by Colin Mewburn Mercer, Vice President, Global Integrated Supply Chain Solutions, Agility
E-commerce is growing at an unprecedented rate in Asia Pacific, driven by faster internet services and, in many markets, almost universal mobile uptake. In light of this, the region is set to become the largest digital retail market in the world, offering opportunities for both global online retailers, such as Alibaba, ASOS and Taobao, as well as local competitors, such as Qoo10, Zalora and Luxola.
This means, according to market research company eMarketer, retail e-commerce sales in Asia Pacific are projected to reach US$1.15tr this year, taking up more than half of the global market. Therefore, new resources and infrastructure must be put in place to support this growth. Logistics providers have a key role in this network and must work even more closely with their customers to develop tailored and agile solutions that meet the demands of the industry.
Impact of e-commerce on logistics
The uptake in e-commerce has had a huge impact on the logistics industry. It has effectively sped up well-established processes, as well as demanded new ones. Most processes are bound by strict timelines making accuracy and consistency of execution a basic criteria.
However, whilst one cannot speed up a ship carrying cargo, or increase the speed of a plane, a logistics provider can use planning and transport optimisation to improve the timelines of the end-to-end process to fit with a client’s expectations.
On a fundamental level, e-commerce relies on two things – speed and accuracy. It demands that a logistics provider does exactly what they did yesterday but at a faster pace. It also demands immense accuracy, as there are target parameters at every step of the shipping and distribution process to maximise efficiency. Most, if not all, e-commerce retailers offer their customers a cradle-to-gate tracking service which puts exacting demands on process and efficiency.
The logistics involved in e-commerce also seeks perfection – customers need to receive their goods quickly, efficiently and without damage in order to remain satisfied. This might seem like a standard expectation but it underestimates the number of issues that can arise along the supply chain, as well as the need to have seamless and effective processes in place.
Warehouses also impact the logistics and transportation process, not least due to the growing requirement to fulfil fast or same-day delivery services. Traditionally, a warehouse was used to store goods, with flows in and out that were pre-defined. Now, we are witnessing change in the in-outflow model where there is one line for goods purchased online, and another for goods meant for distribution to traditional bricks-and-mortar stores. Each operating line has its own approach and standards, adding complexity to the systems that logistics providers have to manage.
Working together for success
e-Commerce demands that logistics providers and retailers share a symbiotic relationship. Shipping fees are an added cost to the retailer and logistics providers need to ensure a delivery is done quickly and successfully in order to fulfil the retailer’s promise to their customers.
For example, when a provider does store deliveries, there is a set schedule – products go out on a daily or weekly basis, and everything is planned out well in advance. With the door-to-door deliveries for e-commerce retailers, there is an extra step of having to deliver the goods straight to someone’s door – be that their home, their office or wherever.
As a result, logistics providers are developing systems that will specifically support the requirements of the e-commerce industry and gradually moving away from their traditional business models.
Unfortunately though, one cannot employ a cookie cutter approach. Logistics providers have to look at how core competencies within the business can design and develop solutions that streamline the supply chain, allowing greater control of upstream and better management of downstream functions. In summary, it is essential to plan out the end-to-end journey as precisely as possible to meet the needs of the customer.
According to eMarketer, by 2019, 20.4 per cent of all retail sales in Asia Pacific will be through e-commerce, rising from only 10.4 per cent today. A significant part of this growth will be enabled by the introduction of new technology into the supply chain.
Technology is set to revolutionise the status quo within the industry as data analytics begin playing an even bigger role. 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 a shipment misses its original schedule, companies are able to use the data captured to send the order on the next available route. At a predictive level, it means that logistics providers are able to forecast future demand patterns and consult customer order patterns to develop smarter business strategies.
This information will then provide the necessary insights that can be used to improve the overall management of the supply chain, thereby enabling logistics providers to deliver a more strategic service all-around.
At the same time, the role of the warehouse will continue to change and the implementation of systems will make it easier for the client to make decisions about what they need. As we move forward, there will be a demand for more sophisticated warehousing and distribution facilities, which will require significant investment in partnerships between retailers and logistics providers.
e-Commerce will continue to demand a new and more intense level of flexibility from the logistics industry. This requires an adjustment to traditional business models and mind sets, as well as encouraging innovative minds to evolve and adapt technologies to meet the challenges and opportunities that lie ahead. If this is successfully achieved and all sides of the supply chain collaborate and utilise the rich data that e-commerce naturally delivers, then the business growth opportunities are almost boundless.
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.