The global e-commerce logistics market, according to Transport Intelligence (Ti), grew by 18.2 per cent in 2018, with emerging markets showing the fastest expansion. The UK-based company expects the global market to grow at an expected nominal 2018-2023 compound annual growth rate (CAGR) of 11.8 per cent. The company’s figures suggest that the cross-border component is a significant driver of this uplift. Cross-border e-commerce is bringing supply chain stakeholders into direct contact and challenging the status quo, but while gaining access to millions, if not billions, of new customers is an attractive proposition for e-commerce companies, targeting purchasers in foreign markets is not the easiest of strategies.
The report also examines the trend for offering more omni-channel retail solutions, likely to be a key requirement moving forward. This is largely driven by the purchasing behaviour of consumers, who demand a seamless experience enabled by different channels to order, pay, collect and return products, demanding more delivery and returns options and leverage retailers against each other to get the best value for money.
In addition, Global e-commerce Logistics 2019 examines e-fulfilment and last mile cost structures, and provides analysis of structural variations by geography and retail sector.
The report authors spoke extensively with senior management and leaders at the largest e-fulfilment and last mile providers globally, as well as with niche e-commerce logistics providers. A common theme was the threat posed by global retail platforms managing their own logistics requirements while also offering services to third parties.
The entry of players such as Amazon, Alibaba and JD.com is forcing many to consider what the future of e-commerce logistics might look like. The report’s lead author, Viki Keckarovska, senior research analyst at Ti, said: “While some would say that Europe’s legacy infrastructure and market structures are unfit for the new e-retail world, it could equally be argued that Europe boasts probably the most efficient logistics and transport sector in the world. Ti’s discussions with logistics executives and leaders in the market suggest Europe’s legacy infrastructure is seen as a hindrance to the development of efficient e-retail distribution networks, with facilities in the ‘wrong’ place and markets which were more focused on B2B rather than B2C deliveries”.
Global e-commerce sales are projected to hit $4.2 trillion USD in 2020 and exceed $6.5 trillion USD by 2023 based on figures from German database company, Statista. By 2021, more than 2.1 billion shoppers are expected to purchase goods and services online.
In terms of retail e-commerce sales growth by region last year, Asia Pacific saw a rise of 25 per cent, followed by Latin America (21.3 per cent), Middle East and Africa (21.3 per cent), Central and Eastern Europe (19.4 per cent), North America (14.5 per cent), Western Europe (10.2 per cent) and +20.7 per cent worldwide.
Taking a closer look at the fastest-growing e-commerce countries in 2019, Mexico reigned supreme at 35 per cent. India trailed at 31.9 per cent followed by Philippines (31 per cent), China (27.3 per cent), Malaysia (22.4 per cent), Canada (21.1 per cent), Indonesia (20.6 per cent), Argentina (18.8 per cent), Russia (18.7 per cent) and South Korea (18.1 per cent).
Growth rates, according to Canadian e-commerce company, Shopify, only tell part of the story, though, as the leader of global e-commerce is China. “With an estimated $1.9 trillion USD in e-commerce sales in 2019, online sales in China are three times that of the US. In fact, China’s share of the global e-commerce market is 54.7 per cent or nearly twice that of the next five countries combined [US, UK, Japan, South Korea and Germany].”
These statistics show almost exponential growth in the online retail space. So, how will freight operators across all modes tackle these volumes?
One whitepaper commissioned by logistics company, DHL, provides new insights on how specific challenges within the e-commerce supply chain can be overcome with the support of new technologies.
Change at the Speed of the Consumer: How E-Commerce is Accelerating Logistics Innovations, authored by Professor Lisa Harrington, President and CEO of lharrington group llc, looks at six principal areas where e-commerce is challenging the supply chains of merchants and logistics companies: customer expectations for a perfect buying experience; consumers’ desire to buy and receive goods ‘anywhere, anytime’; exploding demand for urban delivery; competition for labour and wage inflation; the emergence of new online sales models and unexpected surges in demand; and environmental concerns.
The impact of these challenges is most keenly felt in the areas of fulfilment and last mile delivery.
Labour in the US, for example, which is the world’s second largest e-commerce market accounts for 40-60 per cent of warehousing operating costs. With real estate company CBRE predicting in 2018 that an additional 450,000 warehouse workers will be needed in the US by the end of 2019 and unemployment at a consistently low rate, this presents a risk in terms of both cost and recruitment, particularly during peak periods.
Increased urbanisation, combined with heightened pressure – from both socially conscious consumers and municipal authorities, in particular – to reduce the environmental impact of transport operations is forcing retailers to seek out creative ways of balancing delivery convenience with reduced mileage for diesel-powered vehicles over the last mile.
Across each of the profitability challenges, technologies already exist that allow companies to reduce unit costs, better forecast needed inventory or increase productivity to absorb additional growth. Robotics and automated sorting systems, for example, allow companies to process higher order volumes without the need to engage large numbers of temporary workers.
Advanced Warehouse Execution Systems, combining Internet of Things capabilities, machine learning, business intelligence and data mining agents can increase performance and responsiveness to meet rising customer expectations.
While autonomous vehicles for last-mile delivery still await regulatory approval in many markets, digitalisation can already support better demand forecasting to allow inventory to be placed closer to the end customer and to optimise transport routings, reducing time on the road. As many of these technologies evolve further and new innovations come to the market, companies that are able to deploy them effectively within their supply chain will be best positioned to address the costly inefficiencies, volatile order trends and demanding customer expectations that characterise the fiercely competitive e-commerce market.
“The insights from this new whitepaper show that profitability is still a major challenge for many e-commerce companies, despite — or often actually because of — the dynamic growth of the sector,” said DHL eCommerce Solutions CEO, Ken Allen.
“It also gives our customers a comprehensive overview of the specific areas where that challenge is most prevalent, and which technologies currently offer the most potential to support them.
“DHL’s innovation approach is targeted at identifying, piloting and deploying across our global network the most effective technologies and solutions in each of these areas. We will continue to actively expand robotics and automation across many parts of our operations, for example, and we see artificial intelligence becoming an enabler throughout our business in the future. There is no ‘silver bullet’, but companies must embrace new technologies and innovate to thrive,” he said.
Acknowledging that innovation can itself be a profitability challenge, particularly if approached at the wrong pace or with excessive outlays of capital, the research also detailed a three-step approach to innovating successfully: focusing on innovations that provide differentiation; adopting a long-term, strategic view of innovation; and bridging the silos of people, software and machines.
“Given the complexity of the global logistics industry, the huge variance across markets and regulatory environments, and the competitive differentiation that comes from relationships and in-depth knowledge of customers’ supply chains, we still see people playing a critical role in the industry for the foreseeable future,” said Allen. “The companies that will win the race to future success are those that are able to combine the expertise of their people with software and machines most effectively.”
The Blockchain in Transport Alliance (BiTA) said that executives from FedEx, DHL and United Parcel Service (UPS), last year, shared a single stage and found common ground on how blockchain technology can transform the global supply chain.
“This is not a process improvement initiative,”said Dale Chrystie, FedEx business strategist and blockchain fellow, during Blockchain Revolution Global conference in Toronto on April 25 2019. “This is a breakthrough discussion. This is a different way to think about how global clearance looks in the future.”
Chrystie, also Chair of the BiTA Standards Council, joined Eugene Laney, head of international government affairs for DHL USA and Mahesh Sahasranaman, Principal Architect, UPS Supply Chain Solutions, in a discussion with Don Tapscott, Executive Chairman of the Blockchain Research Institute (BRI), which is based in Canada.
“This is really happening,” Tapscott said, making light of executives from the rival parcel carriers appearing together.
The three executives agreed that there is a collective interest in embracing uniform standards and getting governments on board with blockchain technology.
“This is an issue that must be looked at with a global viewpoint,” Chrystie said. “These dots are going to connect. The question is how are you going to accelerate that process.”
Customs clearance is an area where blockchain can play an important role, one that requires making governments part of the conversation. Laney pointed to the long lines of trucks at the US-Mexico border as an example of where blockchain, with the use of digital fingerprints, could improve the backlog.
“How can we take all those standards and share the best way we can with each other – and share with governments that are part of that supply chain?” Laney said.
“Blockchain is a team sport; no one company today completes customer supply chain shipments by itself,” Laney said after the panel. “As such, there is a real need for an open and standardised version of blockchain to be shared by all shipping participants.”
Sahasranaman discussed the need to ‘wrangle the standards’ to avoid fragmentation. “Standards bodies like BiTA and BRI help that conversation, to move it forward,” Sahasranaman said. “Collaboration to create standards, ensure that standards are agreed upon, and further ensure those can be used as designed on the blockchain platform is essential for a multi-party supply chain environment.”
Sahasranaman noted after the discussion that “The supply chain panel between UPS, FedEx and DHL should stand out as an example – that organisations regardless of how hard they compete, must seek to collaborate in areas that would maximise benefits from this technology to all supply chain participants.”
Chrystie emphasised the need for blockchain standards to be open source. “We don’t think you get to a global supply chain blockchain without doing that [open source standards],” Chrystie said. “We need to come to get to agree how we can do that.”
Laney stated after the panel that, “DHL Express has mastered tracking and tracing single supply chain transactions, but it can be challenging for some companies to fully manage their goods from production to final delivery. Along with other key elements, such as IoT and RFID tags attached to packages, blockchain would improve visibility, not only for shippers but also for customers who could watch in real-time as parts move through their manufacturing lifecycle.”
Laney also commented on the use of blockchain to solve significant issues. He said, “Governments often ask manufacturers and their supply chain participants to ensure that dangerous and counterfeit goods can be detected and stopped. We see the application of blockchain as a way to help us solve these issues to secure transportation networks and stem the tide of counterfeit goods.”
Tapscott applauded the three executives as “wonderful examples how you need to think big, have integrity and be considerate of the interest of the global economy when you set out to embrace new technology.”
Tapscott said after the discussion, “To fully realise the potential of this second era of the internet, companies will need to coordinate and collaborate on a scale they’ve never done before. The BRI’s goal is to bring industry leaders together, inform them and inspire them to work together and achieve this blockchain revolution. I know BiTA shares that goal as well.”
