Balancing Consumer Demand and Flexible Logistics in E-Commerce

6/21/2019

With e-commerce giants promising order fulfillment within a couple days (or even sooner), today’s consumer demands to have their online products in-hand faster than ever.

This environment has introduced a unique logistics and transportation challenge: To satisfy the continued expansion of e-commerce and the expectations that come with it, every point in a company’s supply chain must adapt to accommodate the faster pace that e-commerce imposes.

A more complex supply chain than ever

Previously, businesses could comfortably manage their logistics operations through a traditional hub and spoke distribution model, with most orders ending up in retail stores. Now, businesses must consider how their supply chains can quickly move specific orders to consumers at any number of locations. This means proactively coordinating across every mode of transportation—including air, ocean, and surface transportation—to maintain clear tracking and meet on time delivery windows directly at consumers’ homes.

As a result, logistical thinking must be much more hands-on, drawing on a variety of services and resources while staying efficient and visible. Now, after an initial rush to capture share in an emergent e-commerce market, companies find themselves facing new questions of how to keep up while also keeping costs down.

Choosing logistics priorities

From my perspective, the chief tension today is between fixed infrastructure and fluidity. An asset-light, service-heavy supply chain means more flexibility but comes at a higher operating cost. Conversely, developing fixed infrastructure to strengthen the supply chain may ultimately reduce costs but also reduce agility in the market.

Interestingly, this segmentation of logistical importance has already begun to develop. I’ve seen some online businesses begin to push back against e-commerce’s standard of immediacy, choosing instead to emphasize building supply chains that privilege volume over speed. This has driven e-commerce sellers to start offering consumers increased variety in shipping speed options. It remains to be seen, however, whether having many alternatives will cause consumers at large to adjust their e-commerce delivery expectations.

The fact remains that e-commerce fulfillment encompasses multiple, conflicting considerations of time, transportation mode, and cost on vast scales. To tie these factors through informed decision making is a difficult endeavor. But because e-commerce continues to grow and its barrier to entry is lower than ever, doing so is vital to remaining competitive.

Where to start

Of course, one can’t discuss e-commerce without talking about big data, and here, companies may find the tools they need to make decisions about where to invest. Advanced business intelligence and predictive data modeling help businesses better understand and anticipate consumer demand so their supply chains can respond accordingly. Through access to this data and integration with service information from their shippers, companies are better equipped to decide their priorities and choose where to focus their resources.

If businesses are unsure where to begin, they should also recognize that they do not have to be e-commerce authorities: There are industry experts they can consult who can help optimize logistics models. In the end though, each business must decide for itself where its tipping points are between speed, volume, and cost.

-Matt Castle, vice president, global forwarding products and services at C.H. Robinson

 

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