The Supply Side: E-commerce expands services to meet rising consumer demand

About two-thirds of e-commerce businesses see logistics as a key differentiator among them, and expanding services has become necessary to meet rising customer expectations, according to a new survey.

In a recent webinar, Johannes Panzer, head of industry solutions for e-commerce at logistics software provider Descartes Systems Group, discussed the results of the second annual E-commerce Supply Chain and Logistics Benchmark Survey. More than two-thirds of the 181 survey participants were e-commerce vendors, and the rest were third-party logistics companies. Nearly 80% ship parcel packages, more than half ship less-than-truckload freight and 64% have more than 500 shipments per day.

While 66% of survey participants see e-commerce logistics as a key differentiator among them, about 10% of them see e-commerce logistics as a “necessary evil,” the survey shows. E-commerce started to become popular in 2000, and over the next decade, consumers became focused on price, looking for the best deal, Panzer said. Now, consumers have started to become service buyers, with rising expectations.

In the survey, more than half of the participants see e-commerce is impacting their industry by increasing supply chain visibility for the client, and larger companies are more interested in investing in e-commerce.

Over the next five years, the greatest impacts to business are expected to be marketplace and channel strategies, technology advances and shrinking margins. Panzer explained online shoppers used to start with Google to search for a product, but now, Amazon is their first stop. He also said technology is available for those who want to increase transparency.

The majority of companies in the survey expect annual growth over the next two to three years. None expect to shrink, 7% expect limited or zero growth, 8% expect less than 5% growth, 48% expect 5% to 15% growth and 36% expect more than 15% growth.

Technology is driving the growth in e-commerce, he said. Nearly half of the top-performing companies expect to see a more than a 5% rise in IT expenses, 54% of IT investments are expected to be in connections, warehouse and carrier integration, and 32% of the top-performing companies are early adopters of technology. Bottom performers comprise 13% of those that are early adopters.

REAL-TIME VISIBILITY
The top four strategies and tactics of top-performing companies include offering new shipping options and delivery services to customers (58%), optimize pick, pack and ship process (47%), optimize returns process (37%) and real-time tracking of packages (21%), according to the survey.

Panzer said real-time tracking is a bigger issue in North America because distances and delivery times are longer. In Europe, warehouse automation is more important because warehouse space is more critical, he said.

In November, Lowell-based carrier J.B. Hunt Transport Services started to work with visibility systems provider project44 to integrate its visibility system into the carrier’s software platform, J.B. Hunt 360. The system will allow customers to view real-time shipment information regardless of the carrier and eliminate the need for multiple platforms.

“The challenges our customers are facing today require greater visibility into their transportation network,” said Shelley Simpson, executive vice president and chief commercial officer for J.B. Hunt. “By integrating project44 technology within J.B. Hunt 360, customers can view and manage multi-carrier freight from a single platform, helping them streamline operations and meet their supply chain goals.”

Panzer said a lot of focus has been put on increasing shipping speed, but what customers really want is to have shipping choices. And offering choices can make a difference for e-commerce companies, he said. More than half of survey participants believe offering window-of-delivery times is on the rise, and 56% of participants said express shipping is difficult with which to compete.

In April, Amazon announced it would invest $800 million to reduce delivery times for its Prime members. Weeks later, Walmart announced it would offer free next-day delivery in select areas and had plans to expand the service to 75% of U.S. consumers by the end of the year.

The time between receiving an order and handing off the order to a carrier varies, and top-performing companies are faster at this. The process to deliver an order to the carrier takes 6% of participants more than 48 hours, 19% between 24 and 48 hours, 44% between 12 and 24 hours and 31% less than 12 hours. The survey shows 42% of the top performers complete the process in less than 12 hours, while 23% of the bottom performers do this in the same amount of time.

FINAL MILE SHIPPING
With shipping costs on the rise annually, some e-commerce shippers have been choosing to handle the last mile of a shipment, instead of handing it off to a carrier. But the cost can be greater to do this, until shippers reach a high number of shipments. Among the top performers, 17% already handle home delivery, Panzer said.

Department store John Lewis of the United Kingdom offers time windows in which to ship items and provides services such as setting up TVs for customers. Propane distributor Origin of Australia allows customers to view a propane truck on the way and will notify them if a shipment is delayed.

J.B. Hunt has been acquiring companies to expand its reach into e-commerce and the last mile of shipments. In February, J.B. Hunt completed the acquisition of New Jersey-based carrier Cory 1st Choice Home Delivery. It spent $100 million to acquire Cory as part of J.B. Hunt’s growth into the final mile delivery of bulky items, especially furniture. J.B. Hunt’s Final Mile Services division is part of the carrier’s Dedicated Contract Services segment, and revenue rose $26 million in the first quarter of 2019, from the same period in 2018.

In 2017, J.B. Hunt spent $136 million to purchase Houston-based carrier Special Logistics Dedicated, allowing the company to expand its pool distribution and fulfillment delivery services. Pool distribution allows a company to combine multiple less-than-truckload shipments into one shipment, resulting in a lower shipping rate, and the service is used in the distribution of e-commerce freight. The 2017 deal was the first time in 26 years J.B. Hunt had acquired another company.

With the Cory acquisition, the final mile division will include 100 locations and more than 3.1 million square feet of warehouse and facilities space.

Editor’s note: The Supply Side section of Talk Business & Politics focuses on the companies, organizations, issues and individuals engaged in providing products and services to retailers. The Supply Side is managed by Talk Business & Politics and sponsored by Propak Logistics.