The Need for Efficient and Effective Logistics in E-Commerce

The Need for Efficient and Effective 

Logistics in E-Commerce

Prof Archie D'Souza

Logistics is the key enabler in driving change in e-commerce in India. The size of E-Commerce Logistics in the world is today USD 2.5 trillion, the US at 550 billion is, by far, the biggest market; next comes China, a distant second at 140 billion; Britain is another large market with 110 billion. In contrast, it is just 20 billion in India, but growing at an annual compound rate of 35 to 40 percent. This means that it will more than double every three years. China moves 52 million shipments a day, compared to 1.8 to 1.9 for India. The e-commerce logistics ecosystem is supposed to grow year on year at 50%. Non-metros will drive this growth and logistics will bridge the gap. Increasing internet penetration, smartphone usage, and language diversity on e-commerce platforms have led to substantial growth of e-commerce platforms in India.

Unlike traditional retailing, e-commerce entails the delivery of merchandise to the buyer. While this does away with the need for shop shelves and expensive real estate, distribution, and fulfillment centres need to be set up at strategic locations. Warehouses though can be located away from residential areas where rents would be far less. They, however, can never be too far from the ultimate customer. Further, last-mile connectivity becomes crucial, a big challenge in big cities where traffic congestion is a major problem. The result is a sector that is seeing very rapid growth. This discussion is about efficiency and effectiveness, so we'll skip the statistics.

One of the reasons why India's logistics industry has lagged behind is because of slow technology adoption. It hasn't been on par with international standards. Thanks to e-commerce this is changing. The demands of e-commerce, with the customer wanting immediate deliveries and information in real time, have forced the logistics industry to adapt.

Customers today have a variety of hand-held devices with myriad apps. They place orders at the click of a button and expect instant information and immediate delivery. The digital revolution has gone beyond the social media. Today, analytics, the cloud, Artificial Intelligence (AI) and Internet of Things (IoT) has caused revolutions that were unimaginable. The entire landscape has changed. A report published by the Texas based Intel IDC states that 70% of Indian firms will deploy AI before 2020. The logistics industry, to catch up, will need to hire qualified AI professionals. No logistics firm will be able to thrive without professionals in AI and Machine Learning. It looks like SAP and Blockchain are passe. The former definitely is, the latter will be soon.

There are multiple components in digital space. The mobile is but one of them. It has, though, resulted in logistics and customer service taking a quantum leap. Among the things that mobile apps provide are dashboards, analytics, and real-time customized business information. In addition, what is also required to be provided to the customer last-mile delivery information along with timely deliveries. The right type of vehicle with the right delivery staff is needed here, a service no app can provide.

Technology has also helped in creating previously unheard-of value-added services such as a trucker delivering a shipment and, immediately thereafter, picking up a fresh one. For this to be done, interlinked processes are called for. Quality and quantity parameters ought to be in line with the system processes. Delivery staff ought to be able to do a product-wise check. For this, they have to be qualified and skilled. The day of the unqualified driver is gone. Also, without mobile devices and bar-coding (not really a new technology) this would never have been possible. Even the card-swipers have become mobile. This helps pass on information on last-mile delivery and first-mile pick-up immediately. Electronic payments too ensure that services like COD are provided to the customer.

One of the things that scanning devices have done is that they've enabled users to assume that every package can be traced and tracked in real time. Not long ago, this was inconcievable and, till very recently, a service available only to the courier and express cargo industries. With Radio Frequency Indication (RFID), and using mobile technology, full visibility has been rendered possible. This has resulted in customers deriving exponentially enhanced value, never envisaged before. RFID scanners are now available at unbelievably low costs. So, packages can be traced without the need for package-level individual scans. Surely, this will not only revolutionize logistics operations, it will also result in much better customer service.

Demand elasticity is another challenge that e-commerce companies have to contend with and, with it, the logistics service providers. There are times, like at festivals for instance, when there is a spike in demand for goods. This puts a great deal of pressure on the logistics service providers. E-tailers' order volumes can jump to unimaginable levels. Then, in very quick time, they could shrink back. Scaling up and down so rapidly would be impossible without the right use of technology. Almost every e-commerce player has multiple service providers for pick-up, line-haul, international carriage, storage, and other services like customs clearance. It is only an integrated technology interface with multiple service providers that can aid this scaling up or down.

So, creating an architecture that has a scalable environment becomes imperative. This should have a scalable environment tightly integrated with analytics, IoT, AI, and Machine Learning, all this, with the right levels of security. Only then can the demands of elastic logistics be met.

Due to the lifestyles of most people and also, due to long distances between places of work and residence, the demand for fixed-time pick-up and deliveries is increasing. This is a service given not just to the customer but also to the customer's customer. Would this be possible without technology?

Storage places or warehouses too have changed in a way that's unbelievable. Fully automatic warehouses, using robotics is becoming the trend. Robotic Process Automation (RPA) is a concept whose time has come. Its adoption is a foregone conclusion. It is transforming customer service and, at the same time, reducing costs. Like robots, it won't be long before drones and driverless vehicles become the norm rather than the exception.

We are today at the cusp of a revolution, the scale of which was never thought of. The last innovations to have such a sizeable impact on logistics was perhaps the introduction of the oceangoing container and the wide-body aircraft. If India has to catch up with the developed world, we need to see all this happening here.