A new study by DHL looks at six principal areas where e-commerce is challenging the supply chains of merchants and logistics companies, and lists ways in which innovation can alleviate cost and profitability pressures.
“Change at the Speed of the Consumer: How E-Commerce is Accelerating Logistics Innovations” identifies these challenges as follows: customer expectations for a perfect buying experience; consumers’ desire to buy and receive goods “anywhere, anytime”; exploding demand for urban delivery; competition for labor and wage inflation; the emergence of new online sales models and unexpected surges in demand; and environmental concerns.
The impact of these challenges is most keenly felt in the areas of fulfilment and last mile delivery, noted the study.
“Labor in the U.S., for example, which is the world’s second largest e-commerce market, accounts for 40-60% of warehousing operating costs. With real estate company CBRE predicting in 2018 that an additional 450,000 warehouse workers will be needed in the U.S. by the end of 2019 and unemployment at a consistently low rate, this presents a risk in terms of both cost and recruitment, particularly during peak periods,” it continued.
Increased urbanization and heightened pressure to reduce the environmental impact of transport operations are forcing retailers to seek out creative ways of balancing delivery convenience with reduced mileage for diesel-powered vehicles over the last mile.
The study said technologies already exist across each of the profitability challenges, allowing companies to reduce unit costs, better forecast needed inventory or increase productivity to absorb additional growth.
These include robotics and automated sorting systems, which allow companies to process higher order volumes without the need to engage large numbers of temporary workers.
Another is Advanced Warehouse Execution Systems which, when combined with Internet of Things capabilities, machine learning, business intelligence and data mining agents, can increase performance and responsiveness to meet rising customer expectations.
“As many of these technologies evolve further and new innovations come to the market, companies that are able to deploy them effectively within their supply chain will be best positioned to address the costly inefficiencies, volatile order trends and demanding customer expectations that characterize the fiercely competitive e-commerce market,” the paper said.
Since innovation can itself be costly, the research also detailed a three-step approach to innovating successfully: focusing on innovations that provide differentiation; adopting a long-term, strategic view of innovation; and bridging the silos of people, software and machines.
Ken Allen, CEO of DHL eCommerce Solutions, said that given the complexity of the global logistics industry, people are still expected to play a critical role in the industry for the foreseeable future. “The companies that will win the race to future success are those that are able to combine the expertise of their people with software and machines most effectively,” he said.
Photo by Startup Stock Photos from Pexels
