Understand and deliver: How can businesses tackle growth in e-commerce?
A new generation of online shoppers wants better, faster service. It’s time for logistics to get creative with flexible networks, automation and big data.
Today’s consumers are more urbanized, wealthier, and buy more than ever before. They are also more impatient – prioritizing speed and convenience – and yet they also prefer sustainable products, ethical production and eco-friendly deliveries. Balancing seamless experiences with lengthy lists of provisos is the monumental task facing e-tailers and their logistics partners all over the world.
Yet according to a new DHL report, prepared with the support of Euromonitor, both sectors are well placed to meet these requirements as long as they take a more creative approach to fulfillment – particularly to the last mile, the final leg of the journey from transport hub to final destination. The report identifies four key trends that are having a big impact on this famously difficult final stretch – localization, flexible delivery options, the growing number of seasonal spikes and evolving technologies – and offers recommendations on how e-tailers and their logistics partners can address these trends via their supply chain.
Innovations and disruptions
The emergence of a generation that regards ease and spontaneity as birthrights certainly augurs well for the future of e-commerce: shoppers are expected to spend $2.4 billion a year via mobile devices by 2022. However, this inevitably poses great logistical challenges. Innovation in this area has tended to focus on three core areas: localizing delivery networks enabled by enhanced consumption predictive capabilities; creating flexible delivery solutions to guarantee convenience and address cost concerns; and increasing elasticity to manage seasonal demands.
As the logistics industry evolves, delivery networks today are becoming far more localized, shifting their supply chain to focus more on regional fulfillment strategies with the aim of shortening the last mile. Many operations have implemented a system of micrologistics, where transport operators focus on smaller regional warehouses and increase the number of fulfillment centers. Amazon has almost 800 in the U.S. Yet other workarounds can be more inventive: In the U.S., for instance, DHL eCommerce works with the U.S Postal Service to facilitate last-mile delivery. Delivery is not just about speed but also convenience through predictability - no one likes waiting in for a package.
To solve this problem, variations of lockers have been adopted in many countries. Amazon Locker, a flexi-solution offered by the e-commerce leader, has a network of 2,000 locations in more than 50 cities. There are also intelligent lockers that help facilitate two-way logistics through product returns via product codes. Then there’s Citibox in Spain, which provides a smart mailbox that can be installed within apartment buildings and allows for dropoffs and pickups to be arranged via smartphone. In Germany, a pilot project between DHL and Volkswagen fitted 50 Polo vehicles to act as mobile parcel lockers and provide “in-car delivery” for select customers.
For same-day – or even within-the-hour – deliveries, fundamental shifts in the supply chain are even being explored. These include crowdsourced deliveries, or deliveries outsourced to third-party contractors such as Postmates and UberRUSH, who operate their own vehicles to deliver single parcels.
A more elastic framework will be critical to fulfilling consumer expectations and controlling costs – particularly when orders spike at certain times. Increasingly, firms are turning to data and automation to stoke and determine their demand. German retailer Otto has implemented artificial intelligence systems that generate day-to-day forecasts on orders. This has reportedly led to a 40 percent increase in forecast accuracy and a 20 percent reduction in overstock.
As applications of real-time data and artificial intelligence are becoming more established throughout the supply chain, other technologies are being integrated throughout the entire e-commerce chain. Augmented reality, for example, is used to improve productivity in warehouses by providing data to personnel visually, while AR apps such as fashion retailer Gap’s Dressing-Room and IKEA Place let customers “try” a product before purchasing, reducing the likelihood of goods being returned.
The future of e-Commerce and logistics
According to Katja Busch, CCO and head of Customer Solutions and Innovations, DHL, the industry is moving toward a greater local presence, developing alternative delivery models, pushing for digitization in fulfillment and delivery, incorporating robotics to aid its workforce and more. For example, DHL is streamlining its last-mile process using geo-map reading, which plans routes using live data on the roads and is also agile in finding alternative routes if necessary. The company claims this technology, which incorporates AI, cloud computing and real-time data capabilities, has helped lift last-mile productivity by 20–40 percent.
There are, of course, a growing number of shifting external factors – from pollution issues to social policies, – which means that transport companies need to apply a great deal of agility to their strategies. Inevitably, the four key trends DHL and Euromonitor identified as impacting the last delivery mile – localization, flexible delivery options, seasonal demand and evolving technologies – can pose a challenge with regard to overall costs and service. At the same time, they can also cause organizational strains.
The report stresses that, in the absence of a one-size-fits-all solution for all urban environments, logistics providers must be ready to apply flexible networks, automation and data prediction wherever appropriate.
In other words, aerial drones, self-driving vehicles and other headline-making last-mile solutions will only triumph if they truly help transport operators succeed in this approach to the urban consumer.— Boyd Farrow
Published: November 2018
Images: Bryan Anselm/The New York Times/laif