Our notion of convenience is evolving. Being able to offer options, from product variety to flexible delivery schemes, is essential for every business. That’s probably why some of the biggest companies in the world are moving beyond retail to establish their own logistics task forces. From Amazon to FedEx, the line between e-commerce retailer and logistics provider is blurring. We explore what’s behind this new trend, and what it means for supply chain.
How E-Commerce Brought Logistics From a Back-End Function to an Operational Powerhouse
Logistics has always been vital to the customer experience. In-store logistics, from shelf arrangements, to store layouts, to return services, has significant and direct impacts on customer satisfaction.
But it’s with the growth of e-commerce that logistics — particularly last-mile logistics — has gained attention as a key driver of enterprise success. Valued at over $550 billion, it’s no surprise that online retail is leading this trend. E-commerce has propelled logistics from the simple storing and processing of goods to an all-around customer-centric model for doing business. With e-commerce companies, shoppers have more control over their buying experience than ever before. They can opt for next-day delivery and even track shipments in real-time. Innovations like Amazon Key build last-mile logistics around one pillar — the customer's convenience.
Many of the new technologies being introduced into supply chain are particularly relevant to logistics. Amazon now uses drones for shipping. Artificial intelligence, the Internet of things (IoT), and blockchain technology are being explored as new solutions for automating processes, easing decision-making, and tracking entire transactions.
To sum it up: logistics is no longer simply a basic aspect of business; it is now an exciting and dynamic field with huge potential for business-changing innovations.
The Lines Blur: How (and Why) Retailers Are Adding Logistics to Their Service Functions
Omnichannel retail is becoming the obvious solution for businesses to offer flexibility to customers. A sleek omnichannel supply chain lets buyers finish their purchase in-store or online, regardless of how it was initiated. Running a supply chain that can reliably ship and store inventory for both in-store and online purchase isn’t just good for customers; it also lets brands integrate information about retailers, customer profiles, and sales channels, building a reliable database for future supply chain planning.
These benefits haven’t escaped online retailers. Earlier this year, Amazon announced its own shipping line, Shipping With Amazon (SWA). Attracting more Amazon Prime members, cutting costs, and gaining independence from 3PLs, are the primary motives behind the move. The company spent as much as $20 billion in deliveries and other shipping-related costs in 2017 alone. Having its own shipping service could address these costs while also encouraging Prime memberships.
If SWA proves that it can offer better efficiency and ROI, other major online retailers could follow in Amazon’s footsteps. The logistics landscape will change dramatically in the next few years as former customers of 3PLs move into the logistics market and become their competition. This could mean both a decline in business for 3PLs and the challenge of doing business against powerful competitors with solid customer bases and the ability to invest in advanced technologies.
These changes are already starting to take place. Walmart, the multinational retail corporation that famously put its competitors out of business thanks to its airtight inventory strategy, is also looking to take control of its own logistics. The company bought Parcel, a same-day delivery service that allows customers to set their preferred delivery time within a two-hour window. For now, Parcel only covers the New York area. But for a company with almost unlimited resources to pursue a competitive logistics strategy, that could change soon.
The shift to in-house logistics isn’t just happening in retail. Novatek, an independent natural gas producer, recently formed its own transportation subsidiary, the Maritime Arctic Transport LLC. By having its own shipping service, Novatek will gain full control over its operations and cost, which they state is vital to their long-term business plan.
It’s not just retail brands that are crossing the line into logistics. Last year FedEx introduced FedEx Fulfillment. The service offers warehousing, fulfillment, and reverse logistics to small and medium-sized enterprises (SMEs). Other companies are looking to combine retail and logistics by increasing the inventory capacity of urban storefronts, so they can function as small warehouses for ecommerce fulfillment.
Once a back-room cost center outsourced to 3PLs, logistics could become a key driver of business in the coming years. By placing more emphasis on providing products when and where customers want them, companies like Amazon and Walmart are helping to bring logistics to the forefront of supply chain management.