May 5, 2023
As we step into 2023, the logistics world is gearing up for a disruptive transformation. With the advent of new technologies and changing customer demands, logistics companies are facing unprecedented challenges and opportunities. It's an exciting time for the industry, as businesses embrace innovation to stay competitive and drive growth. In this article, we will explore the top 10 trends that are set to shape the logistics world in 2023, and how disruptive pioneers are leading the way towards a more efficient, connected, and sustainable future. So fasten your seatbelts and get ready for an exciting journey into the future of logistics!
1. eCommerce will dominate the retail marketIf you're still skeptical about the power of eCommerce, you might want to sit down for this. We are going to present some facts and data that will blow your mind and convince you that eCommerce is not only here to stay, but also to dominate the retail market in the near future.
- The global eCommerce market is expected to total $6.3 trillion in 2023, up from $4.2 trillion in 2020. That's a staggering 50% increase in just three years!
- eCommerce sales will account for 22% of all retail sales worldwide in 2023, up from 14.1% in 2019. That means that almost one in every four purchases will be made online.
- The US eCommerce market will reach $1.2 trillion in 2023, making it the second-largest eCommerce market in the world after China. The US eCommerce sales will grow by 39% from 2020 to 2023, faster than the global average of 33%.
- The number of digital buyers worldwide will reach 3.2 billion in 2023, up from 2.7 billion in 2020. That means that more than 40% of the world's population will be shopping online by then.
- The average annual spending per digital buyer will increase from $1,548 in 2020 to $1,972 in 2023. That means that people will not only shop online more often, but also spend more money per purchase.
- The most popular product categories for online shopping in 2023 will be fashion, electronics, and furniture. These categories will account for more than half of all eCommerce sales worldwide.
- The most popular online shopping platforms in 2023 will be Amazon, Alibaba, and Shopify. These platforms will dominate the eCommerce landscape with their massive customer base, product variety, and innovative features.
2. Logistics companies will invest heavily in digitalizationLogistics companies will invest heavily in digitalization, using artificial intelligence, blockchain, cloud computing, and big data to optimize their operations and enhance their customer experience. This is not a wild guess, but a serious prediction based on the current trends and benefits of digitalization in the logistics sector.
- Digitalization can improve interoperability, data analytics, internal operations, time and cost efficiency, and customer satisfaction for logistics companies.
- Artificial intelligence can help logistics companies automate and streamline various processes, such as transportation management, shipment execution and tracking, inventory management, demand forecasting, and route optimization.
- Blockchain can help logistics companies increase transparency, traceability, security, and trust in their supply chains, by creating immutable records of transactions and events that can be verified by all parties involved.
- Cloud computing can help logistics companies access scalable, flexible, and cost-effective IT infrastructure and services, without having to invest in expensive hardware and software.
- Big data can help logistics companies collect, store, analyze, and leverage large volumes of structured and unstructured data from various sources, such as sensors, GPS, RFID tags, social media, etc., to gain insights and make better decisions.
3. Resilience will become a competitive advantage for logistics providersSupply chain resilience will be a key priority for businesses, as they face increasing risks of disruption due to natural disasters, cyberattacks, trade wars, and pandemics. They will adopt agile and flexible strategies to cope with uncertainty and volatility. This idea is supported by facts and data from a recent survey by McKinsey, which shows that companies have made significant progress on measures that have been on their agenda since the start of the COVID-19 crisis, such as increasing visibility, diversifying suppliers, and optimizing inventory. The survey also reveals that companies that invested more in supply chain resilience before the pandemic were able to recover faster and perform better than their peers. According to the survey, resilient companies achieved 30 percent higher revenue growth and 40 percent higher earnings growth than non-resilient companies in 2020. However, supply chain resilience is not a one-time effort, but a continuous journey that requires constant adaptation and innovation. The survey also identifies some of the emerging challenges and opportunities that supply chain leaders will face in the post-pandemic world, such as digital transformation, sustainability, customer-centricity, and talent development. To succeed in this dynamic environment, businesses will need to embrace a culture of learning and collaboration, and leverage advanced technologies and analytics to enhance their decision making and agility.
4. Technology will enable new modes of transportationTechnology will renovate new modes of transportation, such as drones, autonomous vehicles, hyperloop, and electric trucks. These will offer lower costs, higher efficiency, and lower environmental impact for moving goods and people.
- Drones can deliver packages faster and cheaper than traditional methods, reducing traffic congestion and greenhouse gas emissions. According to a study by the University of Washington, drone delivery could reduce energy consumption by 54% and carbon dioxide emissions by 53% compared to diesel trucks in some scenarios.
- Autonomous vehicles can improve safety, mobility, and productivity by eliminating human error, reducing crashes, and optimizing routes. According to a report by McKinsey & Company, autonomous vehicles could save up to 300,000 lives per year worldwide by 2040, reduce travel time by up to 40%, and increase GDP by up to 5.6%.
- Hyperloop is a proposed mode of transportation that uses pods traveling in vacuum tubes at speeds of over 1000 km/h. Hyperloop could reduce travel time, energy consumption, and carbon footprint significantly compared to conventional modes. For example, a hyperloop trip from Los Angeles to San Francisco could take only 30 minutes and use only 4% of the energy of a plane flight.
- Electric trucks are vehicles that use batteries or fuel cells to power electric motors instead of internal combustion engines. Electric trucks could lower operating costs, noise pollution, and greenhouse gas emissions for freight transportation. According to a study by the International Council on Clean Transportation, electric trucks could achieve a 50% reduction in total cost of ownership by 2030 and a 90% reduction in carbon dioxide emissions by 2050 compared to diesel trucks.
5. Sustainability is becoming more important than everSustainability is not only a buzzword, but also a competitive advantage for logistics providers in 2023. As more and more customers demand eco-friendly delivery options, logistics providers have to adapt their practices to reduce their environmental impact and increase their efficiency. One of the ways they can do this is by adopting the circular economy model, which aims to eliminate waste and reuse resources as much as possible. For example, some logistics providers offer reverse logistics services, which collect used products from customers and return them to manufacturers for refurbishment or recycling. Another way is by using renewable energy sources, such as solar or wind power, to run their warehouses and logistics centers. This can help them save on energy costs and reduce their carbon emissions. For instance, Iberdrola, a global energy company, provides renewable energy solutions to logistics companies such as Amazon and DHL. A third way is by offsetting their carbon footprint, which means compensating for the greenhouse gases they emit by investing in projects that reduce or capture carbon elsewhere. For example, DHL has a GoGreen program that offers carbon-neutral shipping options to its customers and supports various environmental projects around the world. These are some of the examples of how sustainability can become a key differentiator for logistics providers in 2023, as they strive to meet the expectations of eco-conscious consumers and regulators.
6. Collaboration will be the key to success in the logistics industryCollaboration in the logistics industry involves companies forming strategic partnerships and alliances to share resources, expertise, and data. These collaborations can help companies reduce costs, improve efficiency, and enhance customer service. Additionally, by collaborating, companies can access new markets and expand their customer base. One example of successful collaboration in the logistics industry is the partnership between DHL and Amazon. In 2018, DHL announced a new service called Parcel Metro, which is aimed at delivering packages to customers in urban areas. The service was launched in Chicago, and DHL partnered with Amazon to provide last-mile delivery services for Amazon's Prime members. The partnership allowed DHL to leverage Amazon's vast network of customers and delivery drivers, while Amazon benefited from DHL's expertise in logistics and delivery. Another example is the partnership between UPS and Shopify. In 2018, UPS announced that it had partnered with Shopify to provide UPS shipping rates to Shopify merchants. This partnership allowed Shopify merchants to access UPS's global network of logistics and delivery services, while UPS benefited from Shopify's large customer base. The logistics industry is also leveraging platforms and networks to connect with customers and suppliers across the globe. One example of such a platform is Freightos, which is an online marketplace that connects shippers and carriers. Freightos allows shippers to compare prices and delivery times from multiple carriers, and it provides carriers with access to new customers. In 2021, DHL conducted a study on the logistics industry, which revealed that 81% of logistics companies believe that collaboration will be the key to success in the industry. The study also found that 60% of logistics companies are currently collaborating with other companies to share resources, expertise, and data. The logistics industry is poised for growth, and companies that embrace collaboration will be better positioned to succeed in the future.
7. Customer-centricity will be the driving force behind logistics innovationGone are the days when logistics companies could get by with a one-size-fits-all approach to their services. Today, customer-centricity is no longer just a buzzword, but a fundamental strategy for innovation in the industry. In an ever-evolving and fiercely competitive market, logistics companies must now provide personalized and seamless experiences that cater to their clients' needs for speed, convenience, and transparency. And how do they accomplish this? By tapping into the power of cutting-edge technologies like data analytics, chatbots, voice assistants, and augmented reality to revolutionize their communication and engagement with customers.
- Data analytics can help logistics companies understand their customers' needs, preferences, and behavior better, and provide them with tailored solutions and recommendations. For example, DHL uses data analytics to optimize its delivery routes, reduce costs, and improve customer satisfaction.
- Chatbots and voice assistants can provide 24/7 customer service, answer queries, provide updates, and handle complaints. They can also automate tasks such as booking, tracking, and billing. According to Deloitte, chatbots are the top use of AI in enterprises, and their adoption rates are expected to almost double over the next two to five years.
- Augmented reality (AR) can enhance the customer experience by providing immersive and interactive features. For example, AR can help customers visualize how their products will look or fit in their desired location before they buy them. AR can also help logistics workers perform tasks more efficiently and safely. For example, AR glasses can provide real-time information and guidance for picking, packing, and loading operations. According to Research and Market, the total AR market is expected to grow at a CAGR of 31.5% from 2021 to 2026.
8. Diversity and inclusion will be a core valueDiversity and inclusion will be a core value for logistics organizations, as they seek to attract and retain talent from different backgrounds, cultures, and perspectives. They will foster a culture of respect, empowerment, and belonging for their employees and stakeholders. Let's sprinkle in some amusing tidbits to back up this notion:
- According to a Deloitte report, 75% of millennials say that a diverse and inclusive workplace is important to them when choosing an employer.
- A study by McKinsey found that companies in the top quartile for gender diversity on their executive teams were 21% more likely to have above-average profitability than those in the bottom quartile.
- A survey by Gartner revealed that 69% of supply chain professionals said that diversity and inclusion initiatives improved their team performance.
9. Ethics and social responsibility will be a major concern for logistics playersLogistics players are aware that ethics and social responsibility are not mere catchphrases, but crucial components of their business strategy. These companies recognize their obligation to various stakeholders, including customers, employees, suppliers, environment, and society as a whole. They are also aware that maintaining ethical and socially responsible practices can give them an advantage in the highly competitive market. For example, Logistics UK, a trade association for the logistics industry in the UK, has a corporate social responsibility (CSR) policy that covers four areas: economic, social, environmental, and governance. They aim to conduct their business in a way that is ethical, transparent, accountable, and compliant with the law. They also support various initiatives and charities that benefit the community and the industry. According to a study by Jennings (2002), logistics social responsibility (LSR) can be defined as "the integration of ethical principles into logistics decision making and practice". The study proposes an integrative framework for LSR that consists of six dimensions: legal compliance, ethical awareness, stakeholder management, social responsiveness, environmental stewardship, and global citizenship. The study also suggests that LSR can enhance the performance and reputation of logistics firms. As logistics players encounter greater scrutiny from regulators, media, and society, ethics and social responsibility will become a top priority for them in the future. They will strive to uphold elevated levels of transparency, accountability, and compliance throughout their operations and practices. Furthermore, they will endeavor to generate value for their stakeholders while making a positive contribution to society at large.
10. Innovation and creativity will be the hallmarks of the logistics sector in 2023As the logistics sector navigates a dynamic and complex environment in 2023, innovation and creativity will serve as its defining characteristics. In order to remain competitive, companies will embrace experimentation, learning, and adaptation, as they explore new opportunities and challenges. One area where innovation is being implemented is the use of autonomous vehicles and drones for deliveries. StartUs Insights reports that these technologies can reduce delivery costs by up to 40%, while also boosting speed and efficiency and enhancing customer satisfaction. Additionally, logistics companies are adopting blockchain and smart contracts for supply chain management to improve the transparency, security, and traceability of transactions, as well as minimize paperwork and errors. Another area where logistics companies are leveraging innovation is the integration of artificial intelligence and big data analytics for demand forecasting and optimization. These tools allow logistics companies to anticipate customer needs, optimize inventory management, and reduce waste. A PwC survey suggests that in 2023, supply chain-intensive sectors prioritize increasing efficiency and reducing costs. By embracing innovation and creativity, logistics companies can achieve these goals and gain a competitive advantage in the market.
May 5, 2023
If you're an eCommerce seller who wants to ship your products internationally, you might have heard of the term "airway bill" or AWB. But what exactly is it and why is it important for your business? In this article, we'll answer some of the most common questions about AWB and show you how it can benefit your eCommerce operations.
So what is AWB?An airway bill (AWB) is a document that accompanies your goods when they are transported by air. It serves as a contract between you (the shipper) and the carrier (the airline) that specifies the terms and conditions of the shipment. It also acts as a receipt that proves that the carrier has received your goods and is responsible for delivering them to the destination.
How AWB started its journeyThe origin of AWB can be traced back to the early days of aviation, when air transport was mainly used for mail and passengers. The first AWB was issued in 1927 by Imperial Airways, a British airline that operated flights to Africa, Asia, and Australia. As air transport became more popular and efficient, it also opened up new possibilities for eCommerce. Online retailers could now reach customers all over the world with faster and cheaper delivery options. However, this also meant that they had to deal with different customs regulations, taxes, and duties in each country. That's where AWB came in handy. It provided a standardized way of identifying and tracking the goods, as well as specifying the terms and conditions of the shipment. It also helped to simplify the customs clearance process by providing information on the origin, destination, value, and description of the goods. Today, AWB is still an essential document for international air cargo. However, it has also evolved with the times. Many airlines now use electronic AWB (e-AWB), which replaces the paper version with a digital one. This reduces errors, costs, and environmental impact.
How many types of AWB are there?There are two main types of AWB: master airway bill (MAWB) and house airway bill (HAWB). A MAWB is issued by the carrier to the freight forwarder or consolidator who arranges the shipment of multiple consignments from different shippers. A HAWB is issued by the freight forwarder or consolidator to each individual shipper who has a consignment in the consolidated shipment. A HAWB contains more details about the specific goods and their destination than a MAWB.
What are the main functions of the AWB?The AWB has several functions for both the shipper and the carrier. Some of them are:
- It provides information about the shipment, such as the description, quantity, weight, dimensions, value, origin, destination, routing, and delivery date of the goods.
- It indicates the charges and fees associated with the shipment, such as the freight rate, fuel surcharge, insurance, customs duties, taxes, and other expenses.
- It specifies the liability and responsibility of the carrier and the shipper in case of loss, damage, delay, or misdelivery of the goods.
- It serves as a proof of delivery when the carrier delivers the goods to the consignee (the receiver) and obtains their signature on the AWB.
- It facilitates the customs clearance process by providing the necessary documents and information to the customs authorities.
AWB can store more information than you think!The AWB contains various fields that record different information about the shipment. Some of the most important fields are:
- AWB number: a unique number that identifies the shipment and allows tracking its status and location.
- Shipper's name and address: the name and address of the person or company who sends the goods.
- Consignee's name and address: the name and address of the person or company who receives the goods.
- Carrier's name and code: the name and code of the airline that transports the goods.
- Airport of departure and destination: the codes of the airports where the goods are loaded and unloaded.
- Flight number and date: the number and date of the flight that carries the goods.
- Nature and quantity of goods: a brief description and quantity of the goods in terms of pieces, weight, volume, etc.
- Handling information: any special instructions or requirements for handling or delivering the goods.
- Charges: a breakdown of all charges and fees related to the shipment.
Ok, I’m running an eCommerce business, how can it benefit me?If you run an eCommerce business that sells products internationally, you know how important it is to have a reliable and efficient delivery service. But did you know that using an airway bill (AWB) can make your crossborder logistics even easier and more convenient? Here are the top 5 benefits of AWB for eCommerce in general.
- Faster delivery time. AWB is a document that serves as a contract between the shipper and the carrier, as well as a receipt of goods and a tracking number. It allows the carrier to transport the goods by air without any additional paperwork or customs clearance. This means that your products can reach your customers faster and with less hassle.
- Lower shipping costs. AWB helps you save money on shipping costs, as it eliminates the need for multiple documents and fees for different countries. You only pay for the weight and volume of your goods, not for the number of documents or the destination country. Plus, you can take advantage of lower rates offered by air freight carriers, especially for bulk orders.
- Better security and tracking. AWB provides better security and tracking for your goods, as it contains all the information about the shipment, such as the sender, receiver, contents, value, and destination. You can track your shipment online using the AWB number and get real-time updates on its status and location. You can also use AWB to file claims or complaints in case of damage, loss, or delay of your goods.
- Higher customer satisfaction. AWB also improves your customer satisfaction, as it ensures that your products arrive on time and in good condition. Your customers will appreciate the fast and smooth delivery service, as well as the ability to track their orders online. You can also use AWB to provide proof of delivery and confirmation of receipt, which can help you avoid disputes or chargebacks.
- Easier compliance and regulation. AWB makes it easier for you to comply with the rules and regulations of different countries and regions when it comes to crossborder eCommerce. AWB is a standardized document that is recognized and accepted by most authorities and agencies around the world. It contains all the necessary information and declarations for customs clearance and taxation purposes, which can help you avoid fines or penalties.
May 5, 2023
As the world becomes increasingly interconnected, eCommerce businesses have seized the opportunity to expand their customer base beyond borders. Thanks to technological advancements and global trade agreements, it is now possible to sell products to customers in different countries with relative ease. However, international shipping is not without its challenges. One of the biggest obstacles faced by eCommerce businesses today is shipping disruptions, which can cause delays and result in customer dissatisfaction. If you are running an eCommerce business that sells to customers across borders, delivering your products on time and in good condition is crucial to your success. But what happens when things go wrong? These disruptions can cause significant delays that can negatively impact your business reputation and bottom line. However, there are ways to deal with these disruptions effectively. In this article, we will explore the different types of shipping disruptions and provide practical tips on how to mitigate their impact
1. Customs clearanceCustoms clearance can be a complicated process, involving inspections, taxes, and fees that vary by country. It's essential to understand the regulations and requirements of each destination country to avoid delays and ensure successful delivery. In 2019, global trade experienced a total of 117.6 million customs seizures worth $3.3 billion, which highlights the importance of adhering to customs regulations. To navigate this process efficiently, partnering with experienced logistics companies that have extensive knowledge and experience with customs clearance is essential. These companies can help you prepare and submit necessary documentation, and liaise with local authorities to minimize the risk of delays. It's also important to provide accurate and detailed information on product descriptions, values, and quantities to avoid any discrepancies during the customs clearance process.
2. Weather conditionsWeather conditions can significantly impact the transportation and delivery of goods, causing delays and disruptions. According to the World Economic Forum, the total economic cost of natural disasters reached $232 billion in 2019, with transportation and logistics being one of the most affected sectors. It's crucial to monitor weather conditions and have contingency plans in place to address any potential disruptions. One strategy is to diversify your shipping routes to avoid areas that are prone to severe weather conditions. You can also leverage technology, such as real-time tracking and weather forecasting tools, to make informed decisions and keep your customers updated.
3. Holidays and peak seasonsHolidays and peak seasons can significantly impact delivery services and cause delays. For example, Chinese New Year, which falls between January and February, can cause disruptions in shipping from China, affecting eCommerce businesses that rely on Chinese suppliers. Similarly, Black Friday, Cyber Monday, and the holiday season can create a surge in demand for delivery services, leading to delays in shipping and delivery. To manage these peak periods, eCommerce businesses should plan ahead and communicate with their customers. It's essential to understand the shipping lead times and capacity of delivery services during these periods and set realistic delivery expectations for your customers. You can also offer alternative delivery options, such as expedited shipping, to meet the demands of customers who need their orders quickly.
4. Incorrect or incomplete addressProviding an incorrect or incomplete address is a common mistake that can cause delays in delivery. In fact, according to a survey by Pitney Bowes, 20% of eCommerce shipments experience delivery issues due to incorrect or incomplete addresses. To avoid these delays, it's crucial to verify and confirm the address with the customer before shipping the product. You can use automated address verification tools to check the accuracy of the address and reduce errors. Another strategy is to offer address correction services to your customers to prevent errors at the source.
5. Missing or inaccurate documentationMissing or inaccurate documentation can also cause delays or rejection at customs, leading to frustration and potential loss of business. For example, a missing or inaccurate commercial invoice can lead to lengthy delays in the customs clearance process. In 2019, 70% of customs issues were due to incorrect or missing documentation. To avoid these issues, eCommerce businesses should have a clear understanding of the necessary documentation for cross-border delivery and ensure its accuracy. Automating the documentation process with digital tools can also help reduce errors and streamline the customs clearance process.
6. Product restrictionsCertain products may be restricted or prohibited from entering certain countries due to safety, health, or legal reasons. It's essential to understand these restrictions and regulations to avoid delays, penalties, or even the seizure of goods. In 2020, the U.S. Customs and Border Protection seized over 27,000 shipments of counterfeit goods worth approximately $1.3 billion. To navigate these restrictions, eCommerce businesses should conduct thorough research on the product restrictions and regulations of the destination country before shipping their products. They can also partner with experienced logistics companies that have extensive knowledge of international shipping regulations to ensure compliance and avoid any issues.
7. Delivery errorsDelivery errors are a common problem in international shipping and can have a significant impact on delivery times. Inaccurate or incomplete addressing information, incorrect labeling, and damaged packaging are just a few examples of the types of errors that can occur during shipping. According to a survey conducted by MetaPack, delivery errors are a major problem, with 55% of customers experiencing a late or failed delivery due to incorrect addressing. To reduce the risk of delivery errors, it's essential to use accurate and complete addressing information and to make sure that your products are packaged securely and labeled correctly. This can help to minimize the risk of damage during transit and ensure that your products are delivered to the correct address, on time, and in good condition.
8. Political instabilityPolitical instability can have a significant impact on international shipping, with protests, riots, and civil unrest all potentially causing disruptions to transportation and delivery services. For example, during the Arab Spring in 2011, many businesses in Egypt were affected by the unrest, leading to delays in delivery services. Similarly, the ongoing conflict in Yemen has disrupted shipping routes and caused delays in the delivery of humanitarian aid. To mitigate the impact of political instability on shipping, it's essential to have contingency plans and work with logistics providers that have experience operating in politically unstable regions. This can help to minimize the risk of delays and ensure that your products are delivered on time and in good condition.
9. Capacity constraintsCapacity constraints can also lead to delays in international shipping, particularly during peak seasons such as the holiday season. During these periods, delivery services may experience a surge in demand, leading to capacity constraints and delays. Similarly, the COVID-19 pandemic has led to disruptions in transportation and logistics, causing capacity constraints and delays. To mitigate the impact of capacity constraints on shipping, it's essential to plan ahead and work with logistics providers that have sufficient capacity to handle your shipping needs. This can help to ensure that your products are delivered on time and in good condition, even during periods of high demand or disruption.
10. Payment issuesPayment issues can also cause delays in international shipping, with customs duties and taxes often causing problems for businesses and customers alike. If your customer fails to pay the customs duties or taxes on their shipment, it may be held at customs, leading to delays. Similarly, if there are issues with your payment processing system, it may cause delays in the processing of your shipment. To avoid payment issues, it's crucial to have a reliable payment processing system and work with logistics providers that have experience handling customs clearance and tax payments. This can help to ensure that your products are delivered on time and in good condition, without being held up by payment-related issues.
In conclusion…As an eCommerce seller, it's essential to acknowledge that delays in international shipping can be inevitable in some scenarios. Customs clearance, weather conditions, holidays, and peak seasons, and other factors outside of your control can cause shipping delays. However, it's how you proactively manage these delays that can set you apart from other sellers. One way to differentiate yourself is by communicating with your customers about the potential for delays and providing updates on the status of their shipments. This can help manage customer expectations and reduce frustration. Another way to stay ahead of delays is by working with logistics providers that have experience navigating customs clearance, transportation disruptions, and capacity constraints. By being proactive in managing potential delays, eCommerce sellers can turn this into a competitive advantage. Customers are more likely to return to a seller that has transparent communication and is reliable in delivering their products, even in challenging circumstances. So, don't view delays as a setback, but as an opportunity to set yourself apart from other sellers in the eCommerce space.
May 5, 2023
If you're an eCommerce business owner, you might have heard of the term "value chain" before. But what does it mean, and why should you care? In this article, we'll explain what a value chain is, how it works, and how it can help you create more value for your customers and your business.
A brief history of Value ChainA value chain is a way of looking at all the activities and processes involved in creating and delivering a product or service to your customers. It was first introduced by Michael Porter, a famous Harvard professor and business guru, in his book “The Competitive Advantage: Creating and Sustaining Superior Performance”. Porter argued that competitive advantage comes from performing these activities better than your competitors. A value chain consists of two types of activities: primary and secondary. Primary activities are those that directly contribute to the creation and delivery of your product or service, such as:
- Inbound logistics: This includes receiving, storing, and managing the raw materials and components that you need to make your products.
- Operations: This includes transforming the raw materials and components into finished products.
- Outbound logistics: This includes packaging, sorting, and shipping your products to your customers.
- Marketing and sales: This includes promoting, advertising, and selling your products to your customers.
- After-sales service: This includes providing support, warranty, repair, and customer service to your customers after they buy your products.
- Procurement: This includes sourcing and purchasing the raw materials, components, equipment, and services that you need for your primary activities.
- Technological development: This includes researching and developing new products, designs, processes, and systems that can improve your primary activities.
- Human resources management: This includes recruiting, hiring, training, developing, retaining, and compensating your employees who perform the primary and secondary activities.
- Infrastructure: This includes managing the overhead and administration of your business, such as finance, accounting, planning, legal, etc.
What can you get from understanding your value chain?By analyzing your value chain, you can identify where you can create more value for your customers and where you can reduce costs or improve efficiency. For example, you can:
- Improve your inbound logistics by finding cheaper or better quality suppliers or by optimizing your inventory management.
- Improve your operations by adopting lean manufacturing techniques or by automating some processes.
- Improve your outbound logistics by finding faster or cheaper delivery methods or by offering more options to your customers.
- Improve your marketing and sales by segmenting your market or by using digital marketing tools.
- Improve your after-sales service by offering more guarantees or by providing online support.
- Benchmark your performance against theirs and see where you can improve or where you have an edge.
- Identify opportunities for differentiation or innovation that can give you a competitive advantage.
- Identify threats or challenges that can affect your market position or profitability.
Let’s see how it works for the giants too…Now that you know what a value chain is and how it works, let's look at some real-life examples of eCommerce businesses that have used it to create value for their customers and themselves.
Example 1: AmazonAmazon is probably the most well-known and successful eCommerce company in the world. It has a huge and diverse product catalog, millions of loyal customers, and a global presence. But how does it manage its logistics value chain? One word: innovation. Amazon is constantly investing in new technologies and strategies to optimize its logistics operations. Some of its innovations include:
- Fulfillment by Amazon (FBA): This is a service that allows third-party sellers to store their products in Amazon's warehouses and let Amazon handle the packing, shipping, and customer service. This way, sellers can focus on their core business and benefit from Amazon's logistics expertise and scale.
- Amazon Prime: This is a membership program that offers customers free two-day shipping on millions of items, as well as other perks like video streaming, music streaming, and access to exclusive deals. This program increases customer loyalty and retention, as well as encourages more frequent and higher-value purchases.
- Amazon Logistics: This is Amazon's own delivery network that consists of thousands of drivers, vans, trucks, planes, drones, and robots. This network gives Amazon more control over its delivery speed, quality, and cost, as well as enables it to offer same-day and next-day delivery options to customers.
Example 2: AlibabaAlibaba is the largest eCommerce company in China and one of the biggest in the world. It operates several online platforms that connect buyers and sellers across different industries and markets. But how does it manage its logistics value chain? One word: collaboration. Alibaba recognizes that it cannot do everything by itself, so it leverages its ecosystem of partners to create a seamless and integrated logistics network. Some of its collaborations include:
- Cainiao Network: This is a logistics platform that connects merchants, warehouses, carriers, and consumers in China and abroad. It uses big data and artificial intelligence to optimize routing, inventory management, and delivery performance. It also offers smart lockers, self-pickup stations, and facial recognition technology to enhance customer convenience and security.
- Alibaba Cloud: This is a cloud computing service that provides infrastructure, software, and data solutions to businesses of all sizes and industries. It helps Alibaba and its partners to improve their operational efficiency, scalability, and innovation capabilities.
- Ant Group: This is a financial technology company that offers digital payment, lending, insurance, wealth management, and credit scoring services to consumers and businesses. It helps Alibaba and its partners to facilitate transactions, reduce risks, and increase customer satisfaction.
Example 3: ShopifyShopify is a leading eCommerce platform that enables anyone to create an online store and sell their products. It has over one million merchants worldwide who sell everything from clothing to furniture to art. But how does it manage its logistics value chain? One word: empowerment. Shopify empowers its merchants to customize their logistics operations according to their needs and preferences. Some of its features include:
- Shopify Fulfillment Network (SFN): This is a network of fulfillment centers that Shopify partners with to offer fast and reliable shipping to merchants who want to outsource their logistics operations. Merchants can choose which products they want to store in SFN warehouses and which shipping options they want to offer to their customers.
- Shopify Shipping: This is a service that allows merchants to buy discounted shipping labels from major carriers like UPS, USPS, DHL, and Canada Post directly from their Shopify dashboard. Merchants can also track their shipments and manage their returns easily.
- Shopify Apps: These are third-party applications that merchants can install on their Shopify stores to enhance their functionality and performance. There are hundreds of apps available that cover various aspects of logistics such as inventory management, order fulfillment, dropshipping, delivery tracking, customer service, etc.
May 5, 2023
May 5, 2023
First of all, what is logistics? According to Wikipedia, logistics is “the detailed organization and implementation of a complex operation”. In other words, it's the art and science of getting stuff from point A to point B in the most efficient and effective way possible. Sounds simple, right? Well, not quite. Logistics involves a lot of planning, coordination, communication, problem-solving, and creativity. It also requires a lot of resources, such as people, vehicles, equipment, warehouses, software, and money.
How it all began…Logistics has been around for a long time. In fact, some historians trace its origins back to ancient times, when people had to transport goods and materials across long distances using animals, carts, ships, and roads. Some of the earliest examples of logistics include the construction of the pyramids in Egypt, the Silk Road trade route in Asia, and the Roman Empire's military campaigns. These civilizations understood the importance of logistics for their survival and prosperity. However, logistics has evolved a lot over the centuries. Thanks to technological innovations and globalization, logistics has become more complex and dynamic than ever before. Nowadays, we live in a digital world where we can order almost anything online with just a few clicks or taps. We expect our products to be delivered fast, cheap, and safe to our doorstep or our nearest pickup point. We also want to track our orders in real time and have the option to return or exchange them if we are not satisfied. This is where eCommerce comes in. eCommerce is the buying and selling of goods and services over the internet. It has revolutionized the way we shop and do business. eCommerce has also created new opportunities and challenges for logistics. On one hand, eCommerce has increased the demand for logistics services, as more and more customers shop online and expect fast and reliable delivery. On the other hand, eCommerce has also increased the competition and complexity for logistics providers, as they have to deal with more orders, more destinations, more regulations, more risks, and more customer expectations. This is why logistics is so important for eCommerce. Logistics is not just a cost factor or a support function for eCommerce. It is a strategic advantage and a key differentiator for eCommerce businesses. Logistics can make or break an eCommerce business. A good logistics system can help an eCommerce business to increase its sales, customer satisfaction, loyalty, and retention. A bad logistics system can hurt an eCommerce business's reputation, profitability, and growth.
Logistics exists in many forms and models!There are many ways to classify logistics, but one of the most popular is based on the direction of the flow. According to this classification, there are three main forms of logistics: inbound, outbound, and reverse.
- Inbound logistics refers to the activities involved in sourcing, receiving, and storing raw materials, components, or finished goods from suppliers or manufacturers. Inbound logistics is closely linked to procurement and inventory management. For example, Amazon’s “More on the way” message means any purchases of the out-of-stock item will be immediately shipped to the fulfillment center as soon as they arrive from the supplier.
- Outbound logistics refers to the activities involved in picking, packing, shipping, and delivering products or services to customers or distributors. Outbound logistics is closely linked to order fulfillment and customer service. For example, Shipium is a software company that helps ecommerce businesses optimize their outbound logistics by providing real-time visibility, predictive analytics, and proactive communication.
- Reverse logistics refers to the activities involved in collecting, processing, and disposing of returned, damaged, or unwanted products or materials from customers or distributors. Reverse logistics is closely linked to quality control and sustainability. For example, Patagonia is a clothing company that encourages its customers to return their worn-out products for recycling or repair through its Worn Wear program.
- 1PL stands for first-party logistics, which means that a company handles its own transportation and warehousing of goods. In other words, they do everything themselves, from sourcing raw materials to delivering finished products to customers. Sounds simple, right? Well, not quite. As you can imagine, managing all aspects of logistics can be very costly and time-consuming for a company. That's why many businesses outsource some or all of their logistics functions to third-party providers. And that's where the other PLs come in.
- 2PL stands for second-party logistics, which means that a company hires another company to provide transportation services. For example, a manufacturer might contract with a trucking company to move its goods from the factory to the distribution center. The trucking company is the 2PL provider in this case.
- 3PL stands for third-party logistics, which means that a company hires another company to provide a range of logistics services, such as transportation, warehousing, inventory management, order fulfillment, and more. For example, an online retailer might contract with a 3PL provider to store its products in a warehouse, pack and ship orders to customers, and handle returns and exchanges. The 3PL provider is the one-stop shop for all the retailer's logistics needs.
- 4PL stands for fourth-party logistics, which means that a company hires another company to manage and coordinate its entire supply chain. For example, a multinational corporation might contract with a 4PL provider to oversee its global network of suppliers, manufacturers, distributors, and retailers. The 4PL provider is the mastermind behind the scenes who optimizes the supply chain performance and efficiency.
- 5PL stands for fifth-party logistics, which means that a company hires another company to provide advanced logistics solutions using technology and data. For example, an eCommerce platform might contract with a 5PL provider to leverage artificial intelligence and machine learning to analyze customer behavior, demand patterns, and market trends. The 5PL provider is the innovator who creates new value and opportunities for the eCommerce platform.
How can my eCommerce business improve its logistics?Well, there is no one-size-fits-all solution for this question. Each eCommerce business has its own unique needs and goals when it comes to logistics. However, some general principles that can help an eCommerce business optimize its logistics system are:
- Understand your customers' needs and expectations. Know who your customers are, where they are located, what they want to buy from you, how they want to receive their orders, how much they are willing to pay for shipping and handling fees, how often they shop online from you or your competitors.
- Choose your logistics partners carefully. Find reliable and reputable logistics providers who can offer you the best quality service at the best price. Compare different options and negotiate contracts that suit your needs and budget. Establish clear communication channels and performance indicators with your logistics partners.
- Invest in technology and innovation. Use software tools and platforms that can help you manage your inventory, orders, shipments, tracking information etc., automate your processes reduce errors improve efficiency save time money etc., integrate your systems with your logistics partners' systems etc., leverage data analytics artificial intelligence machine learning etc., enhance your visibility control optimization decision making etc., explore new technologies such as drones robots blockchain etc., that can improve your delivery speed accuracy security sustainability etc.
- Optimize your supply chain network design. Design your supply chain network according to your product characteristics customer segments market conditions etc., balance your trade-offs between cost service quality risk etc., choose your distribution channels modes methods etc., locate your warehouses fulfillment centers distribution centers etc., strategically near your suppliers customers markets etc., optimize your inventory levels safety stocks reorder points etc., according to your demand patterns seasonality variability etc., implement lean agile resilient green etc., supply chain practices
Top 5 criterias for an effective logisticsAfter optimizing your logistics, you would want to measure your result in a quantifiable manner, but based on what criterias can we determine a logistics is effective? There are multiple indicators that we can consider, depending on the context. However among them, these 5 are generally regarded as the most important criterias:
- Cost: The cost of logistics includes all the expenses related to transportation, warehousing, inventory, packaging, labor, taxes, and fees. An effective logistics aims to minimize these costs while maintaining or improving the service level.
- Speed: The speed of logistics refers to how fast the products or services can reach the customers or distributors from the point of origin. An effective logistics aims to reduce the lead time and increase the delivery reliability.
- Quality: The quality of logistics refers to how well the products or services meet the expectations and requirements of the customers or distributors. An effective logistics aims to prevent or reduce errors, damages, losses, defects, and complaints.
- Flexibility: The flexibility of logistics refers to how well the logistics system can adapt to changes in demand, supply, environment, or regulations. An effective logistics aims to increase the responsiveness and resilience of the logistics operations.
- Visibility: The visibility of logistics refers to how much information is available and accessible about the status and location of the products or services throughout the logistics process. An effective logistics aims to improve the transparency and accuracy of the data and communication.
In conclusion…Logistics plays a pivotal role in the success of any eCommerce business operating in the digital world. By prioritizing logistics, you can significantly enhance your customer service, optimize your costs, and expand your market presence. Neglecting the importance of logistics for your online store may have a detrimental effect on your business, and it could potentially make or break your success. Therefore, it is crucial to recognize the pivotal role that logistics plays in your eCommerce operations and to invest accordingly.
May 5, 2023