E-commerce has reshaped operations and customer expectations far
beyond retail. In this QAD Precision Report we look at how the
current crisis is accelerating the disruptive influence of
e-commerce, and how manufacturers can respond.
The impact of e-commerce on a broad variety of industries has only
been accelerated by Covid-19. Even before the current pandemic,
manufacturers across a variety of industries had begun to respond to
the pressures of e-commerce — particularly the need for ever faster
delivery times — by reconfiguring their distribution models.
While delivery times slipped due to unprecedented levels of consumer
demand during the pandemic, shoppers by and large expect timely
delivery of their online orders. Granted, many will understand that
one-day shipping may not be currently available, it is unlikely that
customers will continue to accept long turnaround times for delivery
once the crisis has passed.
The Inescapable Impact of Covid-19
The coronavirus pandemic created serious
fluctuations in demand for ground transportation. In the US, for
example, in the initial days of the shelter in place orders, there was
a spike in consumer demand for e-commerce products, as well as PPE and
other necessities. However, as businesses — from manufacturers to
manicurists — closed in response to stay at home orders, demand
After that, however, demand for certain types of consumer packaged
goods, healthcare and other e-commerce orders accelerated as consumers
turned to online shopping for a wider variety of goods — some
for the first time ever. This trend seems likely
to continue across much of the world.
Nonetheless, whether we are buying summer clothing from a local
retailer or sourcing car parts from a manufacturer on the other side
of the world, we want sellers to appreciate our business and send us
what we want, when we want it.
How E-Commerce is Reshaping B2B Shipping
Global enterprises with multiple manufacturing and distribution sites
have complex supply chains and transportation operations. Despite
decades of experience in moving raw materials and finished goods from
manufacturing facilities to final customers, e-commerce has impacted
how even the largest manufacturers conduct their business.
Last year, a survey
and report from DHL Supply Chain found that factors driving
demand for ground transportation included the considerable growth in
e-commerce volumes and ongoing demographic changes such as
urbanization. These factors are unlikely to change at any time soon.
Let us take a deeper dive into these factors.
EXPONENTIAL E-COMMERCE GROWTH
E-commerce growth across a variety of industries offers substantial
benefits for manufacturers, but it is not without its challenges.
Manufacturers gain direct access to customers helping them to build
brand loyalty and trust. Just as important, manufacturers gain access
to valuable consumer data regarding purchasing habits, spending
patterns and brand preferences.
As a result, direct-to-consumer (DTC) sales channels have been
experiencing explosive growth. Initially focusing on smaller retail
goods like apparel and sporting goods, consumers are increasingly
willing to purchase larger, more expensive items such as home wares,
consumer electronics and white goods online direct from manufacturers.
Direct-to-patient shipping is also increasing, driven by the demand
for home healthcare products. In the US and other established life
sciences markets with aging populations, home healthcare is gaining in
popularity as a way to manage healthcare costs.
As a result, parcel shipping has thus become a larger part of many
organization’s transportation operations. Unsurprisingly, this has
both financial and operational impacts. It is appreciably easier to
send a single shipment of five hundred items to a single distributor,
than it is to send one of each item to five hundred separate consumers.
DEMOGRAPHIC CHANGES AND THE ENVIRONMENT
E-commerce growth has happened concurrently with changing
demographics around the world. In particular, people continue to
migrate from rural to urban areas.
According to a 2018 United Nations report, 55
percent of the world’s population live in urban areas. This
percentage shifts considerably around the world. While only 43
percent of people in Africa are urban dwellers, this percentage
rises to 74 percent in Europe and 82 percent in North America.
Furthermore, the UN has forecasted that by 2030 there will be 43
megacities around the world, each with a population of 10 million
people or more.
The growth of e-commerce alongside increasing urbanization presents
an obvious problem — traffic congestion along with noise and air
pollution. In parts of the world, cities have introduced congestion
charges to discourage people from using private vehicles.
Carriers have responded to these challenges by greening their fleets.
This includes hybrid and zero emission vehicles, along with cargo
bikes. Many carriers have also been conducting trials of drone
delivery and delivery robots too. Nonetheless, given the high volumes
of e-commerce orders, delivery vehicles — whether electric or
combustion — are likely to be necessary for many years to come.
Transportation as a Differentiator
B2B CUSTOMERS WANT THE SAME SERVICE AS B2C CONSUMERS
There is hardly an industry vertical that has not felt the impact of
e-commerce in some way. Retail, of course, has led the way, but is
also the industry that has felt the pain of disruption the most. Long
established, seemingly untouchable market leaders have faltered in the
path of upstart digital only rivals. E-commerce has reshaped both our
shopping behavior and our expectations. Amazon in particular both
responded to consumer demand for ever faster delivery — and perhaps
created it too — with Prime two-day, and later one-day, shipping.
The 2019 report from DHL Supply Chain found that transportation, in
particular ground transportation, has been undergoing changes that far
exceed normal market fluctuations — and that is before the coronavirus
pandemic sent shockwaves through logistics and supply chains. This
report found that nearly three quarters — 71 percent — of the
companies they surveyed stated that ground transportation is strategic
to their operations. As president of transportation for DHL Supply
Chains, Jim Monkmeyer succinctly put it: “They’re
starting to look at transportation as a weapon.”
B2B customers increasingly want and expect much the same service from
their vendors and suppliers that they receive when they shop online.
In particular, they want timely delivery and in-transit visibility.
THE IMPORTANCE OF TECHNOLOGICAL SOLUTIONS
As Kearney’s 2020
State of Logistics Report: Resilience Testednotes, the US
parcel delivery market grew 9 percent last year, making it a $144
billion market. Furthermore, the report found that the pandemic has
underscored the importance of technology in logistics. Providers
previously skeptical of investing in technology such as shipment
tracking and electronic signatures now believe that these are necessities.
Shippers need technological solutions that allow them to meet
customer expectations for speedy delivery, but at the lowest possible
cost, through leveraging global multi-carrier
networks. In addition, transportation execution systems should
integrate with ERP and WMS solutions for real-time management of
inventory, shipment visibility and delivery
exception. Reliable transportation, especially for the last mile,
Furthermore, companies increasing their amount of international
e-commerce or DTC sales need export
management solutions that integrate trade compliance, restricted
party screening, customs reporting and documentation with
shipping. Large enterprises generally have systems and staff resources
dedicated to these functions. Nonetheless, systems put in place to
move freight are not optimised for parcel deliveries — particularly at
large volumes. To succeed under the new normal, new solutions — and
new thinking about transportation — is critical.
LET’S KEEP IN TOUCH
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About QAD Precision – Trusted Global Trade and Transportation Execution
QAD Precision, a division of QAD Inc., provides industry-leading global
trade compliance, and multi carrier transportation
execution solutions from a single, integrated platform. An
ISO-certified company, QAD Precision assists companies to streamline
and transportation operations, optimize deliveries, and increase
logistics ROI. QAD Precision’s scalable and extensible solution easily
integrates with existing ERP and WMS solutions. Industry leaders in
every region of the world rely on QAD Precision’s global support
centers to leverage thousands of carrier services and manage millions
of global trade and shipping transactions every day. For more
information about QAD Precision, visit www.qadprecision.com.