Article on E-Commerce Logistics by Prof. Akhil Chandra

E-Commerce, a new business  opportunity to Indian Logistics Service providers

World over, blue chip logistics companies like DHL, DB Schenker , United Parcel service and many others have embraced E-Commerce in a big way changing themselves from a ‘brick and Mortar company’ to ‘Click and Mortar company’ providing new efficiencies to their management of their complex supply chains.
Could India be left far behind? Answer is big No ! India has now an internet user base of over 10 million users over 865 million mobile phone users and though the penetration of E-Commerce is low compared to markets like US, UK, Japan and China but is growing at a much faster rate with large number of new entrants and a burgeoning and upwardly mobile  middle class with large disposable income. Timing is now just right to cash in this new E-business opportunity for third party  Indian logistics providers and jump into  the bandwagon and with increasing broadband internet ( growth at 20 per cent) and 3 G penetration aided with WI-MAX connectivity offered to business entreprises , floodgates are wide open now for becoming last mile carrier to both type of Businesse viz B to B and B to C.   They have to integrate their business with E-Retailers with seamless information flow between Retailers, themselves and manufacturers after developing their ICT  capability. Let us look now look to other key drivers to this new E-Business opportunity  which are:

·                    Availability of much wider product range to what is available at brick and mortar retailers

·                    Busy lifestyles, urban traffic congestion and lack of time for offline shopping

·                    Lower prices compared to brick and mortar retail driven by disintermediation and reduced inventory and real estate costs

·                    Unlimited reach of the customers both nationally and internationally through internet portals

·                    India has world’s fouth largest internet users

·         India has close to 10 million online shoppers and is growing at an estimated 30%  CAGR vis-à-vis a global growth rate of 8-10%. Electronics and Apparel are the biggest categories in terms of sales.

·         Direct Imports constitute a large component of online sales. Demand for international consumer products is growing much faster than in-country supply from authorized distributors.

What shall be the new challenges to LSPs for this new E-Business opportunity?

        Electronic Commerce demands an agile, high velocity and granular approach to Logistics .

A manufacturer or online merchant must be able to customize an individual order; ship it directly to the buyer anywhere in the world; track the whereabouts of the item at any given time along the supply chain, handle customer inquiries, handle product returns (reverse logistics) all at very high speed  and at a fraction of the cost of traditional shipping and fulfillment.

Larger number of small parcels or packages due to a larger number of buyers making direct orders and a larger number of sellers than in traditional trade;

Origins and destinations of shipments are more widely dispersed, given that more buyers place direct orders with producers and distributors and more sellers access buyers globally

Accountability for shipments extends through the entire supply chain, compared with traditional logistics in which accountability is limited to single links of the supply chain

Customers have high expectations about quality of services and demand fast delivery of shipments;

Higher incidence of cargoes returned to the supplier than in traditional trade;

Greater demand for and availability of information covering transactions over entire supply chain, thus allowing on-line shipment tracking and other supply chain management functions;

Substantial increase in the volume of small shipments, leading to growth of demand for warehousing transport and other logistics infrastructure that can handle larger volumes of small shipments;

Qualified e-logistics providers must depend on integrated IT systems and complex

software to manage the dynamic flow of products. The quality of information must be much better than that of traditional outsourcers, so that companies can have visibility into their supply chains. Better information also reduces inventory throughout the supply chain, enabling companies to react quickly to market changes.

When delivering to private persons instead of companies, the demand for fast and accurate deliveries will increase. This is because one or more of the physical nodes will disappear when the goods can be transported directly from the producing company to the end customer. Direct home deliveries will request shorter lead times, and more complex distribution systems will be necessary to make this possible.

Conclusion:

E-Commerce opportunities can no longer be ignored by Indian 3 PL players. Country has now offered robust internet connectivity with high reach in the country and with new technologies like Wi-MAX and 3G future of E-Commerce is bright and early birds in logistics industry can reap the benefits offered. E-Commerce has been embraced by practically most of big international players and with multi-branding which is soon to be allowed to foreign Retailers like Wal-Mart, Tesco and Carrefour etc by Government of India , application of E-Commerce shall rise offering a clear cut opportunity base to Indian logistics service providers. Onus is on them to accept the change and thrive with the E-Buiness opportunities. logistics industry has to face the challenges and opportunities created by e-commerce, both from within the industry and from external players. The industry has always been pressed to cut costs and squeeze margins, and the future will be even more formidable as competition forces most companies to continue the streamlining of their business.