March 7, 2021

Fulfilment; the top ecommerce topic for 2018

Dr Peter Mowforth

What’s going to be the hot ecommerce topic that takes centre stage during 2018? Will the focus be around technical innovation such as the Google-Home/Amazon-Alexa home automation controllers, a step change in machine learning or other AI technology technology or could it be increased adoption of cryptocurrencies, legal changes or even market opportunities resulting from global trade liberalisation?Ecommerce tends to be a pragmatic topic that progresses as a result of those things that have the biggest impact on the bottom line. For that reason I believe that it will be advances in the set of things involved with the logistics and transportation of products through ecommerce supply chains that will see the major advances during 2018. There are a number of statistics, news stories and technology developments that all point to significant disruptive change sweeping through the industry, specifically:

  1. Faster delivery times: Major channels such as Amazon using it’s Prime offering that defaults to one-day delivery. and companies such as Shutl already deliver within 90 minutes in built-up areas across the UK. Customer expectations for fast delivery have driven a recent slew of investments in high-speed delivery start-ups to help meet the needs of ecommerce businesses - particularly in areas such as food delivery:
  1. Shift to small packages: Because ecommerce shortens supply chains, one consequence is that there has been a rapid expansion in the need to move much larger numbers of smaller packages. Combining mixed loads (mixed origins, sizes, weights and precise destinations) into the supply chain uses a process called Groupage which results in mixed package container traffic. This shift is exacerbated where a brand-owner/manufacturer sells products directly to end user customers as has happened with companies such as Adidas. Several traditional container businesses have found this shift in business model difficult to accommodate which in turn has resulted in a significant consolidation within the industry.  The combination of a rapid growth in small package transport with the need for quick fulfilment has inevitably led to a massive increase in air freight. Accordingly, the The International Air Cargo Association, reported that air cargo revenue in 2017 rose by 15 percent
  2. Integrated, automated software: The need for speed combined with the large increase in small package numbers means that at every part of the fulfilment process there is a growing need for smart software that is able to integrate and automate processes. These process start with order processing. From there the process proceeds to pick-pack-despatch from the warehouse. This then flows through to courier integration, delivery and, possibly, returns. Keeping track of and optimising all these components has to be automatic so as to cope with rising volumes of trade. The complexity of these automated systems should not be underestimated. Consider a company that might have half a dozen warehouses in different parts of Europe with each containing different levels of stock for different products. Consider a customer who places a large order that cannot be fulfilled by a single warehouse. The problem-solving logic needs to work out which products should go from where, to where in order to minimise courier times and costs. With some couriers using size, others using weight, each with different costs and delivery networks then the complexity of the problem rapidly escalates. If you are selling products that might involve different levels of duty or import/export tax depending on where they originate then doing the calculations by hand is not a practical option. While an end-user customer may simply want to know the cost (including fulfilment) along with when it will arrive, their simplicity of question may well require cutting edge adoption of big-data and AI to provide an answer.
  3. Growth of global ecommerce infrastructure: China is investing heavily in fulfilments channels designed to speed-up and improve the global distribution and warehousing of ecommerce products e.g One Belt One Road Initiative. There is also a significant growth taking place in the use of low-cost warehousing that combines quick access to communication hubs and airports.From an ecommerce-company’s perspective, solving these tricky fulfilment issues is starting to get easier. There are integrated solutions now available for businesses using Magento, WooCommerce and Shopify. Configuring each solution usually involves in populating a matrix of variables defined by the size/weight, the distance, the delivery time and whatever set of fees you have managed to negotiate with each courier.To an end-user, the huge and disruptive changes that will take place during 2018 will end up being seen as little more than a marginal gain. The fulfilment will take place a bit quicker with improved feedback about exactly when and where the purchased product will be arriving at its destination. While this may only seem a marginal gain to the customer, achieving this incremental improvement will have massive and disruptive consequences for those involved in undertaking fulfilment. In these highly competitive and low-margin industries the winners will be those best able to make use of better software to make what they offer better integrated and ever-more automated.

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