Friday, May 20 2022

Author Roland Slegers-Leijsten has just published a book that analyzes how the rise of e-commerce is likely to drive a change in the logistics landscape over the next few years. The book, E-Commerce Logistics in Europe: Integrate or Stagnate, costs €45 (hardback) or €15 (e-pub) and is available on Bol.com and via verloopuitgeverij.nl. With thanks to Dr. Slegers-Leijsten, ESM presents one of the book chapters below.

The e-commerce market in all European countries is growing rapidly. In my previous research, a necessary shift from a “push” market to a “pull” market has already been recognized. In addition, more and more Business2Business (B2B) and Business2Consumer (B2C) sales combinations need to be integrated into supply chains.

In 2019, the three largest e-commerce markets in Europe were the UK (€168 billion), Germany (€111 billion) and France (€103 billion). The Netherlands was approximately the 5th largest e-commerce market with a turnover of 29 billion euros. Moreover, at the start of the COVID-19 pandemic, growth went faster and faster.

Operations will always be sales driven. This implies that logistics concepts and operations should always follow and relate to sales concepts. From my point of view, the following sales trends have their impact on logistics concepts and operations, as more and more companies do:

  • Combine B2C and B2B sales.
  • Combine online and offline retail. It started with companies that were offline retailers originally and added online retail over time. Some have succeeded, many have not. In recent years, original online retailers have also added offline sales channels. In general, this is a very capital-intensive strategy, and this trend is currently in its infancy.
  • Use D2C and D2B. They let their suppliers ship the (partial) purchase directly to their customers.
  • Sell ​​abroad, in Europe or worldwide.
  • Selling outside of their own sales channels, through wholesale platforms like Amazon, Ebay, Zalando, Britdeals, Chinabrands, OTTO, Etsy, CDiscount, Darty, Bol.com and Wehkamp.
  • Sell ​​directly to consumers (manufacturers).
  • Having a wide range of products and a large “long tail”.
  • Sell ​​products with a wide range of physical characteristics (weight, dimensions, fragile, dangerous products, fresh products, etc. etc.).

While in B2B business companies often work with Service Level Agreements (SLAs) and the requested performance of logistics operations is (more or less) known in advance and therefore (more or less) predictable, the online consumer (B2C) expects his/her own specific temporary “SLA” for each purchase made online. Thus, multi-channel and omni-channel sales concepts are becoming more and more common.

As a result, the following challenges arise from a logistics and supply chain perspective:

  • The stock must be available for several sales channels and/or companies in different countries. This implies that the stock is in different warehouses, perhaps in different companies and in different countries. Real-time and reliable extraction of stock availability, shipping capacity/options, pickup capacity/options and delivery capacity/options of different warehouses and carriers at the time of transaction is a must , but very complex. This requires OMS and TMS functionality that is integrated in real-time with the online store front-end(s), WMS and ERP systems, and chain transport systems.
  • There is often a wide range of physical characteristics of products (weight, dimensions, fragility, danger, etc.) sold online. This implies that multiple carriers with a variety of services are needed to be able to deliver orders to customers.
  • Many companies are wondering how to integrate offline and online distribution into transportation.
  • B2C and B2B sales must be served by logistics solutions, many companies are wondering how to integrate B2C and B2B distribution into warehouses.
  • Selling across borders poses challenges when it comes to inventory location, with customs requirements, multiple carriers needed, and transportation costs that can vary significantly from order to order.

When companies start to combine their offline, online, B2C, B2B, wholesale and cross-border sales platforms, all of the previously mentioned logistical challenges become an instant reality.

When using D2C and/or D2B dropship solutions to ship a (partial) purchase directly from the supplier to the customer, even more systems in the chain need to be connected and the stock availability and logistics capacity data of their( s) warehouse(s) and carrier(s) must be available in real time during the purchase process for:

  • Being able to offer reliable shipping options and costs.
  • Know how to optimize the chain.

On top of that, demands on the level of logistics service excellence are increasing, such that failure and limited service have a direct negative impact on revenue, due to decreased conversion and retention.

These trends and the logistical challenges that accompany them underscore the need for a continuous flow of products and information in real time, from ‘checkout to doorbell’, because ‘the last mile begins with the first click’. Throughout the supply chain, retailers, manufacturers, warehouses and carriers must be tightly linked/integrated in real time to ensure reliable first-time shipping and delivery, also providing customer options regarding logistics services .

At the same time, reducing CO2 emissions is becoming increasingly important, but the good news is that getting it right the first time and providing consumers with reliable shipping and delivery options will not only help increase sales and reduce costs, but will also help to reduce CO2 emissions. Multi-store, multi-warehouse and multi-carrier solutions must be put in place for this. Let your supply chains work for you as a ‘sales engine’ and ‘cost/CO2 savings’.

Here is a brief example from my own experience as an online consumer:

Somewhere in early 2021 I needed to buy two totally different products, file folders and a leaf rake. Due to COVID-19, offline stores were closed, so I decided to buy them through a wholesale platform. After filling my basket, I was pleasantly surprised to be able to choose a specific date for the delivery of the two products. So I chose my option, four days after the day of purchase, and finalized the purchase at checkout.

Of course, I knew that the two different products would be shipped by two different resellers from two different warehouses. Not to set the bar too high, I expected the two different products to be delivered on the chosen day by two different carriers.

The next day I already received an email from one of the two drop-shippers that they could not deliver on the chosen day, but that it would be later. When reading this email, the first question I had was whether the product was not available for shipment and/or whether there was no corresponding warehouse production capacity for ship the product at the right time? Unfortunately, I will never know for sure.

Then there was an overload of email communications regarding the delivery status of both products. Both the wholesale platform and the drop shippers and carrier kept me busy reading emails about status details, which was too much! On top of that, they were communicating information that was not aligned.

In the end, the first product was delivered on the day chosen by a carrier. I was at home, but the driver didn’t bother to ring the doorbell, so I found the package soaked (it was raining) outside my door at the end of the day. It was very disappointing.

Two days later the second product was delivered and again I found it outside my door. After this second drop, I discovered that both drops were carried out by one and the same carrier, so I was wondering why they were not able to deliver both products in one drop?

This example indicates a few topics that are not yet in place. In the front-end of the online store, they are fully capable of selling products from multiple vendors. However, the logistics concept seems to be far behind and not able to support this sales concept:

  • Maybe there is not enough link on stock information between the wholesale platform and the supplier at the time of purchase?
  • Perhaps there is not a sufficient link on the production capacity of the warehouse between the wholesale platform and the supplier at the time of purchase?
  • Is there no control at the time of purchase on which carrier can deliver the two products (coming for two suppliers), when this carrier can do the two pick-ups, when both suppliers must be able to ship and when can this carrier deliver both products in one drop?
  • The quality of the carrier delivering the products is questionable as they just drop the products at my doorstep without ringing the doorbell even when I am at home.

The fact that the logistics concept is not at the right level to be able to support this sales concept leads to an unsatisfied customer, over-communication, increased transport costs (two drops instead of one) and more emissions of CO2 as needed.

My conclusion, not only based on this example, is that there is work to be done regarding logistics concepts and operations. Chain business, logistics and finance systems should and can be enabled to connect with each other to get real-time data and perform a higher level of chain control.

To purchase a copy of E-Commerce Logistics in Europe: Integrate or Stagnate, visit Bol.com and via verloopuitgeverij.nl.

© 2022 European supermarket magazine. Article by Roland Slegers-Leijsten. For more information on supply chain, click here. Click on subscribe register for ESM: European Supermarket Magazine.

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