How e-commerce is transforming the logistics industry

How e-commerce is transforming the logistics industry

A few years ago, supply chains mainly focussed on delivering the right quantity of products at the right location within an agreed-upon shipment schedule. The shipments usually contained bulk orders and supply chains were less complex. However, in the age of e-commerce, the scale and volume of commercial transactions has changed drastically, giving rise to a number of complications that did not exist earlier. Consumers are more demanding today and their expectations are impacting not only the market pattern, but also the logistics industry. As a result, the modern supply chain is much more complex, challenging and evolved. Here are some of the changes that have occurred due to the rapid growth of e-commerce.

Warehousing

One of the most important requirements for the fast-paced, competitive e-commerce industry is warehousing facility for goods. To ensure faster delivery of items, it is important for e-commerce businesses to maintain an inventory at a secure and functional location. While warehouses have been in use since many decades, the demand for warehousing space has increased drastically with rapid growth of e-commerce and online retail. There is not just increase in number of fulfilment centres but also in the size of the structures.

In a study conducted by PricewaterhouseCoopers in 2016, it was found that e-commerce companies require three times more warehousing space than traditional businesses. This has resulted in increase in the size of the warehouses and also their management. Today, major e-commerce players such as Amazon and Alibaba are thriving because of robust logistics which involves an efficient and modernised warehousing facility. These companies are establishing multiple fulfilment centres across their area of operation to cut down on the shipping time and cost. Cameras, radio-frequency (RF) ID devices, laser-sensors and barcode readers are being deployed to automate the warehouses which has completely transformed the traditional warehouses and played a pivotal role in the success of many businesses.

Transportation and Shipping

Another integral aspect of logistics is transportation. In the age of e-commerce and online retail, transportation forms the fundamental block of the logistics infrastructure. Today, the transport infrastructure plays a dominant role in facilitating the penetration of online retailers in remote areas and expanding the market for e-commerce businesses.

E-commerce has brought new challenges for the logistics industry which have given rise to various innovations in the transportation patterns. The primary challenge faced by logistics providers is fulfilling the customer’s supply chain expectations. Most consumers want their shipments to be delivered at their doorstep. They also expect real time updates about the location of their individual shipment in transit and want to be alerted in case of any delays in delivery. The trend of Express deliveries started by Amazon has also fuelled consumer expectations of faster deliveries of parcels. These factors have forced carriers and shippers to develop a more time-definite supply chain.

In order to achieve faster shipping, businesses are competing against each other to conquer the “last-mile” space which incurs the maximum cost. Since the competition is extremely tough in the e-commerce sector, companies are compelled to provide incentives such as “free shipping” and easy returns, which are feasible only if the cost of shipping is reduced. This has prompted retailers to collaborate with 3PLs that are specialised in handling complex supply chains at reduced cost. E-commerce businesses and logistics providers are making greater use of warehouse automation and smarter packaging technology to avoid damages and ensure accuracy. The advent of e-commerce has clearly made the entire shipping process more internet dependent. Information technology has become an intrinsic part of the shipping as well as return process. 

Technology

With meteoric growth of e-commerce, the modern supply chain is transforming as per the requirements of the e-commerce industry. In a study conducted by the Council of Supply Chain Management Professionals (CSCMP) in 2017, it was found that the price of energy was no longer the “primary factor” in determining the cost of logistics, rather, consumers’ demand for e-commerce deliveries has emerged as the major determinant for logistics cost. Since the current trend demands the supply chain to be more efficient, the logistics industry is depending heavily on advances in technology to control costs. The CSCMP report says that technologies ranging from big data and predictive analytics to robotics and artificial intelligence are modifying the entire modern supply chain and fuelling growth of e-commerce.  

Advanced data analytics models with prescriptive and predictive algorithms are being deployed to plan the resource requirements much ahead of actual demand. In such a scenario, data collected through e-commerce sales plays a crucial role in planning the inventory and additional resources for logistics. The key to building an efficient supply chain is to stay one step ahead with the preparations. However, the job is not done till the package is delivered to the customer on time. To ensure smooth operation, companies are investing in automation and using more sophisticated productivity tracking systems.

Managing an e-commerce supply chain efficiently is a complex task that requires extensive planning and skilful execution. These complexities have already changed the way logistics works and with the increasing volume of online trade, new challenges will emerge which will further alter the logistics industry.

– Swati Sinha

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