The application of freight data, processed through advanced analytics, might change how large e-commerce companies handle market fluctuations, according to a recent report.
A FreightWaves white paper shows a widely supported use for data-driven decision-making in supply chain management. More than 90% of third-party logistics providers and shippers said the data-driven decision-making “will promote competency in the supply chain,” according to the report. Also, 71% of third-party logistics providers said big data improves quality and performance. However, 35% of shippers believe existing third-party logistics partnerships can support big data initiatives.
Large e-commerce companies need more from their supply chains, especially logistics capacity, the report shows. And the disrupting events of 2020, particularly the COVID-19 pandemic, have only increased the need.
The pandemic accelerated the growth of e-commerce by seven years within several months, according to John Koetsier of Forbes. In May, total online spending rose 77% to $82.5 billion, from the same month in 2019.
The growth e-commerce companies have experienced during a typical holiday season, or peak season, is small compared to the recent surge in e-commerce amid the pandemic. In the 2019 holiday season, e-commerce spending rose 13% to $142.5 billion, from the same period in 2018, the report shows. However, this accounts for less than 25% of the growth experienced since the start of the pandemic, according to the report.
The growth is attributed not only to items that are shipped directly to consumers’ homes but also to those who purchase items online and retrieve them at a store. The niche market of buy online and pick up in-store, (BOP or BOPIS), has become the reason many people visit brick-and-mortar stores during the pandemic, the report shows.
“It blended the traditional demands of e-commerce and brick-and-mortar stores into one option that frankly did not seem ready for wide-scale, national use,” according to FreightWaves. “Exceptions exist, notably those surrounding Walmart and significant e-commerce retailers. In turn, e-commerce giants are in a full-out war to capture the post-COVID-19 consumer. Retailers know they have an opportunity to amass significant wealth by capturing more of the e-commerce market, and even Walmart is now in the game.”
The report also highlighted consumers’ demands to receive products within 48 hours of placing an online order and noted a report by Betsy Atkins of Forbes that Amazon has set the standard, but other retailers such as Walmart and Target are responding by implementing two-day shipping.
“To keep up with increasing demand from e-commerce channels and meet the expectations of consumers, organizations will need to invest in their warehouses and distribution centers and improve development and implementation of advanced supply chain and logistics processes,” according to Atkins.
Walmart’s rollout of Walmart+ to compete with Amazon Prime “may very well be the only thing that can keep Walmart relevant as customers continue a massive exodus from brick-and-mortar stores in favor of e-commerce everything,” the report shows. “It’s not just retail, either. Food supply chains are seeing a record-breaking growth for online ordering [too], to the tune of 367% or more.”
Yet, the value of Wal-Mart’s e-commerce department ($337 billion) is about one-eighth of that of Amazon’s ($1.5 trillion), according to PYMNTS.com. And, nearly half of the families who shop at Walmart use Amazon Prime.
Walmart has a larger stake in the grocery business than Amazon, but according to PYMNTS.com, the Bentonville-based retailer is concerned that Amazon could take some of its market share in the grocery business as consumers transition to online shopping amid the pandemic.
As a result of the intense competition, more orders and faster promises for shipping will put a burden on logistics networks, and smaller companies might face an increased risk of being without capacity, unable to control freight spending and possibly pushed into bankruptcy, according to the FreightWaves report.
Some of the logistics challenges that e-commerce companies have worked to overcome include the driver shortage, hours-of-service regulations, worker retention, the electronic logging device (ELD) mandate, economic instability and reducing the rate of returns.
As e-commerce rises, so will the logistics challenges the companies experience. Freight data can be used to provide insights into what carriers are expected to do and how the market might respond, according to the report. The data can be used to determine the amount between a carrier picking up a load and when it was offered by the shipper. This lead time would help carriers better plan drivers, sales representatives and available capacity, allowing for better use of its assets. Shippers might look to another carrier if it missed a scheduled time to pick up a load. However, as e-commerce increases, carriers might look to the shippers who pay more to secure capacity.
E-commerce sales rose 44.5% in the second quarter, from the same period in 2019, and the sales increased from 10.8% of all retail sales in the period last year to 16.1% in the same period in 2020, according to a recent Journal of Commerce article.
Because of the recent increase in freight demand, shippers who had negotiated for lower rates in early 2020 are having to renegotiate prices to ensure capacity, the article shows.
Demand for e-commerce fulfillment and personal protective equipment are expected to contribute to elevated levels of U.S. imports through at least October, according to the JOC. The import surge that started in June was expected to last at least through September, but the timeline was extended, based on the growth in fulfillment of e-commerce orders as consumers prefer to shop online amid the pandemic.
The FreightWaves report also showed several other data points that shippers could use to predict whether spot rates will rise, including the frequency at which carriers reject loads. Higher rejection rates might mean shippers need to renegotiate contract terms. If the rejection rates are low, shippers might see rates fall. Shippers might look to more contract freight when rejection rates are high. Spot rates rise when rejection rates are high, the report shows.
Other data uses can help to reduce expenses and includes improving fleet maintenance, mitigating fuel surcharges and building a wider network based on competitive carriers, according to the report.
“Using data, e-commerce giants can better predict what will happen in the market, how quickly freight will be picked up and delivered and whether customers will continue shopping with that company or more to one of the other primary e-commerce competitors,” the report shows. “In the U.S., the situation surrounding COVID-19 is grim. However, the situation surrounding e-commerce giants is a full-speed race to the finish line where the winner will take all.”