E-Commerce Supply Chain & Transformation in Logistics - Logistics

Introduction

The transformation in logistics over the years has been remarkable. Starting from the 1970s, where suppliers delivered directly to shops, the evolution has adapted to various industrial changes and technological advancements. This transition has been especially pronounced with the advent of e-commerce. This article delves into the intricate details of this transformation and the differences between traditional logistics and e-commerce supply chains.

Historical Perspective

1970s: Basic Logistics

In the 1970s, logistics were relatively straightforward. Suppliers knew how to deliver products to shops without much complexity.

1980s: Distribution Centers

By the 1980s, industries became more mature, leading to the creation of Distribution Centers. These were not related specifically to e-commerce but served overall distribution needs.

1990s: Liberalization

The 1990s saw increased liberalization, which expanded consumption beyond the top 10 cities to the entire country. This required more complex supply chains, involving import centers and extensive retail distribution.

E-Commerce and Its Impact

New E-Commerce Fulfillment Hubs

With the surge of e-commerce, the supply chain evolved further. Fulfillment hubs specifically designed for e-commerce were created to handle fragmented delivery efficiently. Unlike traditional logistics that typically dealt with bulk deliveries to businesses, e-commerce required delivering products directly to millions of consumers.

Last Mile Delivery

One of the significant aspects that changed with e-commerce logistics is the emphasis on last mile delivery, accounting for more than 53% of cost. For traditional logistics, the final goods delivery cost is minimal compared to e-commerce, where delivering directly to consumers' homes significantly increases the cost.

Economic Differences

Traditional logistics aimed at keeping costs low by waiting for a full load before dispatching deliveries. E-commerce, however, prioritizes speed and efficiency, often using small vehicles like bikes for faster delivery, thereby increasing the cost structure.

Operational Differences

Complexity in Delivery

Traditional cargo might only require a van to make a few stops a day, allowing for efficient bulk delivery. E-commerce, however, operates with multiple smaller deliveries requiring a more agile and fragmented approach.

Delivery Time Frames

E-commerce companies avoid deliveries outside standard hours due to consumer preferences. This requires precise timing and additional operational planning.

Cost Management

The operational costs in e-commerce are ballooned by the need for more delivery personnel and vehicles, in addition to higher per-package costs due to frequent smaller trips.

Supply Chain Management

Inventory and Warehousing

Traditional retail chains use multiple regional warehouses, replenishing store stocks based on sales. In contrast, e-commerce companies typically maintain fewer, strategically placed large distribution centers to minimize inventory and warehousing costs.

Stock Keeping Units (SKUs)

E-commerce platforms facilitate a greater variety of SKUs compared to physical retail stores limited by shelf space. This flexibility allows online retailers to offer a broader range of products.

Returns and Cash Collection

Returns are more straightforward in traditional retail, often resulting in credit notes rather than refunds. E-commerce platforms, however, promise hassle-free returns, making it crucial to handle returns efficiently.

Transportation and Partnerships

The role of transportation partners is critical in both traditional and e-commerce logistics. However, e-commerce companies heavily rely on their logistics partners to ensure timely and efficient delivery, making them indispensable in the supply chain.

Conclusion

The logistics industry has undergone significant transformations, especially with the rise of e-commerce. While traditional logistics focused on cost-efficiency, e-commerce logistics prioritize speed and customer satisfaction, leading to unique challenges and higher operational costs.

Keywords

Logistics Transformation
E-Commerce Fulfillment
Last Mile Delivery
Supply Chain Management
Inventory and Warehousing
Transportation Partnerships

FAQ

What were the primary logistics practices in the 1970s?

In the 1970s, logistics were quite straightforward, with suppliers delivering directly to shops without much complexity.

How did distribution centers change in the 1980s?

The 1980s saw the creation of distribution centers to handle the mature industry's overall distribution needs, not specifically focused on e-commerce.

What challenges did e-commerce bring to logistics?

E-commerce introduced the need for efficient last-mile delivery, creating higher operational costs due to the fragmented nature of delivering directly to consumers.

What is the significant cost difference between traditional logistics and e-commerce logistics?

In traditional logistics, the final goods delivery cost is minimal. In contrast, e-commerce logistics see a substantial portion (over 53%) of costs arising from last-mile delivery directly to consumers' homes.

How do e-commerce companies manage their inventory differently?

E-commerce platforms typically maintain fewer, larger distribution centers to minimize inventory and warehousing costs, whereas traditional retail chains use multiple regional warehouses to replenish store stocks.