Logistics Progression in an Ecommerce-Dominant Supply Chain Sector

Today, e-commerce logistics in developed economies represents the latest big driver of change in physical distribution networks and supply chain management. This field has evolved substantially over the past forty years and continues to grow today.

Most third-party logistics (3PL) and transport companies, in particular multi-channel providers, are only starting to realize what this will bring to their distribution network infrastructures.

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This evolution has passed through various phases as follows:

  • Most retail stores’ inventories were replenished by direct deliveries from wholesalers and suppliers in the 1970s.
  • Retailers started to centralize store deliveries through new distribution centers in the 1980s.
  • Global sourcing took off in the 1990s, with many retailers developing import centers.
  • E-commerce began to rapidly expand from around 2000, with internet only retailers leading the way.

E-Commerce Logistics in Developed Markets

The growth of online retail in developed economies has been stronger in sectors such as ICT goods, electrical and electronics, and fashion as opposed to food. Purchased items are typically distributed via a parcel, postal, or freight network. The e-commerce logistics models have created a wave of new demand for 4 types of logistics functions:

  • Mega e-fulfillment centers either operated by a logistics service provider or by the retailer, often operating 24/7, and where the merchandise is stocked and picked at item level.
  • Parcel hubs/sortation centers which sort orders by post or zip code.
  • Parcel delivery centers handling the delivery to the customer.
  • Seamlessly integrated technology where shopping carts connect via WEB XML, API, or some other connection to a transportation management system. These technology products for logistics feature:package delivery
    • the ability to organize and track shipment
    • online order documentation and status
    • online dispatch invoice and documentation
    • payments auto reminder
    • interface with existing ERP or SCM system
    • online alerts via mobile or text
    • information systems reports on delivery history, past data analysis, etc.

These e-commerce logistics systems ensure the following benefits to customers, 3PL service providers, and shippers:

  • Cost reduction
  • Improved customer satisfaction
  • Improved communication
  • Improvement in efficiency
  • Transparency into the supply chain
  • On-time delivery

The Continuing Evolution of E-Commerce Supply Chains

Everything has changed since e-commerce was born: who is getting online and by what means they get there, the look and feel of the online space, the proliferation of the Internet into daily life, the speed of internet connections. In the early days, low prices and convenience were the driving forces for e-commerce. Today, e-commerce retailers are catering to every kind of shopping experience, service, and product.

The evolution of multiple shipping options allows customers today more control over the delivery process, with choices from Fed Ex, to UPS, USPS, and more. Now the e-commerce challenge has shifting to finding a way of synchronizing and standardizing the business processes to achieve real time access and insight of the inventory movement.

With extensive number of sales channels, multiple warehouses, and dozens of suppliers, the risk of misplaced orders are much higher than ever before. In order to respond to this challenge, order fulfillment technologies have integrated the back-end and front-end of online retail. Real-time fulfillment data and automated software transform the back-end process in a collaborative effort. Redundant processes can be identified and the inefficiencies reduced by the alignment of important touch-points in the supply chain.