Today’s logistics empire is not your grandfather’s or even your father’s logistics operation. Consumers are expressing an unprecedented amount of power through eCommerce, and in fact, eCommerce logistics is growing increasingly reliant on small parcel and package delivery options daily. Meanwhile, eCommerce is catalyzing significant changes in retail real estate as more companies vie for warehouse space and transportation services to meet a growing number of online orders, explains Alexander Frei and John Morris of Area Development. But, the changes are not limited to warehousing, and you need to understand how they will impact the modern supply chain.
Warehousing Expansion Is a Must.
In 2011, eCommerce represented a fraction of overall retail operations. But, by the end of 2012, eCommerce logistics had grown to 5 percent. Today, eCommerce is the primary driver of small package logistics. More importantly, small packages make up $82.2 billion of the logistics industry, and that number will only grow from here. As a result, more incoming orders and greater order diversity naturally requires increased numbers of warehouses. Fortunately, some shippers have a plan for enhancing warehouse usage.
Warehouses Renew Focus on Inventory Control.
The simplest way of making a warehouse run efficiently is by managing inventory better. At the same time, more warehouses only mean more products can be stored. They do not mean more packages can be sent. So, the only solution to better managing inventory for eCommerce is by changing the internal layout of a warehouse, reports Inbound Logistics.
Employees need to be able to access a variety of products with the shortest travel distance. Consequently, warehouses are creating new picking procedures and using advanced software systems to automatically identify what items should be picked in a given order.
For example, some warehouses are keeping a huge variety of products within small areas of a warehouse, allowing for the rapid picking and packaging into small parcels. The short bin-to-package distance enables workers to pick more products, and in some cases, robotics are being deployed to further enhance the number of picked orders. As a result, warehouses can ship more packages.
Predictive, Real-Time Analytics Are King of eCommerce Logistics Strategy.
Analytics are critical to helping warehouses and shippers determine the fastest routes to get products to customers. However, actual transportation represents a small portion of areas that need to be analyzed. For example, the location of distribution centers impacts the distance between warehouse and consumer. Yet, warehouses cannot be conveniently located in every region, or can they?
The eCommerce consumer expects free shipping, fast delivery, and hassle-free returns, asserts the Eli Broad College of Business at Michigan State University. Therefore, traditional warehouse and distribution center models are being abandoned in favor of smaller, localized regional centers to handle specific markets. But, this brings back the fundamental problem of small packages that many shippers experience; small package shipping tends to be labor-intensive and costly.
Logistics Providers and Truckers Move to 3PL-Based Operations.
Third-party logistics providers (3PLs) offer significant advantages to shippers and retailers engaged in eCommerce. In addition, many retailers lack the resources and equipment to provide low-cost shipping and returns processes to their eCommerce consumers. As a result, shippers and retailers have turned to 3PLs to provide expanded resources, web analytics, increased visibility of shipments, handling of web orders and web portal needs, and technology-based picking for eCommerce orders, such as robotics and low-energy sensors.
Existing fleets are also stretched to the breaking point. The capacity crunch seems to be only growing worse, and the major carriers have already taken steps to increase rates for 2016 and beyond. Yet, dimensional pricing models are starting to make shipping high-volume, low-weight products costlier than high-weight, low volume products. Unfortunately, the only way to stay competitive with the major carriers is by having access to discounted, negotiated rates through a 3PL.
International Shipping and Fulfillment Processes Are Getting More Complicated.
eCommerce logistics is not just a big deal for shippers and retailers in the U.S. According to Athira A Nair of Your Story, eCommerce in India is expected to be valued at more than $220 billion by 2025. Yet, the whole value of the logistics empire in India as of today is only $300 billion, with an annual compounded growth rate of 12.17 percent until 2020. Consequently, the overall value of the logistics market in India could easily double in size by 2025, and other markets around the world show similar trends, explains Patrick Burnson of Logistics Management. So, the problem starts to arise when more companies seek to keep shipping costs down in an international eCommerce market.
Fortunately, 3PLs have large global footprints, capable of organizing and adapting to the growth of eCommerce logistics across international borders. This will help to avoid customs’ delays and problems when moving across international and geographic boundaries. Since the majority of online sales are shipped via small package, having the ability to convert small package to LTL or to full truckload is essential to keeping up with the demand and pressures of lower prices. In other words, the vitality of a 3PL is necessary if today’s eCommerce businesses hope to survive throughout future growth of online sales and distribution.
eCommerce logistics is only going to continue to influence logistics operations around the globe, and many businesses will unlock huge markets and tap into new resources through the expansion of eCommerce. However, these businesses need to understand the current state of logistics in eCommerce in order to prepare for the ecommerce needs of the future.