New frontier

0

Delivery logistics, once a relatively staid business, continues to be pushed in new directions by e-commerce. E-tailers of all sizes are looking to ‘disruptive logistics’ – a combination of delivery speed and innovative services – as a way to add value, separate themselves from the pack, and hold on to customers. Some of the largest names in e-commerce are leading this change, such as Amazon, Google and eBay.

The sheer size and bargaining power of these giants (plus the threat that they may develop their own logistics solutions) means that they are pushing postal and logistics firms to innovate faster than ever before. Continuous double-digit growth rates and peak volumes are becoming a problem for major e-tailers, however. Capacity can be scarce at times, and so guaranteeing service levels at peak times, such as before Christmas, is a card logistics companies can play in their favor. Resolving growth bottlenecks will be a critical issue for e-commerce in the future.

E-tail giants are also likely to continue developing critical customer interfaces that reach into logistics solutions as a means of differentiation. Thus logistics providers will need to be willing to work with the giants to develop tailored solutions – the deal of SingPost with Alibaba is one example.

Small and medium-sized enterprises (SMEs) in the e-tail space profit from innovation in logistics that can help them narrow the gap with the e-tail giants. With the right logistics partner, multichannel retailers can leverage their network of decentralized warehouses to unlock same-day services and gain a competitive logistics edge in the market against many pure players. Pure play SMEs do better establishing themselves as niche experts – exclusive SKUs and bundles can help them avoid conflict with e-tail giants, both in terms of products and delivery speed/service.

As competition in the e-commerce space heats up, parcel/postal firms will need to develop continuous innovation engines focused on the customer interface and last-mile solutions:

Same day: Faster delivery options, such as same day, at scale will be unavoidable. But integrated into regular afternoon delivery waves, same day can be scaled up at a reasonable cost. Same day will enable growth in instant gratification shopping, where customers are willing to pay for faster delivery.

Predictability: While one-hour delivery time windows will be the standard, what customers want is to determine themselves when and where they get their packages. Such self-selected delivery windows, priced by an intelligent yield management system, can offer new ‘pay per slot’ revenue opportunities.

Last-mile touch points: Parcel lockers, to-the-door options, private door lockers and parcel shops will continue to expand, with innovation around convenience.

Sunday delivery: The rest of the pack will be forced to follow in Amazon’s footsteps, and Sunday delivery can be expected to expand beyond the USA/UK, local jurisdiction and densities permitting.

Fresh/perishable goods delivery: This will require logistics companies to build scalable, cost-efficient cold-chain solutions. Major logistics companies are already testing delivery options. Given the attractive size of this market and high delivery frequency required by households, this sector will be one of the hottest growth areas in the coming 12 months in the USA and Europe.

Data management and integration: This will play an expanding role. E-tailers want real-time data on delivery progress, while end customers want to be able to change deliveries on the fly.

Logistics providers will need to offer fully integrated transparency on data, with constant, real-time interfaces.

There is no denying it – postal/parcel companies must increase the time they spend (re-) innovating their businesses if they want to stay in the e-tail vanguard. Without innovation, traditional products and business models will be tested and found wanting as the pace of disruption continues.

About the author

Michael Lierow is a partner at Oliver Wyman for sustainability and transportation in Munich. He has 12 years of consulting experience with a special focus on efficiency programs and network optimization. He studied Business and Economics at the Otto-Beisheim Graduate School of Management in Germany, France and Australia

Share.

Comments are closed.