How Increased E-commerce is Impacting the Logistics Industry
about 3 years ago by
People are shopping online more and more. Australian e-commerce grew by 105% in the last five years. ( CBRE Market Outlook: Australian Industrial & Logistics Sector 2021, MOAILS) It is now 13% of total retail spending. It is predicted to exceed 20% by 2025. Increased online spending does not happen within a vacuum. Behind each product bought is a complex logistics system. How is this increased e-commerce impacting the logistics industry? What do you need to be aware of as we head into this evolving environment if you are part of the logistics industry?
Faster, more flexible delivery, and easy returns
The move to e-commerce is not new, but the impact of Covid 19 has accelerated the increase, jumping e-commerce ahead into 2025 predictions. Retailers are also noticing a change in consumer expectations. In the Australian Retail Outlook 2021 (ARO 2021) retailers responded that almost half of consumers are expected to demand faster delivery speeds. 35.7% said that customers want more flexibility in their delivery options. Buyers also want the security of knowing they can return items easily if they don't meet their expectations or needs.
Faster, flexible delivery options and easy returns sound simple. Delivering on these promises when your competitor is just one click away requires companies to be proactive and responsive. It takes a lot of work. Retailers were asked what the 3 biggest challenges facing the retail industry were. The second-highest response in 2021 was managing supply chain issues. (ARO 2021) Previously this had never been mentioned as a concern. The added complexity of an e-commerce supply chain has met the challenges of COVID-19. It has affected the logistics industry significantly.
Higher Inventories
Retailers have traditionally worked with a Just-In-Time model of inventory management. This model produces just what's needed, minimising the need to store extra inventory. As consumers demand greater availability and faster delivery, many industries are making the switch to a Just-in-Case model instead. This switch to higher inventories will greatly increase the amount of storage needed.
Not only do companies need to keep higher inventory, to meet demand promptly, they also need to make sure it is in the most strategic locations. Fast delivery is quickly coming to mean the same or the next day. The status quo of one Distribution Centre and bulk deliveries to retail outlets isn't able to meet these new delivery demands.
Increased demand for strategic storage locations
Storage locations in strategic areas will be in high demand.
To cater for the forecasted growth in e-commerce (i.e., 460,000 sqm per annum required), new supply [of storage sqm] will need to be elevated by 35% (MOAILS 2021)
Storage locations will need different storage and handling areas for outgoing goods and returned goods. They will also need to be flexible as they serve a variety of end-users. This may range from bulk deliveries to retail outlets to packaging individual items for direct delivery to the consumer.
Greater variety of delivery options
As consumers order more of their products online, delivering those products in a timely way becomes more challenging. This process is called last-mile logistics. The logistics of the final delivery process. Many outlets are becoming creative in their use of click and collect options, effectively making the sale both online and in-person. But, there still remains a large percentage of sales which must be delivered. Combine that increasing number, with increasing expectations on delivery speed and a desire for delivery choice and you have a huge logistical challenge.
Globally, Companies, like Amazon, have established, efficient last-mile logistics. They have excelled in the increasingly online environment. The challenge for small to medium-sized businesses is how to deliver to the consumer in the most economical, efficient way.
A variety of options are being explored. Combining small shipments into one lot, storage in accessible kiosks, and the diversification of services like Uber or Ola are just a few. Each business will need to explore a variety of options to provide for these growing consumer expectations.
"If 2020 has taught us anything it’s that those organisations that can be agile and pivot quickly will lead the future growth and direction of our industry.” Iconic CEO, Erica Berchtold
Logistics systems crucial
Storage locations are increasing and spreading out. Individual items leave storage facilities with very little notice. Returns are happening with growing regularity. The ability to know where your items are, how many of them there are, and where they should be for greater efficiency is vital. To be able to access critical data from a variety of locations, in close to real-time is a crucial element in the future of logistics. In a world where consumers desire same-day delivery, technology is essential to bring together all the elements of inventory, storage, packaging, and delivery.
The labour to run it all
As e-commerce increases and impacts the logistics industry, the demand for quality labour will only increase. Skilled, quality workers will be needed for the production of increased inventory, storage centres, returns processing, and transport options. Logistics systems will need well-trained candidates for IT and data entry. Every area within the logistics industry will see increased demand for personnel to service them.
This demand for labour will also come with a level of uncertainty and variability. The ability to hire trusted candidates for peak periods will be an essential element in managing the logistical challenges of increased e-commerce.
How MTC can work with you
With the growth of e-commerce, the businesses that succeed will be those that are able to change and adapt to new logistics models. Finding solutions that meet consumers' increasingly higher expectations will be important. The ability to recruit candidates who can put those solutions into practice within your business, both permanently and at peak times, will be essential. Partnership with a recruitment company you can trust helps to minimise some of the challenges that may bring.