typically has thousands of suppliers with smaller fulfillment locations, also known as nodes. Each supplier has multiple fulfillment locations with schedules and processes unique to each location.
• 1P: This is different from a first-party (1P) network where retailers operate about five to 20 larger fulfillment locations or nodes.

There are more ship-from and ship-to locations to manage.

• 3P: 3P supply chains are more complex because there are more deliveries-to-destination scenarios to manage. They are operating in thousands of locations.
• 1P: 1P supply chains have fewer origin-to-destination scenarios to manage since all shipments originate from their own fulfillment centers. These fulfillment centers consist of, on average, from five to 20 buildings.

A more intricate fulfillment topology with cost and speed implications.

• 3P: 3P network management is more difficult to manage because it’s hard to pinpoint which suppliers are shipping inefficiently. There might be more efficient options for suppliers with multiple warehouses, for example. This is because the fulfillment center shipments to and from multiple locations form a web of possibilities. As a result, it can be difficult for retailers to understand why their average 3P cost per shipment is higher or identify how they can make their 3P program more profitable.
• 1P: 1P is more straightforward to manage. This is because inventory flows are contained to fewer locations. This allows for more efficient reporting and tracking. You can see how inventory flows to and from fulfillment locations more easily compared with a 3P network.

How Rithum uses AI to guide retailers’ dropship and marketplace inventory

Technology allows retailers to use the supplier network to reduce transportation costs and improve shipping speed. By optimizing inventory placement, retailers can also improve restocking speed in 3P reverse logistics.

Delivery Promise AI enables 96% on-time forecast accuracy

Once a customer purchase is made, Rithum’s predictive delivery model automatically determines the most cost-efficient shipping carrier and method to ensure on-time delivery. Rithum’s Delivery Promise has achieved up to 96% early and on-time forecast accuracy.

Delivery Promise provides customers with highly accurate predicted delivery dates, powered by sophisticated machine-learning models. The machine learning models are based on inventory locations, historical pick-pack data, current backlogs, and fill rates. Retailers can predict warehouse processing time and carrier transit time. Estimated delivery dates are viewable on product detail pages and at checkout. Delivery Promise also produces estimated delivery dates for both dropship and 3P inventory.

Shipping carrier rate shopping can reduce overall shipping costs

Another way Rithum saves retailers resources is by reducing overall shipping costs for their dropship programs. Rithum customers can see shipping cost savings of up to 10% using a shipping rate shopping strategy.

Rithum compares rates between carriers and shipping methods to get packages to destinations at the best rate. It factors in supplier warehouse location, historical pick/pack data, fuel surcharges, and other factors.

Finally, End-to-End Monitoring prevents late shipments with real-time visibility and proactive alerts. Rithum’s historical reporting feature allows retailers to uncover new opportunities with KPIs like on-time performance and time to deliver. This includes insights unique to Rithum such as ship method compliance, geolocation data, and more.

Learn how Rithum can unlock your best 3P strategy to complement your omnichannel strategy and ecommerce business here.