E-commerce has transformed the way we shop and consume goods in modern times. Thanks to the convenience of online shopping and doorstep deliveries, e-commerce has disrupted traditional shopping methods and is experiencing an unprecedented surge in demand. However, for e-commerce businesses to thrive, an efficient and reliable logistics network is non-negotiable. Amidst the rapid boom in e-commerce, logistics analytics has emerged as a crucial component that helps manage supply chain operations more efficiently and effectively. In this blog post, we take a closer look at the relationship between e-commerce and logistics, and how logistics analytics is playing a transformative role in the growth of e-commerce businesses.
Global parcels demand
Scott Fata, the principal director of Accenture’s supply chain and operations practice, predicts that as e-commerce continues to expand, consumers will increasingly demand instant gratification and expect it to be a consistent experience.
“Because of this, there will be more forward stocking locations to get the product in the hands of consumers within one day or less,” says Fata. “This will disrupt the traditional long-haul transportation service, and require more regional dedicated fleets. LTL companies can take advantage of this by truly becoming the local, last-mile delivery service. It will also be more difficult to attract drivers who won’t be home on the same day; so, this may require more long-haul shipments to go intermodal.”
Kevin Mahoney, who leads Deloitte’s retail and consumer goods practice, presents his thoughts with a focus on the future.“The impetus for change has already taken place for many in the e-commerce sphere, based on higher cost and eroding margins, which are caused by the increased costs of transportation paired with higher customer service expectations.”
According to Mahoney, the rise of e-commerce has had a considerable influence on supply chain networks as a whole. He notes that customers now anticipate a superior level of service, which is only going to escalate in the future. As a result, businesses will need to decide whether to prioritize speed or inventory in order to meet these demands, both of which will put pressure on the current fulfillment and transportation infrastructure.
Growing Need for Logistics Analytics in E-commerce
As a seasoned supply chain professional with years of experience at Dell, Sears, and Belk, and currently serving as the senior vice president of enterprise logistics at WestRock, Bill Hutchinson witnessed the explosive growth of the packaging industry amidst the pandemic.
“It wasn’t only the volume surge that parcel carriers had to deal with,” says Hutchinson, “it was also the rapid growth of ‘unattractive’ freight originating from stores and other low-density origins, which challenged carrier networks in ways for which they weren’t prepared. Stores don’t have the robust packaging solutions, the dock space, pick density and typically don’t have large back rooms for staging shipments.”
According to Hutchinson, packaging has advanced into a scientific practice that focuses on minimizing costs and cubes. With the new “box-on-demand” technologies, packaging can be customized to fit a variety of products that are being processed in fulfillment centers, ranging from lipstick tubes to curtain rods. During one of his previous positions, an investment of $2 million in a single fulfillment center for a box-on-demand business case resulted in a payback within eight months, which is an impressive ROI that cannot be overlooked.
There is a need to measure the volume and find a way to efficiently ship, track, and deliver store-originated shipments. Technology can help solve this challenge and alleviate some pressures placed on carrier networks. Logistics companies are leveraging digital solutions to manage those outbound flows from stores and other low-density origins while ensuring they are loaded optimally into the carriers’ networks or alternative transportation and options.
By leveraging technology, retailers can easily keep track of shipments from stores, prioritize them for delivery and optimize all outbound flows. This way, carriers are able to more efficiently utilize their current networks and add additional trucks in a cost-effective manner when there is an increase in demand.
Challenges in E-commerce Logistics
While logistics analytics presents opportunities to streamline e-commerce logistics, several challenges still face e-commerce businesses. One of the biggest challenges is the unpredictability of demand, especially during peak seasons such as Black Friday and Cyber Monday. Another challenge is the complexity of reverse logistics, particularly in dealing with returns and exchanges. Finally, there are unique regional logistics challenges like infrastructure challenges in developing regions, which require bespoke solutions.
Optimizing E-commerce Logistics with Analytics
To optimize e-commerce logistics, businesses need to leverage logistics analytics to enhance efficiency and reduce costs. One way e-commerce businesses do this is through route optimization. Logistics analytics can effectively optimize delivery routes, reducing mileage and fuel costs, improving delivery times, and reducing carbon footprint. Also, e-commerce businesses can use logistics analytics to predict demand and optimize inventory. Predictive analytics can help e-commerce businesses stock the right inventory at the right time, eliminating stockouts while reducing overstocking.
The Future of E-commerce and Logistics
As e-commerce continues to revolutionize the retail industry, the evolution of logistics and logistics analytics will continue to drive the growth of e-commerce. We can expect to see more innovations in last-mile delivery, such as the use of drones and autonomous vehicles that can streamline delivery times. Additionally, we can expect to see more digitization within supply chain processes, including pre-and post-sale support for customers, and in planning and forecasting logistics needs.
E-commerce and logistics are intertwined, and logistics analytics is playing an increasingly critical role in the growth of e-commerce. By leveraging logistics analytics, e-commerce businesses can reduce costs, improve customer satisfaction, and optimize their operations. However, despite the potential benefits of logistics analytics, there are still challenges that e-commerce businesses must overcome to scale their logistics. Logistics analytics will continue to drive innovation in e-commerce logistics, creating opportunities for businesses to scale their operations, reduce costs and improve customer satisfaction.
Logistics analytics are essential for climbing the e-commerce industry ladder. By understanding customer demand and preferences, businesses can better take advantage of all available resources to optimize their inventory levels while eliminating stock-outs and reducing overstocking. By using analytics tools to gain insights into customer behavior, companies can make more informed decisions to create efficient supply chains that will ultimately help them create a more successful e-commerce business. Ultimately, logistics analytics can give businesses a better understanding of customer needs and lead to improved operational efficiency while reducing costs and increasing profits.