As previously discussed in Part 1, in developed economies, eCommerce represents the latest leader of change in retail logistics and physical distribution networks, which have evolved substantially over the past 40 years or so. Presently, it remains the case that as eCommerce continues to grow, most retailers -- particularly multi and omni-channel retailers -- are working out what this will entail for their distribution network infrastructures.
According to Cerasis [1], in developed economies the growth of online retail has been stronger in sectors such as fashion, electrical and ICT goods.
In previous times and models, purchased items were often distributed via a postal, parcel or freight network. However, eCommerce logistics models have created new demands.
Mega e-fulfillment Centers: merchandise is stocked and chosen at item level. These facilities, which are either operated by the retailer or a logistics service provider, are typically 500,000 sq ft to one million sq ft in size, or larger. They often operate 24 hours a day, 7 days a week.
Parcel Hubs / Sortation Centers: sorts orders according to geographical location -- often by zip or post code, so deliveries are relevant to parcel delivery center, customer’s home or designated collection point.
Parcel Delivery Centers: handles the ‘last mile’ delivery to the customer.
Seamlessly Integrated Technology: shopping carts connect via API or web xml to a transportation management system, so shoppers get the exact price quote of shipping of larger items. Quotes are often more suited for less than truckload modes, as these technology products for logistics, such as a TMS, must accomplish along with the shopping cart for better management:
Ability to organize and track shipment no matter what mode
Online order status and documentation
Online dispatch documentation and invoice, such as a bill of lading and freight invoice
Auto reminder for payments
Seamless interface with existing SCM or ERP system
Online alerts for critical information via text or mobile
Information systems reports on past data analysis or delivery history
Types of eCommerce logistics systems ensure the following benefits to shippers, customers, and 3PL service providers:
Improved communication
Transparency into the supply chain
Improved customer satisfaction
Cost reduction
Improvement in efficiency
On-time delivery
As a result, the logistic facilities will encourage some retailers to set up their own networks of local depots -- either to cross-dock items shipped from larger e-fulfillment centers or to ship certain ‘fast moving’ products direct to customers. In this emerging model, e-fulfillment blends with urban logistics, as these facilities will be mainly based around the major population centers where online sales densities are highest. [2]
For example, in the U.S., Amazon opened smaller scale distribution facilities to offer same-day delivery services. In the UK, Amazon has a current requirement for some 20 smaller distribution facilities around major urban areas. By contrast, in France, Amazon’s demand remains focused on very large units, with the last kilometer delivery being operated by third party providers. [3]
In the following models, retailers are taking increasing control over their eCommerce supply chains. As we are seeing today, this trend is starting to displace the traditional role of parcel operators.
As predicted, we are experiencing the evolution of multi-channel retailers in developed markets to omni-channel. Omni-channel retailers are now managing their channels in an integrated way that offers customers a seamless experience, however they choose to shop. With omni-channel, a retailer may fulfill orders from stores or warehouses, ultimately blurring the distinction between the two e-fulfillment centers.
Fulfillment technologies have also helped integrate the front-end and back-end of online retail. The back-end process is now a collaborative effect thanks to automated software and real-time fulfillment date. The alignment of important touch-points in the supply chain has reduced inefficiencies and has helped identify redundant processes. We even have robots that will pick inventory for us and move it around the warehouse! [4]
For more on eCommerce solutions, contact us or see “Internet of Things” and the Retail Experience.
Sources: [1], [4] - Cerasis [2], [3] - Jones Lang LaSalle, IP, Inc.
Graphic: DHL Freight Connections