E-commerce Boom Demands Changes to the Logistics Industry

  • August 25, 2022
  • Blog

The e-commerce industry has exploded and continues to grow each year. The estimated size of the global e-commerce logistics industry in 2021 was US$ 439.8 million, and it is expected to increase at a compound annual growth rate of 17.8%. As e-commerce sales soar, there is more responsibility for logistics and supply chains. Smarter network design for the supply chain is needed to keep-up with this proliferation in e-commerce demand.

Demand Fulfillment : What do Consumers Want?

Low Prices and Fast delivery

E-commerce has seen an increase in consumers demanding two main factors: lower costs and faster shipping times. Retailers have to deal with the balancing act of minimizing shipping costs whilst also optimizing shipping speed. Consumers also expect a variety of shipping options such as next-day delivery, free shipping and parcel pick-up from stores or parcel lockers with accurate delivery estimates.

Seamless Returns

Another high demand for the industry is easy returns. Consumers want a seamless experience while returning the products if needed, which demands for smarter reverse logistics processes. It is seen that between 15%-40% of e-commerce purchases are returned by the consumers. If companies cannot offer seamless processes, they face consumer dissatisfaction and loss of loyalty. These demands bring the need for changes in e-commerce freight forwarding, such as:

  • Ability to process more inventory
  • Customer satisfaction is the top priority
  • Improved communication with customers and supply chain
  • Higher supply chain transparency
  • Advanced tracking and order management
  • Accurate delivery estimates and tracking
  • Cost reduction
  • Lower fuel usage
  • Timely delivery that consumers are willing to pay for
  • Seamless returns process

Smarter Solutions are needed

The shift towards e-commerce has made it important for many businesses to rethink their organizational structure and approach, especially considering how products get into consumers hands. This has resulted in supply chain infrastructure being completely different to what it was in the past. E-fulfilment centers have been key in maintaining the e-commerce demand, with warehouses now equipped with the capability to stock merchandise and pick and pack products on an individual order level.

The number of parcel hubs and sorting centers has also increased with e-commerce popularity. Once pick and pack orders have been fulfilled, they are sent to specialized sorting centers that sort orders by country and postcode, and are then delivered to delivery centers. Last-mile distribution centers have also been vital to e-commerce growth as distribution hubs have been moving closer to delivery locations for high-speed operations and lower fuel costs. This has resulted in high demand for warehouse real estate in tier 2 and tier 3 cities as well.

Future of E-Commerce Logistics

Technological advancements have also aided in the growth of e-commerce, where network design, artificial intelligence and machine learning are helping in streamlining the supply chain processes. For example, Australia’s e-commerce industry report shows that e-commerce represented over 16% of all retail sales in the past year, with Australians spending a value over $50.4 billion. With this continued growth, e-commerce logistics practices will continue to improve through several different ways:-

  • Blockchain technology is being used more frequently to remove human error from transactions. This allows for documents to be written through block chains and execute contract terms in real time.
  • Drones have been around for a few years now and are emerging in the supply chain for last-mile delivery and warehouse management. Companies are already using drones to manage inventory tracking, and transport small items through the warehouse.
  • Autonomous ships are being used more often in warehouses for automated product picking and inspections e.g., Amazon, Nike, IKEA. With such fast advancements in technology, it won’t be long till containers can board ships with minimal human staff.

Today, reputed global logistics companies can help and facilitate businesses with solutions related to e-commerce trade at very competitive prices. Brick and mortar businesses should explore e-commerce models to benefit from the fast industry growth and maintain their competitive edge.

With a disrupted freight industry and numerous delays encountered, businesses should consider low-cost finance offered by banks, which allows them to hold much larger buffer stocks at last mile delivery stations/ warehouses, so they are able to meet customer demands in terms of delivery and profit better.

At 20Cube Logistics our professional business consultants have helped many of our clients with 3PL and 4PL logistics solutions for their e-commerce businesses. This was done by providing order level and SKU level visibility, big data analytics and exception handling to optimize their supply chain processes. Within the last couple of years, these businesses witnessed a growth between 40%- 60% because of efficient and reliable solutions.

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