Behind the scenes: understanding the logistics behind the online retail boom

1361929600196_1361929600196_r[1]As more and more people do their shopping online, the logistics sector is having to make some major changes in order to keep up. This Christmas has seen delivery services struggling to keep pace with getting goods to customers. Every year sees demand grow, but the solution doesn’t just involve finding more workers at key times; it also involves changing industry practices and getting smarter.

The changing face of retail

Since the first online sale was made 20 years ago, e-commerce has grown and grown, reaching a total of around $1.5tn this year. The last few months, however, have seen a slump, especially in developing countries such as China and India. The reason for this is that businesses simply can’t keep up with the logistics required to make everything run smoothly behind the scenes. Consumer demand is still growing, but if infrastructure is poor or organisation is lacking, it’s very difficult for online merchants to do business. Naturally, this creates a gap in the market that potential investors are eyeing with enthusiasm, but there is an extent to which each sector needs to find its own solution.

Logistics by sector

Looking at logistics across different sectors illustrates the diversity of challenges faced by the industry and some of the processes involved in solving them.

  • Supermarket shopping – requires local delivery services with the capacity to keep different products at different temperatures and deliver in short timescales, often planning routes so as to reach several customers within one small area.
  • Second-hand books – because they may individually sell at very low prices, these products need to be shipped cheaply, something often achieved through careful coordination of multiple freight movements between dispersed warehouses.
  • Arts and crafts – individual artists cannot access discounts available to large retailers, so they often organise through collectives or storefront companies in order to get improved deals on delivery to widely dispersed customers.
  • Garden products – requires local delivery with the capacity to handle potentially noxious or flammable materials as well as the delicate touch necessary to keep live plants healthy and unbruised during transit.
  • Entertainment – this sector has chosen to work around logistical challenges to a significant extent by switching toward digital products, which can simply be downloaded rather than needing to be transported in physical form.

Keeping up with demand

Logistics networks of all kinds are having to expand to keep up with demand, and that starts with training. Whilst it doesn’t take long to teach basic warehousing kills, there are inevitable delays when it comes to training drivers for forklifts, trucks and other parts of the supply chain, and still more so when it comes to finding people with the skills and education ready to take on management level occupations. This means it will be a few years before the logistics sector is fully ready to support the expansion in e-commerce across the world. In the meantime, however, there’s a great deal to learn from this pivotal moment in economic history.

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