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Navigating Logistics in the New Age of e-Comerce

Navigating Logistics in the New Age of e-Comerce


by Colin Mewburn Mercer, Vice President, Global Integrated Supply Chain Solutions, Agility

The burgeoning e-commerce industry in Asia is getting increasingly hard to ignore. According to eMarketer, by 2019, 20.4 per cent of all retail sales in Asia Pacific will be conducted through e-commerce – a significant increase from only 10.4 per cent today, and considerably higher than the projected worldwide share of 12.8 per cent by 2019.

e-Commerce thus marks a revolutionary shift and unprecedented challenge in the logistics industry. While it is essential to the survival of retailers, the fulfilment of those orders is simply seen as an added cost to them, thus putting pressure on logistics providers to provide their services both faster and at an ever-lower cost.

However, while providers can keep costs down with brick-and-mortar store deliveries by following a set schedule, with home deliveries, there is the extra step of having to deliver the goods straight to someone’s door. Accordingly, the supply chains and distribution systems the industry has come to know will have to evolve to meet the needs of e-commerce retailers and customers.

Speed and perfection

e-Commerce calls for two things – speed and perfection.

Logistics providers are essentially required to do exactly the same as what they did yesterday but at a greater speed. They are being continuously challenged to use planning and transport optimisation to improve the timelines on the end-toend process to fit within the client’s date expectation.

Thus, retailers are looking for a number of things when it comes to their logistics provider. They are looking for end-toend visibility, vendor control, and more importantly, cost savings. This is especially vital in fast-moving retail industries – in these sectors, turnaround time can be so tight that logistics really makes a difference in whether or not a product can be sold.

Secondly, it requires perfection. This means that goods must be received by the consumer quickly, efficiently, without damage – all while ensuring client satisfaction is achieved. This may sound straightforward but given the speed required, there are a lot of issues with how supply chains can be handled effectively. To satisfy all the stakeholders involved, the logistics provider of today has to be dynamic and agile.

To achieve this they must go further than simply revising their ‘last-mile’ delivery services – they must entirely transform their organisations to reflect the new pace that the market demands, from warehouse to final fulfilment.

The evolution of logistics providers

Logistics providers have evolved to meet these demands by developing systems and processes that offer greater flexibility in providing solutions and a higher level of personalised service. This has been seen particularly in the warehouse. It used to be that the warehouse was just where things were stored – now, warehouses are looking at 24 to 36-hour rotations of stock, between online orders and in-store returns and purchases. Warehouses of today have to be run with versatility and the ability to cope with quick turnaround times, to ensure that products are moving at the same pace that the market is.

There is thus a greater focus on the role of technology in logistics. Data analytics are set to revolutionise the status quo within the industry as they begin playing an even bigger role across the supply chain. In order to meet rising consumer expectations, in terms of both speed and cost, retailers and logistics providers need to make greater use of data analytics. Effective use of analytics means that if, for example, a shipment misses its original schedule, companies can use the data captured to send the order on the next available route. It also means that logistics providers are able to forecast future demand patterns, consult customer order patterns, and develop smarter business strategies around all this information at hand.

Impact on the industry

Even as the logistics industry has innovated with solutions like these at an incredible pace, transforming the entire nature of the supply chain globally, retailers and end-consumers have not responded with thanks but with even greater demands.

For instance, to cope with increasingly price-sensitive markets, especially in Asia, retailers now often run very short-term promotional events. These require businesses to bypass some existing networks to ship items directly to the customer or a lockbox location, a process sometimes known as a distribution centre bypass, or DC bypass. Changes like these put huge pressure on the supply chain, calling for a radical reordering of the fulfilment process.

On top of this, the logistics industry has become increasingly B2C, rather than B2B, orienting itself to the end customers of e-commerce retailers. This transformation demands a much more complex distribution system than the standard model of brick-and-mortar deliveries. Instead of delivering large quantities of products to a set list of retailers, logistics providers need to deliver smaller quantities of products to a single customer. The standard distribution system is not made for these little quantities – logistics providers are thus now adapting their entire distribution systems to the nature of e-commerce.

Un-planning for the future

Because of all this, logistics providers are faced with a situation where long-term planning is almost impossible, since any rules that previously existed about the supply chain no longer exist. Their role is now to simply become agile enough so they can create capacity and availability for their customers, which can be turned on at will.

In contrast to years gone by, logistics providers now need to ‘un-plan’ their operations, creating an always-on network, which can to connect to a client’s business at whichever point it is required. e-Commerce is demanding things from logistics providers that require them to completely adjust their mindsets and the way business is done. It has spurred many new concepts and ideas within the supply chain, due the need to address logistical challenges resulting from its ever-changing demands.

Yet, this is far from the end – with emerging technology like drone delivery, driverless vehicles and IoT systems becoming cheaper and more accessible, the industry is looking at a future in which it has to constantly evolve and innovate to stay relevant.

About the Author

Colin Mewburn Mercer is Vice President, Global Integrated Supply Chain Solutions at Agility. An industry veteran, he focuses on Business Process Outsourcing (BPO) and reviews end-to-end integrated supply chain capabilities at a global level. Colin has been with Agility since 2004.