FROM MAGAZINE: Putting a smile in the last mile

FROM MAGAZINE: Putting a smile in the last mile

Posted By : STAT Times 01-10-2016 00:00:00


From tracking, packing, and loading consignments to managing returns and facing unprecedented delays due to natural calamities and man-made hindrances, every stakeholder in the e-commerce supply chain is on the edge of the seat until all the delivery promises are kept.

Surya Kannoth

“You can talk about the miracle of e-commerce in China or in the world but the logistics industry is where China’s real great miracle has been over the past decade… You are the greatest heroes in my heart,” said e-commerce giant Alibaba’s Jack Ma of the logistics fraternity at the recently concluded Global Smart Logistics Summit.

From tracking, packing, and loading consignments to managing returns and facing unprecedented delays due to natural calamities and man-made hindrances, every stakeholder in the e-commerce supply chain is on the edge of the seat until all the delivery promises are kept.

Now with the festive season almost knocking on the doors, e-commerce companies as well as their logistics counterparts are gearing up with their plans for the high-volume shopping period, which is the most critical for retailers.

Last year during the peak season, FedEx delivered more than 350 million packages, and the 2016 holiday season is expected to drive another record peak shipping season, T. Michael Glenn, president and CEO of FedEx Services, told analysts during FedEx’s earnings call for the fiscal first quarter 2017 ended August 31.

“The intensity for demand on Monday has accelerated in recent years, as more and more retail locations have started serving as fulfillment centers for e-commerce orders. We expect each of the four Mondays during the upcoming peak period to be among the busiest in our company's history,” he said.

The shipping company said that it is ready to handle the onslaught of e-commerce deliveries. “We've added 19 automated stations in four major distribution centers for FedEx Ground since the peak season last year alone. We’ve also added more reliable and efficient aircraft to the FedEx Express fleet over the last year,” Glenn said. FedEx Corp raised its full-year profit forecast as continued growth in e-commerce deliveries helped push earnings for the fiscal first quarter ahead of analysts’ estimates.

And with the on-demand delivery gathering momentum for today’s highly demanding consumers, logistics companies are going the extra mile to combat the last mile delivery challenges.

“It (e-commerce logistics) is moving at ‘warp speed’, almost as fast as DHL! Three major dynamics are at play. First, e-tailers now clearly recognise that the race for the customer is in the last mile. Second, customers have ever increasing expectations - they want their orders to arrive faster, cheaper, with more predictability, more convenience, more choice, more control and a great deal more visibility. Finally, nothing stays constant. What is new and exciting today is quickly becoming the norm tomorrow – so e-tailers and their supply chains had better be constantly innovating,” shares Charles Brewer, CEO, DHL e-commerce.

According to a recently released study by Dotcom Distribution, a logistics and fulfillment firm specializing in emerging e-commerce brands, 87 percent of online shoppers identified shipping speed as a key factor in the decision to shop with an e-commerce brand again. The new study, “How Fast Delivery and Quality Packaging Drives Customer Loyalty,” revealed that 67 percent of online shoppers would pay more money to get same-day delivery if they needed the package by a deadline, such as an anniversary. Comparatively, 47 percent would pay more for same-day delivery simply because they wanted their package more quickly, demonstrating that consumers distinguish between a need and a want, yet desire fast shipping when available.

[caption id="attachment_18948" align="alignleft" width="300"]Source: CH Robinson Source: CH Robinson[/caption]

“With consumer demands rising, there is no choice but to make sure you are prepared to meet those demands. There are a variety of attributes that are becoming increasingly important to have, but a couple that should truly be top of mind are flexibility and agility. It is vital to have flexibility in your supply chain. If there is a flood or a port strike, consumers still want and need the products they ordered. It is important to have plans in place in how your supply chain can be flexible to reduce the impact unplanned events can cause,” said Matt Castle, vice president, global forwarding products and services at CH Robinson.

Now that Amazon.com is getting into the package delivery business, the e-commerce major is looking to take further control of its own logistics operations, rather than rely on partners like the UPS and FedEx. Recently, it unveiled its first Boeing 767 in a fleet of Prime Air branded cargo airplanes for a service that is expected to grow to 40 aircraft. Although Amazon insists it has no plan to fully replace its logistics partners, with Amazon taking a sizable chunk of the market for itself, and with its ability to expand beyond its own Amazon Prime customer base, it is very evident that FedEx and UPS are facing a potent new competitor.

Questions are now being raised on whether Bezos’ big bet on aviation, first with cargo planes and soon possibly with drones, could transform the package-delivery business model.

Technology – a gamechanger Furthermore, with delivery promises to be met at the click of a button, technology is set to play a greater role in transportation. Innovations such as driverless trucks, platooning (several trucks following each other closely to reduce air friction and save fuel), drones, and automated guided vehicles used in warehouses and unloading freight in ports will be the order of the day. Integration within industries also holds key. Amazon joining hands with US Postal Service for Sunday deliveries and Walmart buying Jet.com are prime examples.

Addressing product and service innovation at DHL, Charles Brewer shared, “We have a range of approaches in play to address the exciting challenges in the last mile. This ranges from Parcel Lockers to Service Points, from trunk delivery to drone delivery. This is an extremely exciting space and we can all expect continued developments and more innovative solutions to meet customers evolving needs.”

Earlier this year, during the Cargo Facts Asia conference in Hong Kong, Steven Li, director of Strategic Partnerships at Cainiao, Alibaba’s logistics arm, urged the air cargo industry to change to meet the growing demand from rapidly expanding cross-border e-commerce. One-third of the $3 trillion global e-commerce market is cross-border trade, which is growing faster than domestic sales, said Li.

“Sellers and buyers need quick response times, flexible services, complete visibility from pick up to delivery. Air freight companies need to integrate more with other logistics companies, market places and transactions. IT capabilities will be very important in the future,” he said.

Li also explained that Alibaba marketplaces were experiencing bottlenecks with air freight, due to restrictions on products with batteries, liquids and powders. “So I don’t know if you have any solutions on this, because the volumes are huge. And with these restrictions a lot of the time we have to switch to sea freight,” he added.

“Online shoppers often select the least expensive shipping option. However, they also look for visibility, flexibility and control over when and where their packages are delivered. To succeed in today’s dynamic retail environment, multichannel retailers are using their brick-and-mortar stores to reduce delivery time and cost,” observes Louis DeJianne, director for apparel, consumer goods and retail at UPS.

UPS works with retailers to develop end-to-end supply chain strategies that optimise their resources. Take for instance, the UPS My Choice, which gives consumers more control over where and how they receive residential deliveries, and the UPS Access Point network, which offers convenient delivery through more than 24,000 local retailers and delivery lockers in North America and Europe.

On the other hand, Amazon continues to filter the small and light delivery system to blunt competition from rival marketplaces that help Chinese merchants ship directly to US shoppers through the ePacket program. EPacket is an agreement between the US Postal Service and China Post that provides Chinese merchants cheap access to US shoppers on small packages weighing as much as 1.7 kg.

Chinese merchants selling on Amazon can ship orders through ePacket; this means Amazon gets less money than if it had handled packing and delivery, and those sales take longer to reach customers.

Amazon pitches its quick delivery and proximity to US shoppers to encourage Chinese manufacturers and suppliers to ship the items directly to the company's warehouses. Another incentive is to make the products Prime-eligible, which lets them reach Amazon's most loyal shoppers who pay $99 a year for delivery discounts.

By reducing the price of shipping such items and speeding their delivery, Amazon is looking to win both merchants selling the items and customers who want them quickly.

Simplifying Customs for e-commerce Understanding the need to simplify the customs declaration for cross-border e-commerce, Dutch Customs recently teamed up with the Schiphol cargo community to launch a new simplified e-commerce declaration called VENUE. “The new Venue regulation will substantially ease the administrative burden related to e-commerce. Many parcels shipped have a value of For Amsterdam Schiphol, e-commerce imports such as electronics and fashion articles mostly come from China, it is now witnessing other regions increasing their e-commerce shipments through this airport.

“China is our biggest cargo market and the new VENUE declaration is just the latest outcome of our ongoing commitment to providing all our e-commerce customers with the best experience when using Schiphol as their European hub,” shares Saskia van Pelt.

VENUE has been designed to help shippers import and export items that are being purchased via e-commerce platforms - such as fashion, personal care, and homeware - throughout the Union Customs Code transition period, which ends in January 2021.

“Together with Dutch Customs and members of the Cargo Community we are continuously looking at improving efficiencies, not only on the administrative and inspections side but also on an operational level. VENUE is available during a time of transition in the Union Customs Code, during which smaller shippers, as e-commerce shippers increasingly are, may need additional support,” she added.

The Omnichannel route “We are continuing to evolve and adapt with the new concepts in e-commerce. Omnichannel is a great example of how consumer’s demands are changing, and they are looking for a more streamlined experience. In order to meet these ever-changing expectations, supply chains are having to be increasingly flexible and agile,” said CH Robinson’s Matt Castle.

Consumers are looking for their products that they love, to be where they want them, when they want them there and for a price they are willing to pay.

The omnichannel route is gaining traction and is actually seen as a successor of multichannel retail. Retailers will continue to meet consumer demand by making products available through an increasingly seamless online and brick-and-mortar retail experience. The key to doing this successfully is optimized logistics, better known as omnichannel. “At UPS, we guide our customers through developing and consistently providing a seamless omnichannel experience,” said Louis DeJianne, director for apparel, consumer goods and retail at UPS.

One strategy is to use brick-and-mortar retail locations as mini-warehouses. Depending on the consumer’s buying preference for a particular item, our customers can shift inventory to fulfill an online or in-store order from a warehouse or another retail location. The result is a more efficient experience for both the consumer and the retailer. Another strategy is to incorporate additive manufacturing, or 3D Printing, into the supply chain. UPS has a relationship with 3D Printing company Fast Radius, which has an end of runway facilitate at UPS’ Worldport operation in Louisville. Fast Radius now will open a 3D printing factory at a UPS facility in Singapore, expanding the UPS on-demand 3D printing network to Asia and enabling customers to increase their supply chain efficiency with additive manufacturing.

Online shoppers often select the least expensive shipping option. However, they also look for visibility, flexibility and control over when and where their packages are delivered. To succeed in today’s dynamic retail environment, multichannel retailers are using their brick-and-mortar stores to reduce delivery time and cost. UPS works with retailers to develop end-to-end supply chain strategies that optimize their resources. Some examples include the UPS My Choice, which gives consumers more control over where and how they receive residential deliveries, and the UPS Access Point network, which offers convenient delivery through more than 24,000 local retailers and delivery lockers in North America and Europe.

What the future holds E-commerce indeed is an exciting new opportunity in the logistics business. But logistics companies seem confident that e-commerce isn't the make-or-break business for their future profits. While companies like Amazon.com and Alibaba will continue to shape our shopping experiences and habits, players like Fedex, UPS, DHL among others will likely serve as essential allies to ensure those economic transactions ultimately end at our doorstep.


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