The Impact of E-Commerce on Logistics

In its simplest form, “e-commerce” is buying and selling of products and services by businesses or consumers over the internet. People use the term of e-commerce to describe the process of searching for and selecting products in online catalogues and then purchasing by using a credit card or encrypted payment processing.

In the age of “World Wide Web”, multi-story shopping centers are dramatically coming to a close with the rise of e-commerce. Over the last decade, technology has inspired an online retail boom that has benefitted some retailers, while leaving others helpless. With the younger generations embracing smart phones and tablets, e-commerce’s role has shifted from an untested frontier to a vital pillar of the retail industry. In fact, total global business to customer e-commerce sales was expected to top $1.5 trillion in 2014, and it is anticipated to grow 88.4% to $2.3 trillion by 2017.

E-commerce in the United States is also expected to have an annual growth rate of 9.8% between 2013 and 2018. Europe, on the other hand, is expected to grow larger with an annual growth rate of 12% within the same time frame. In addition to those two established markets, emerging markets will also play a key role in the future as the demand for smart phones and tablets will grow alongside a burgeoning middle class. Furthermore, a study made by OC & C Strategy Consulting shows that e-commerce export values will increase annually by 30% between 2013 and 2020.

Since e-commerce business has been rapidly growing and expected to grow even more, it also became a major factor on changing the shape of global logistics industry. Decisions such as physical locations of warehousing and whether to fulfill e-commerce orders from separate facilities, in-store, from existing warehouses or a combination of all three are among the strategic decisions brick and mortar companies are facing as they compete against the likes of Amazon, eBay and Newegg.

Logistics is already widely regarded as a crucial piece of a successful retailer’s business plan and its role will be even greater as the e-commerce increase continues to unfold. This is due to the fact that an efficient supply chain will allow a high level of service to be provided across all channels. The acquisition of the right DC that is in close proximity to major populations is also an increasingly difficult task for retailers because of the limited number of supply and the increase of demand. This is why numerous retailers opt to partner with 3PL firms that can supply the necessary DC and fulfillment services required. It will be seen as a competitive advantage as consumers begin to value time over reliability.

Managing the delivery process is also an increasingly difficult task as delivery locations from warehousing/fulfillment centers are no longer confined to physical stores. Now, these facilities are shipping either directly to the customer, a neutral site (such as a lockbox location, FedEx/UPS store or other retailer) or to the physical store for pickup.

As such, IT companies such as High Jump, Red Prairie, Oracle and others have expanded their traditional warehouse management systems (WMS), transportation management systems (TMS) and other IT solutions to meet this need for flexibility, for not only changing transportation needs, but also for order/inventory management and visibility.
Due to e-commerce, an inevitable market shakeout awaits the transportation industry. The number of transportation and logistics e-commerce products proliferates daily. E-commerce has spurred, not only new concepts and ideas within the supply chain, but also new companies are popping up to address logistical challenges resulting from the rise of e-commerce. It’s no longer about being the fastest rat in the e-commerce delivery race. Instead, it is about being able to deliver an order at a time frame and price point that customers want.