Comment: e-commerce is the test of the best in logistics
The boom in e-commerce of the past decade has transformed the retail supply chain and shows no sign of slowing. Here TV business guru and Pall-Ex chief executive Hilary Devey explains what logistics must do to stay ahead of the game.
It’s now 18 years since I started the Pall-Ex palletised freight network in an old airfield hangar. Back then, the idea of people ordering goods on the internet from their sofa at home was unheard of in this country, perhaps seen more as a futuristic niche than a practical way to shop regularly.
The boom in this sector since the early 2000s has, as readers will know, been incredible. Retailers are still experimenting with new technologies and new business models, to make the most of consumers’ love affair with one-click ordering and e-baskets.
There’s a host of television programmes dedicated to the evolution of shopping and consumers are fully aware of the changes taking place. But where the retailers adapt, so must their supply chains. This, I believe, is what will separate the innovators from the followers.
Because e-commerce is less tactile, shoppers want their deliveries to be as predictable as possible. Retailers, as a result, need consignments’ status and locations to be clearly visible at any given time – either so the information can be passed on to the customer, or so that they can manage their order process effectively. The more visibility in the supply chain, the more efficiently the business’s operations can run.
This presents its own challenges, as customers are more closely linked to the supply chain than they are with physical stores. The lack of a buffer of in-store stock leads to more sporadic demand at the retail distribution centre, which can, in turn, lead to less predictability for the suppliers and the logistics operator between the two.
I see this with the seasonal variation in the goods coming through the Pall-Ex UK hub in Leicestershire. The nature of British weather means that, at the first prediction of sun, vast consignments of sun lotion, garden furniture and cooling beverages make their way through our distribution network. This is certainly an intriguing process throughout the year, but the increased pressure to supply goods at short-notice requires a very well-organised operation.
With e-commerce customers essentially becoming part of the supply chain themselves, this effect is increased, reversing the trend of consolidation that had been taking place thanks to US-style increases in store size. Freight becomes more fragmented and difficult to manage. Then again, this effect may be temporary, lasting until online retailers increase the capacity of their operations to allow for more consolidation of transported goods – the economies of scale making their business operations more efficient.
Another result of this new relationship with shoppers is their desire to know more accurately where their goods are. Whereas catalogue shoppers used to be notified when their purchases had left the regional distribution centre, and given a very approximate delivery date, they now expect to see the entire process from when it has left the original supplier’s door.
Because of this, accurate tracking is becoming an important part of the customer service. At Pall-Ex, we recently developed and launched a suite of mobile tracking IT products that allow retailers to offer real-time shipping information, rather than periodic updates. Although I’m proud of the achievement, others will follow suit. Even though these solutions do not allow us to transport the freight any faster, they contribute to keeping the now more knowledgeable shopper up to date with good service. Ultimately, it means a better customer relationship for the retailer.
Online retailers can make more of a tracking system like this by embedding it onto their own website and using cookies to profile their customers’ choices, locations and timing. This data can be used to build predictions of what stock might be needed in the distribution centres before orders are even placed, and allows the supply chain to react accordingly. Faster deliveries mean happier customers!
E-commerce does bring a host of challenges – for both retailers and logistics providers – and a great deal of experimentation is still taking place in each sector. For me, though, I think it presents an opportunity for innovative businesses to prove themselves and make up good ground after the past few years of struggle.
Hilary Devey is founder and CEO of Pall-Ex Group.
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