Logistics drives e-commerce market ................................................................................
The e-commerce market is growing fast, but the success of this market relies heavily on efficient handling of logistics. It’s time to recognise this industry as a key variable to drive customer experience and reach, say experts.
India’s interest and curiosity in the e-commerce logistics is on a rise. The success of e-commerce markets relies heavily on efficient logistics. The rising e-commerce has maintained the standard of the Indian logistics industry during recession. The increasing penetration of internet and smartphones across the country, increase in the number of urban households, ease of payment, access and variety that online shopping offers, act as market drivers. However, the moment an order is being placed, a lot of work and resources goes to get it parcelled at the customers’ place. Here comes the role of logistics and warehousing.
Recognising logistics as a key variable to drive customer experience and reach, several e-commerce companies have also invested in building their logistics networks and capability. Logistics is thus a key enabler for growth of the e-commerce retail sector and is increasingly emerging as a differentiator in terms of customer service and satisfaction. To build-up their scale while sustaining business margins, e-commerce companies and logistics providers need to work in collaboration to drive the industry forward. CARGOTALK explores how e-commerce focussed logistics companies are riding the wave in the country.
Anshul Singhal, CEO, Embassy Industrial Parks, says, “Logistics sector in India is evolving rapidly and is considered as the backbone of the new age consumer economy. The logistics needs of the industry are changing rapidly with the ever-evolving business models. The industry has been witnessing a quick scale-up in-service orientation and complexity with an increasing emphasis on service levels, increased penetration in Tier-II and Tier-III cities. The evergrowing internet users and smartphones across the country, increase in the number of urban households, ease of payment and convenience are boosting the success of e-commerce focused logistics companies. It is predicted that over 85 per cent of all business will be digital within the next five years.”
“Warehouse operators and logistics firms need to react quickly by implementing the latest technological innovations. E-commerce market has experienced astonishing growth over the last decade and is successfully changing the way people transact. Successful e-commerce thrives by welcoming new logistics models and an efficient supply chain setup is a massive source of competitive advantage for the firms. From efficient transport management system to data analytics, cloud computing, Internet-of-Things and enterprise mobility solutions, the year has seen many innovations in the logistics industry. The supply chain is becoming more customer-centric and it is the most important factor in e-commerce focused companies. The logistics sector specific to e-commerce retailing in the country was valued at USD 0.46 billion in 2016 and is projected to witness a CAGR of 48 per cent in the upcoming five years to reach US $2.2 billion by 2020. To build-up their scale, while sustaining business margins, e-commerce companies and logistics providers need to work in collaboration to drive the industry forward. E-commerce focussed logistics will only grow from here on and will change the traditional way,” he explains.
Sandeep Padoshi, Co-Founder & Director, Wow Express, points, “The growth of e-commerce has paved the way for more opportunities for the logistics sector. For the financial year 2016-17, e-commerce sales reached the US $16 billion with a projection of a seven-fold growth within the next two fiscals as estimated by Morgan Stanley. By 2020, online commerce sales is expected to cross $120 billion. E-commerce focused logistics companies are going to enjoy the benefits of the growing e-commerce sector.”
“E-commerce companies are expanding their reach and are extending to reach Tier 1 and Tier 2 sectors. This is also helping logistics companies to expand and increase their reach. E-commerce focused logistics company are also providing warehousing and e-fulfillment service which
further helps to increase their growth,” he adds.
According to Lalit Bhardwaj, Founder, FlyMyParcel.com, “E-Commerce focused logistics companies are the most reliable nowadays. Logistics is a backbone of e-commerce companies; usually this was outsourced previously. But now the giant e-commerce has started logistics of their own. Now, zone wise warehouses have been developed which will create job opportunity as well as the economic growth of our country.”
Bipin Kulkarni, Vice President – Sales & Marketing, Spear Logistics, informs, “In the last three to four years, 3PLs have emerged to take advantage of scale and efficiency through a technology first approach. Still many e-commerce players prefer to their captive units to do the fulfillment. However, with advent of technology, top e-commerce players across India have now started outsourcing the fulfillment till last-mile deliveries to specialised 3PL player. Indian e-commerce market today is served by a mix of captive and third-party logistics players.”
Understanding the importance of resources and the amount of work involved in getting the order parcelled at customers’ place, Singhal says, “Once goods are purchased online by the customer, they pass through a series of logical steps with an objective to deliver them to the customer in the shortest possible time. First-mile logistics involves picking up goods from the sellers and shifting it to the retailer’s fulfilment center or mother warehouse, depending on the need. In the inventory-led model, products are sent to the fulfillment center without packaging/labelling. In the marketplace model, products are packed and shifted to the warehouse for storage. It is important to update the inventory in the Warehouse Management System (WMS) and to generate the stock report.”
“Products also go through fulfilment stage where they are prepared for last-mile delivery. Then products are sorted based on the delivery location at the processing center of 3PLs and are connected further in the supply chain through line haul depending upon the final delivery location. Line-haul stage involves connecting the main supply center with the main demand center, via land or air depending on the transit time and cost. The final stage is the last-mile logistics; this step involves dispatching and shipping the products to the delivery hubs. From here, the product is shipped to the customers and this phase depends on manpower and infrastructure. Most of the 3PLs face problems in maintaining their manpower due to high attrition rate and therefore, face challenges in reliable deliveries. Efficient transportation is required at each stage of the supply chain, from phase one to final delivery. Only a good coordination between each component would bring the benefits to customers and provide the competitive advantage to the firm,” Singhal continues.
Warehouses have been planned in close proximity to the consumer which allows them to be regional distribution centers
Adding to this, Kulkarni says, “In our e-commerce warehouses, we are handling large volumes of orders of various categories of product i.e. from inexpensive pen drives to high-end mobile phones, from apparel to shoes and so on. Each category of product needs to fulfill within maximum stipulated time of three hours (for normal deliveries and for same day orders it is 45 minutes), after receiving an order. The idea is to explain that It needs to be picked and packed within that time including invoice and label printing before it is handed over to last-mile delivery partner.”
Padoshi notes, “Once an order is placed, the client will forward the order to the logistics service provider, who will then send their resources to pick up the load from the client. The load is then brought to the nearest delivery center. It is then sorted out according to the locations and the shipments are forwarded to each of their respective locations. Once the shipment is received at the location it is then sent to the cluster branch according to their respective pin codes. Once received at the cluster branch it is assigned to a delivery agent who then goes and delivers the shipment to the end customer.”
On a similar note, Bhardwaj points, “This is a big chain; when an order gets placed, that information goes to the stock yard to sort the material and dispatch it as per the type of delivery. Every step of movement gets loaded on the web through the concern department so that the customer could also know the live status.”
Unique challenges
Talking about the role logistics plays in movement of bulky items, Padoshi says, “The toughest part in the movement of bulky items, predictably, is the actual transportation. For e-commerce players, working out the logistics for bulky items is among their biggest challenges. For supply chain, items are divided according to size Normal and Large. Home appliances and furniture are Large, while everything else is in Normal. Apparels, books, electronics etc., which fall in the Normal category, follow the inventory model, while Large items are delivered locally. The shipment charges are made according to the weight of the package, not the item. Volumetric weight is more than the actual weight of the parcel. When a five kg chair is packed, it can weigh 30 kg. Full trucks minimise the movement, and hence prevent breakage despite bumpy roads. But the poor condition of highways demands efficient packaging to protect the goods, leading to higher packaging costs.”
Bhardwaj stresses on wide and straight highways to handle bulk movement. He adds, “There is no exclusive freighter and infrastructure within India to handle the bulk items by air freight. So nowadays, it is totally dependent on ground transport.”
Requirements from warehouses
Explaining the requirements Indospace fulfil as warehouses, Singhal notifies, “For decades, consumer products have been distributed to retail stores in bulk, through loaded transportation. Now, online ordering is pushing brick-and-mortar retailers beyond this traditional supply chain infrastructure. Warehouses and distribution centers are planned in remote locations where costs for land, labour, and taxes were low. Large warehouses developed as distribution centers are beginning to assume some of the characteristics of stores, as more retailing activity starts to happen online. They are highly varied in size and shape, purpose and intent, and deploy technology to meet rising customer service expectations. In e-commerce, the distribution center provides much of the customer experience which has introduced the emergence of multilevel centers, also called fulfilment centers because they give flexibility of time in delivering products to the consumer. Warehouses have been planned in close proximity to the consumer which allows them to be regional distribution centers. This makes it easier for online products to be picked, packed, return and shipped efficiently, consistently and cost-effectively. At Embassy Industrial Parks, our effort is to make each park a selfsustaining business ecosystem catering to seven major cities.”
“CCTV cameras, fire extinguishers, goods handling equipment and security are the basic requirements from warehouses. And, most importantly, the warehouses should be on the wide road and easy access for the big and long vehicles,” opines Bhardwaj.