In almost all Western countries, e-commerce is the main driver of economic growth, especially among retailers. In 2016, e-commerce in the Netherlands accounted for sales of more than 20 billion euros. Shoes, lifestyle products and food boxes were particularly popular. And this growth is not over yet. In January 2017, online sales were 17.2 per cent higher than in the same month of 2016, according to CBS figures. Online sales of shops that carry out e-commerce as an activity alongside physical shops increased by 20.8 per cent.
New requirements
With the rapid growth of e-commerce, the systems and processes of retailers, manufacturers and wholesalers are reaching their limits. These require innovation so that larger volumes can be supported and companies can deploy additional resources for fulfilment and transport. Traditional transport management systems focus on basic processes around planning and optimisation, contract management, procurement, track & trace and control. But e-commerce orders are often mixed B2B and B2C orders with different dimensions and a strong variation in delivery modes and delivery time. Many companies stick to an existing e-commerce infrastructure that is often highly improvised. This easily leads to separate systems for inventory, logistics and processes, and this limits scalability and flexibility.
Major reasons for these non-integrated approaches are separate departments handling orders, and commercial considerations. Many companies determine the delivery channel directly when placing an order. Often it is product or customer characteristics, such as product size or customer location, that determine the delivery mode. For example, one of our customers uses its own fleet for large shipments and small shipments are outsourced to third parties. In terms of commercial considerations, some companies prefer to use their own fleet because it gives them control at all times and maximises their ability to respond to their customers' needs.
Omnimodal integration
To really benefit from the potential of e-commerce, one of the things you need to do is to look at the opportunities offered by a small transport fleet and home delivery. This can be done with an omnimodal strategy. With this concept, smarter decisions are possible in terms of using specialised delivery services or using a commercial third party. Omnimodal integration means an extension to express, parcel and time-critical deliveries, special transport requirements, and integration of inbound and outbound goods. With this, delivery decisions and integration of internet orders can be automated. A more intelligent method also leads to lower costs. An omnimodal strategy should also be part of an overall approach where the organisation includes network automation, carrier selection, small cargo integration and continuous optimisation and execution in its considerations.
It may also involve decisions such as establishing e-commerce distribution centres (DC) near hubs of large parcel delivery companies to use third parties for fulfilment, or perform this again in-house. Thus, weighing up the benefits of having your own separate e-commerce DC versus an integrated DC for both e-commerce and bulk deliveries. Traditional tools and approaches for network planning and optimisation may need to be extended to support new, integrated logistics approaches, which may provide completely different costing schemes.
There are numerous examples of companies that have capitalised on the e-commerce trend in the right way. US-based Finis, for example, designs and manufactures high-quality swimming equipment and clothing. The company simplified customer and partner interactions including the entire e-commerce experience for both B2C and B2B customers - from ordering the products to delivery. A key driver of flexibility at Finis was the adoption of an order management system that allowed the company to easily automate processes. Before the implementation, most of the steps were manual and employees had to log into more than 30 sites to retrieve orders, print labels and enter all kinds of information manually, such as tracking information and routing.
Another example is Hestra, a Swedish maker of quality gloves. The company has three production sites worldwide and is vertically integrated. It handles sourcing, design, production and delivery itself. Hestra's gloves are available in 28 countries, both online and in 5,500 shops. The company switched to NetSuite for ERP in 2010 and integrated it with an application for bin management and pick, pack, ship in their distribution centres. With the new system, order accuracy increased from 85-90 per cent to over 99 per cent. Hestra saved on returns, reshipments and unnecessary stock, and most importantly improved customer satisfaction.
Omnimodal integration is easily supported by cloud technology that eliminates the need for extensive investments to digitise all processes. With cloud technology, error proneness can be reduced and efficiency increased. Large e-commerce fulfillment companies already work in a highly automated way and in many cases already use robotisation for order picking. Small and medium-sized organisations often still rely on manual paper-based processes that easily lead to errors and inefficiencies. Thanks to cloud technology, they too can now have core processes around fulfilment automation. That includes things like order picking with scanners, automating proper labelling, electronic tendering and ASN generation. This can make huge differences in terms of accuracy, compliance and efficiency in e-commerce fulfilment by small and medium-sized companies.
As in a traditional shop, e-commerce is all about the experience. A positive experience - from purchase to delivery - creates customer loyalty and repeat customers. And here, the delivery process is a crucial part of the customer journey.
Eric Geerts, Director of Product Management EU TMS and Arthur Lasschuyt, Director Activations EMEA & ASIA at Descartes
