The logistics industry’s e-driven revolution
There are changes taking place in the logistics world and much of it comes down to e-commerce. Logistics companies are being squeezed by consumers who want timely, low-cost deliveries, and by retailers demanding low-cost fulfilment and delivery operations. This pressure in turn drives innovation and of course change. I meet many entrepreneurs and innovators who are looking to change the way the world works and some are focused on the links between retailers and consumers. Some are looking at how technology can strengthen the connection between the two parties while others want to change the way both behave. Exciting times.
This segment , known as the 'golden quarter' of retail, demonstrates in stark detail the pressure facing logistics companies.. While the UK media may have focused on Black Friday's consumer frenzies at 'bricks and mortar' stores, there were similar frenzies taking place online. Retailers across the board saw sales soar. For example, Amazon's experience of orders up 37.5 percent on last year's sales was typical. Many retailers even closed online stores as sites, systems and logistics companies fought to cope with orders.
In the courier business, revenues are also projected to expand as demand for online deliveries continues to increase. Parcels account for the majority of this industry's revenue too, which is expected to expand over the five years through 2014-19 at a compound annual rate of 7.1%. Ironically the internet has been a mixed blessing causing general post volumes to decrease, but demand for parcels is set to continue to grow.
When we think about retail innovation our thoughts tend to turn to NFC, ibeacons, mobile retail and the integration of online and in store retail experience. Logistics tends to get less attention but has been as impacted by ecommerce as any other area in the retail supply chain. A few examples illustrate this:
The drone is on the horizon
The emergence of robotics in one innovation that is worthy of a mention. Amazon bought KIVA Systems in 2012 and now has KIVA robots in ten of its US warehouses, fully integrated with its technology and increasing the movement of inventory and the speed of order fulfilment.
On the horizon flies the drone. 2014 was the year when Amazon unveiled its plans to use drones to deliver parcels under 5lb. Then Google bought drone-maker Titan Aerospace, and Facebook acquired Ascenta, a Somerset-based drone manufacturer. Drones will play a part in the logistics of the future, driven by retail. But for now they remain on the horizon, as legalities are addressed including permissions from the UK Civil Aviation Authority.
Completing the last mile
Like it or not, getting the product to the consumer's door is crucial. As consumer demands and expectations have risen with the reliability, availability and affordability of tablets, smartphones, high speed broadband and 4G, so too has the pressure to fulfil their demands by delivering in a timely and 'hassle free' way. Retailers and logistics companies have to get it right or they run the risk of dealing with a twitter storm or negative Facebook posts and ultimately losing a loyal customer forever.
In the last quarter alone logistics and delivery companies have had to contend with 'Black Friday', 'Cyber Monday' and the lesser-known 'Boomerang Wednesday' - when consumers return items they bought on the previous Friday and Monday.
Delivery and the last mile is only going to be an increasing problem. A report published by Barclays' Retail and Transport & Logistics team, shows that the UK is set for an increase in online shopping that will demand the delivery of over 1.35 billion deliveries a year by 2018. In 2014 there will have been 930 million parcels delivered in the UK. In addition to this consider that redelivery rates during peak periods run at up to 20 percent.
What do consumers want?
A recent Econsultancy Multichannel Retail Survey showed that online shoppers are demanding more flexible delivery options; retailers and logistic suppliers must meet these demands to increase sales. A fixed date for delivery was the most popular choice (31%), followed by next day delivery and the ability to collect from stores (both 24%). A separate analysis by Opinion Matters found that 51 percent of users feel that current home delivery options are fundamentally inconvenient.
What is needed is greater flexibility on behalf of logistics firms and delivery fleets, as well as innovative technology that can accept deliveries on the behalf of consumers even if they are out. The drones of the future will be of little use if there is no-one in to accept the delivery.
A start up worth looking at is Pelipod. Its mission is to transform parcel delivery and returns by having a secure, home delivery box that uses mobile technology to communicate secure codes for each parcel delivery. Pelipod believes that consumers should have a convenient home fulfilment option for their online purchases. Providing a secure parcel- to-home fulfilment solution gives consumers, retailers and couriers the optimum delivery solution that current methods cannot match
As 2015 arrives along with all our festive shopping, for the logistics industry the pressure to innovate to manage and hopefully exceed retail and consumer demand will only increase. Ecommerce has changed the face of this industry forever so creativity and the smart use of technology will ensure that the industry will continue to stay in control of all the complex more parts or parcels.