To meet growing demand, in terms of both quantity and quality, e-commerce logistics need to adapt. The challenges are numerous: rethinking the last mile, controlling the cost of order preparation, developing a premium offer, making demand more reliable, etc. So how do you optimise your e-commerce logistics? Julien Monterisi, a specialist in e-commerce logistics, answers ORSYS' questions.
How are e-commerce logistics faring in France?
To understand the context of e-commerce logistics, we need to combine e-commerce and logistics data. Firstly, the e-commerce sector is doing well in France. The market is reaching maturity. In fact, all business sectors have switched to e-commerce, whether cross-channel or exclusively online.
This is also what emerges from the latest assessment of Fevad (Federation of e-commerce and distance selling). By 2022, e-commerce will continue to enjoy dynamic overall growth. Here are a few key figures: online sales increase by 14 1TP3QThis was driven by the sale of services, taking sales to around 147 billion euros. And although sales of products online fell by 7 % last year, they are still well up on 2019 (+ 33 %). E-commerce accounts for 12.5 % of product sales in the retail sector. The number of active merchant sites grew by 5 %, with more than 10,000 new sites in one year. Finally, the average shopping basket stands at €65, an increase of almost 7 %.
Against this backdrop, logistics activities, and e-logistics in particular, are growing. To give an idea of the importance of this sector, logistics represents 10 1TP3Q of GDP in France. It comprises 150,000 companies and employs 1.8 million people. All this for sales of some €200 billion by 2020-2021.
Nevertheless, e-commerce logistics is facing specific challenges compared with traditional logistics.
What are the biggest challenges facing e-commerce logistics?
The issues are at different levels.
In social terms, the first thing that springs to mind is the outsourcing of delivery services. But it seems more likely that an economic model will emerge that is adapted to urban centres, with economic players employing salaried workers. On the other hand, recruitment is already a major issue, with the labour shortage the current situation. Logistics is synonymous with physical jobs, from transport to order preparation. And yet these jobs, which are no longer attractive, are in full development. With the automation of warehouses, new skill requirements are emerging that bring them closer to the professions of industry. They also need to master the IT tools associated with e-commerce.
In economic terms, e-commerce logistics must controlling costs to maintain profitability, but without cutting back on quality. In particular, we need to rethink last-mile logistics, in other words, be able to handle city-centre or urban logistics. Another major challenge is order preparation, with single-unit packaging. What's more, how do you maintain the link with your customers when the last stage (delivery, product collection) is carried out by a service provider?
On the environmental planThe constraints are also increasing, both socially and legally.
In this context, how are the players adapting to the constraints of urban logistics?
Most of our customers are located in large urban centres. Today, to keep costs down, the standard is still delivery by shared lorries. However, the gradual banning of combustion engines in low-emission zones is forcing logistics operators to adapt.
On the one hand, this requires them to greening their fleets with electric vans and cargo bikes. And why not invest in small delivery robots, as in Shanghai and London? But, of course, developing a large fleet of adapted vehicles increases the cost of the last kilometre.
An additional difficulty is that the new regulations mean that the standards applicable on the ground vary widely. In fact, beyond the global framework, each local authority organises its implementation as it sees fit. This is a new challenge for transport operators, who are subject to different constraints depending on the towns they deliver to.
On the other hand, e-commerce logistics will have to rely increasingly on small logistics platforms in towns and cities, as close as possible to the recipient.
Does this mean the development of warehouses in the city?
Town centre logistics are indeed changing. Firstly, for multi-channel retailing, with a gradual reduction in the sales area to increase the logistics area. But also with the emergence of small warehouses in towns and cities, also known as mini preparation centres or mini logistics centers (with mechanisation on a smaller scale than in large warehouses). They make it possible to have more stock in town, so to be closer to the customer.
This has two advantages, Reduce the time required for availability or deliverysecondly, to reduce the cost of the last kilometre. For example: from 2021, Adameo, a consultancy specialising in logistics and the supply chain, and AutoStore, a company specialising in warehouse automation, have installed a automated storage area at a La Poste mail and parcel distribution centre in Paris.
What about large warehouses dedicated to e-commerce logistics?
In large warehouses, the changes are linked to the specific nature of e-commerce order preparation. It's no longer a question of moving pallets around, but of a whole range of products. picking process. The vast majority of orders contain a single product or a single unit of several different products. This means a lot of travelling to pick up these products from increasingly large logistics warehouses. To give you an idea : 12 to 15 km per day per order operator. Travel that adds no value!
To overcome this difficulty, the Goods To Man has developed considerably over the last three years, becoming a standard feature of e-commerce logistics. Products move towards people: robots pick up boxes or shelves and move them to the logistics operator's workstation. The operator then packs the products and labels them for transport. For example, Transitic, a specialist in connected intralogistics, creates automated paths within the warehouse to take products through to the dispatch stage.
The need to control the cost of order preparation also explains the development of mechanisation and robotisation in the sector. There is also talk of the automation, or even industrialisation, of logistics. The cost of these installations is certainly significant, but is tending to fall. Above all, it is offset by the productivity gains: from +40 % to +60 %. Not counting the space saving in warehouses. Storing more goods in smaller spaces also means lower property costs.
Apart from the obvious financial benefits, are there any other advantages to adopting this type of organisation?
Absolutely. And it should even become strategic over the next 10 years.
In fact, the construction of new warehouses is likely to be largely curbed by regulations prohibiting the artificialisation of land. Here again, environmental constraints weigh heavily on the logistics sector. The question is what the warehouses of the future will look like. Will they have several storeys? Will they be made from recycled or recyclable materials? Will they have green roofs?
In addition, automation means less floor space, but higher energy consumption. Energy whose price is also rising...
They can be seen as constraints or... opportunities. For example: Systematise photovoltaic panels on the roofs of warehouses to produce some of the electricity they consume... helping to reduce their environmental impact as well as logistics costs.
What are the specificities of e-commerce logistics in terms of stock management?
La inventory management is not specific to e-commerce logistics, it's a question of general logistics. Nevertheless, for a cross-channel retailer, the current problem is to make its stock available everywhere at the same time. For an e-commerce company, the question may arise if it has several remote logistics warehouses. In this case, the solution is "unified stock".. Logistics must be able to pick up the product where it will cost the least to prepare it. To do this, professionals can rely on software - for example, the French OneStock - which makes stock visible wherever it is and calculates what will be the least costly. In other words, choose the product that is in stock in a shop close to the place of delivery rather than a product in a distant warehouse.
Is the current shortage affecting stock management?
Absolutely. You could even say that it explodes the usual rules of stock management. If a product is out of stock on an e-commerce site, the customer can easily place an order on a competitor's site. So we're seeing overstocking of certain products to the detriment of cost optimisation.
How can e-commerce logistics avoid this pitfall?
From a broader supply chain perspective, the key is to assess demand more accurately, even moving from forecasting to prediction. To achieve this, there are of course artificial intelligenceThis requires skills in data science, big data and machine learning. But this requires the skills of a data scientist or data analyst. On the contrary, logistics professionals need tools that are easy to learn and deploy. Software publishers are well aware of this and are working in this direction. For example, the French start-up Verteego.
In addition, the physical inventory remains essential. Today, the RFID technology enables data to be stored and retrieved remotely (from a few centimetres to several dozen metres). RFID tags or radio labels speed up receiving operations and make stocks more reliable. For inventory, considerable time savingsThis can take from a few minutes to an hour at most for a shop. While tags are becoming less and less expensive (10 to 15 cents per tag), the equipment needed to manage them (RFID readers) is more expensive. The question of recycling or re-encoding tags will undoubtedly arise in the future.
Faced with so many changes and constraints, how do you keep your customer promise?
First of all, we need to redefine the customer promise.
Firstly, because the e-consumer seems to have contradictory expectations. They'd like delivery to be fast, as close to home as possible (if possible at home), personalised and without any impact on the environment. But they're going to have to make some choices.
Secondly, because professionals would benefit from make sure their customers' needs are real. Some players have imposed their ability to deliver very quickly as a standard. Does this really meet expectations? It's doubtful. On average, it takes customers more than five days to pick up their orders, even though they are delivered within three days to a relay point.
Today, expectations seem to focus more on the quality of delivery through a range of services to ensure greater flexibility and reliability. Examples: precise delivery slots, the possibility of rescheduling delivery to another time or place, simple product returns.
"Providing different services to get closer to our customers".
This ties in with another major challenge in e-commerce logistics: keeping control of the customer relations and the company's image. In fact, when the logistics service provider manages order preparation and delivery, it is he who conveys a good or bad image of the company. The company 'loses' part of its customer relations, which are handled by people whose work it can neither direct nor control. Retailers are therefore working more and more on additional services that add value to delivery to recreate this customer relationship. This includes taking back old products.
Should you outsource your e-commerce logistics? When should you do it? How should you go about it?
There are no set rules or thresholds (turnover, volume) to determine when you should outsource your e-commerce logistics. It all depends on the specific constraints of each company. Of course, bringing logistics in-house has a cost and requires significant investment capacity (warehouses). But it offers an undeniable competitive advantage: you retain control of your customer relationships. You can also find yourself faced with a saturated warehouse, or decide on a strategy that focuses more on sales than logistics.
To choose the right service provider, you must ask yourself certain questions. For example :
- What relationship would I like to have with my logistics provider?
- How will my volumes change over the next few years?
- I'm a small e-tailer: what are the advantages and disadvantages of choosing a small or large logistics provider?
- Should I keep control of the transport part?
- Is the service provider capable of meeting orders and providing a quality service?
What's more, once the logistics have been outsourced, the work isn't over: audits are needed to ensure that the service provider is fulfilling its mission.
Finally, outsourcing logistics is not a one-way trip. Companies go through cycles, depending on their needs, which lead them to outsource, re-source, outsource again, and so on.
