The disruptive influence of e-commerce stretches far beyond retail. The demand for ever quicker delivery has prompted global enterprises across a variety of industries to reconfigure distribution channels and transportation strategies. In the latest Precision Report we look at the impact of e-commerce and how transportation execution can be a competitive advantage.
Whether you are a craft jeweler or a global manufacturer, you have to get your products to your customers. The transportation of goods requires planning, time, labor and money — there’s no way around that. But no matter what size your business, e-commerce has almost certainly impacted you.
In years gone by, a craft jeweler probably would have bought raw materials from a nearby supplier. He or she would have sold their finished products at local markets and stores. These days, most small businesses sell through their own websites or via an online marketplace. They are just as likely to source raw materials online too — often from far afield. Because of e-commerce, even small businesses are actors in global supply chains.
Global enterprises have been navigating complex supply chains and freight transportation for a long time. But e-commerce has impacted the way even the largest manufacturers and suppliers conduct their logistics and transportation operations.
A recent survey and report from DHL Supply Chain found that transportation, especially ground transportation, has been undergoing significant changes. This, says the report “far exceeds the norms of regular market fluctuation.” Factors driving these changes include external market forces, such as the growth of e-commerce and urbanization.
Some companies have struggled adjusting to the new normal. Others still see transportation as simply the cost of doing business. However, best-in-class companies know that a well executed transportation strategy is a competitive advantage.
The Impact of E-Commerce
DIRECT TO CONSUMER SALES
E-commerce has shortened the distance between manufacturers and end-consumers. It gives manufacturers direct access to customers, and allows them to move into new markets. However, e-commerce also connects digital start-ups and international competition to the same potential customers.
Currently, e-commerce makes up a fraction of all retail sales — in the US it’s around 10 percent. But the trend is only going up. Retail e-commerce sales have grown 20 percent every year for the last decade. Consumers are also making larger, more expensive purchases online, and shopping cross-border looking for niche brands and better deals.
Direct-to-consumer (DTC) sales have experienced explosive growth. When consumers can source large-ticket items such as refrigerators or engagement rings at a lower cost from manufacturers — even if and when they are a less established brand on the opposite side of the world — they are increasingly willing to do so.
Nike, an early adopter of this model, believes that DTC will become increasingly important as a revenue stream. Analysts suggest that the gross margins on Nike’s DTC business are 62 percent, compared with 38 percent for its wholesale business.
Buying sneakers online is one thing. But e-commerce has also impacted how life sciences companies and medical manufacturers reach their customers too. In the US, Europe and much of the world, direct-to-patient shipping is on the rise. E-commerce, along with growing demand for home healthcare products, means that many shipments are now going directly to price- and time-sensitive patients, rather than through traditional distribution channels.
Parcel and express shipping has thus become a larger part of distribution operations. This has cost and operational implications. It’s a lot easier to send a shipment of one thousand items to a single address, than it is to send one of each to a thousand different addresses.
URBANISATION AND THE ENVIRONMENT
Explosive e-commerce growth is happening alongside demographic shifts, including the continued migration of people to urban areas. In 2018, the United Nations reported that 55 percent of the world’s population lived in towns or cities. In North America and Europe it is 82 and 74 percent respectively. By 2050, 68 percent of us will be urban dwellers. What’s more, the UN projects that in just eleven years the world will have 43 megacities with more than 10 million residents each.
The delivery of products to high-density areas is not just a logistical challenge — it impacts the environment and quality of life. Combustion engines cause air and noise pollution. And in high density urban areas they contribute to traffic congestion. As a result, many of the world’s largest cities have instituted congestion charges to discourage vehicle use.
Carriers have responded by adding hybrid and electric vehicles to their fleets, and using cargo bikes in urban areas. Delivery robots are likely to become more a common sight on city streets too. Unsurprisingly, Amazon is getting into the fray. This January, the company launched a trial of Amazon Scout, a delivery bot that travels at walking pace and can negotiate pedestrians, pets and other obstructions.
Drone delivery trials have been conducted, or are planned across a number of geographies including Australia, Europe, the USA and Vanuatu. However, it is unlikely that drones will replace ground vehicles. There are legal and logistical problems to overcome. Drone have limited capacity in terms of battery life, range and package weight. Plus, a number of trials have been dodged by complaints about noise and safety.
Environmental concerns are also increasingly important to customers. Green delivery options — especially ones that don’t compromise delivery windows — are likely to become a key differentiator.
Transportation Execution as a Differentiator
MEETING CUSTOMER EXPECTATIONS
E-commerce is not just changing shopping behavior, but customer expectations. That’s unsurprising — almost all of us shop online, and almost all of us expect our deliveries as soon as possible. B2B customers want the same service they receive when they shop online for retail goods, including prompt turnaround, in-transit visibility and always in-stock inventory.
Final mile delivery is crucial to customer satisfaction. This, in turn, means that ground transportation is more important than ever before. The DHL Supply Chain report found that 71 percent of the companies they surveyed say that ground transportation is strategic to their operations. Furthermore, 75 percent agree that investment in this area will directly help sales. As Jim Monkmeyer, president of transportation for DHL Supply Chain, puts it: “They’re starting to look at transportation as a weapon.”
The impacts on distribution, and ground transportation, are clear. Same-day or next-day delivery turnarounds are not possible if there is a significant geographic distance between the manufacturer and the customer.
Shippers need to get closer to customers, either through building distribution centers or partnering with a 3PL. Furthermore, transportation execution needs to be integrated with ERP and warehouse management systems for real-time management of inventory and shipment visibility. Reliable transportation, especially for the last mile, is crucial.
Companies moving into DTC sales need to solutions to implement trade compliance screening, as well as customs reporting and documentation. The majority of enterprises will have staff resources in place for these functions. But systems put in place to move cargo containers or even pallets won’t necessarily work for parcels — particularly at large volumes.
THE PRECISION SOLUTION
The PRECISION solution automates global trade and transportation from one platform, and integrates with leading ERP and warehouse management systems as well as legacy solutions.
PRECISION Global Trade Management automates export processes, including documentation production and customs reporting. PRECISION ensures that all the documents required to complete a shipment are prepared correctly. This includes documentation for specialist products and hazardous goods.
When you ship globally — especially if your products are regulated or dual-use — the ability to ensure that your trading partners are authorized to receive shipments is critical. PRECISION Trade Compliance starts at the beginning of the export sales process. Shippers can verify trading partners, determine end use, validate the country of destination and so forth. This gives shippers the ability to perform due diligence, streamline trade compliance, create audit-ready electronic reports and mitigate the risks associated with changing global trading environments.
PRECISION Transportation Execution is a global, multi carrier transportation management solution. The solution manages both inbound and outbound shipments across every region of the world for any mode of shipment, including parcel, LTL, truckload and freight.
PRECISION’s Multi Carrier Shipping Software offers access to a global network of more than 5,000 carriers. PRECISION Multi-Carrier Shipping allows you to search for carriers by geography and capability. The solution gives you the ability to compare costs, routing options and other criteria so you can make better decisions.
PRECISION Delivery Exception Management is a centralized portal for multi-carrier and international package tracking. PRECISION allows you to track shipments originating in any system as well as to track every shipment, in every region, in the same way. The system allows you to proactively manage problem shipments by exception, capture proof of delivery, and raise tracers for lost and damaged shipments.
About Precision Software – Trusted Global Trade and Transportation Execution
Precision Software, a division of QAD Inc., provides industry-leading global trade management, transportation execution and multi carrier shipping software solutions from a single, integrated platform. Preeminent industry leaders in every region of the world rely on Precision’s global support centers to leverage thousands of carriers and manage millions of shipping transactions every day. Our open architecture easily integrates with Enterprise Resource Planning, Warehouse Management Systems and legacy solutions. An ISO-certified company, Precision Software assists companies to minimize shipping costs, optimize first mile and last mile deliveries, automate free trade agreement compliance, avoid customs delays and mitigate the risks associated with dynamic trading environments to maximize their competitive advantage. Precision Software’s customers span multiple industries including banking and finance, life sciences, high technology, retail, industrial, automotive, higher education and public sector as well as logistics providers. For more information about Precision Software, visit www.precisionsoftware.com.
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