ECommerce and its Impact on the Logistics Industry

Posted in Operations & IT Articles, Total Reads: 404 , Published on 01 July 2016

The fast development of information and mobile technology in the past few years is changing many aspects of our lives i.e. how we look for the information we seek, how we plan our travel and most of all how we buy products or services. Even though classic store based retail is still preferred, e-commerce, which involves buying and selling of products and services mainly through electronic channels, like computer, tablets, mobiles etc. is gaining ground. The most common form of e-commerce is online shopping.

Ecommerce can be of mainly three categories. Most common is business to consumer e-commerce (B2C), where individual customers order various products online, which they then receive through courier, parcel or by post. Second category of e-commerce focuses mainly on transactions between companies or businesses, such as manufacturers and a wholesaler, similarly from wholesalers and retailers and vice versa is called business to business e-commerce (B2B). The next category of e-commerce refers to the transactions between consumer to consumer (C2C), for example of Quickr or other similar websites. Nowadays a fourth category called consumer to business is popping up where consumer can quote their prices to various businesses who then shape their proposition accordingly.


The Logistics sector of E commerce industry is influenced by use of technology, which has helped to improve ecommerce in area such as supply chain, inventory management, improve customer satisfaction. Penetration of internet and usage of mobiles has improved inventory tracking and automated fulfillment services. The use of digital billboards, mobile messaging and email helps to target potential customers. Below Technology in ecommerce has changed the logistics industry:

• Application programming interfaces (API) interfaces: -

Currently most of the operation in supply chain happens manually, so costs incurred is very high in handling operations and there is high probability of error in manual operation. With manual operation, integration in the supply chain is very less. Therefore, application programming interfaces helps to increase integrate with supplier, Industry, transporter and customer for real time exchange of information and data. This would improve visibility of shipments and immediate query resolution of the customers and help the organization to build relationship with the transporter and customers. This can help companies in better monitoring its logistics, higher negotiation power for lowering freight, proper coordination in supply chain and higher customer satisfaction due to higher serviceability.

• Reverse supply chain using system integration: -

Sometime due to wrong order placed and bad quality product in the steel and cement industry and return management has to be efficient to deliver the agreed product to the customer. Currently no third party logistics give clear visibility and updates on the status of reverse shipments. Third party logistics are planning to deliver quality checks and order number, while returning to warehouses and cargo handover. In the future, it can be expected that ecommerce retailers could invest heavily in reverse supply chain to improve satisfaction. In steel sector the reverse logistics is mainly applicable for returns from ports and sidings in case of in availability of freight providers at rail hub and ports. This is done in order to avoid hefty fines for occupying port area or siding more than prescribed time period. The return logistics can be improved so as to reduce overall logistics cost.


• Inventory and warehouse management information: -

Inventory and warehouse management system provide information on availability of products in the warehouse. it will help to planning, organising, managing, directing and controlling of the available resources. Warehouse management system check stock out information, availability of storage location in the warehouse to store the product, allocation of specific area to particular product, picking location, customer wise segregation of the products and thereby increasing labor productivity.

• Warehouse automation system: -

The market for warehouse technology which include warehouse management and warehouse automation and control plays important role in effectively managing warehouse. To stock out the products, companies uses First in First out(FIFO) and Last in first out (LIFO) methods depends upon the accounting methods used. Due to increase in ecommerce usage, fulfillment of online order requires high responsiveness and require more agile technology in the delivery system. Ecommerce industry like Amazon and Alibaba uses automated robots to fulfilment the order successfully. Usage of robots and tracking system in warehouse management system reduces error incurred in transporting the products to the delivery location. Similar technology can be used in steel sector to monitor and maintain inventory level and reduce material handling. Automation can also reduce loading time of freight providers due to clear visibility, tracking ability and less manual operation.

• Vehicle tracking system in ecommerce industry: -

Vehicle tracking is required to the products effectively and fast delivery to the customer. Effective vehicle tracking in India depends on quality of mobile infrastructure available to track the vehicle. Poor infrastructure and inadequate coverage across the region affects tracking of the vehicles. Currently GSM system is used to track the vehicles and various companies provide complete solution to track the vehicles from loading to unloading of products. It also tracks the time incurred in each operation of product delivery and providing an insight into the loopholes in the logistics system. This may help in reducing logistics inefficiency and increase negotiation power of the company.

• Increasing use of RFID, AIDC and lot based technology: -

Usage of radio frequency identification, automatic identification and data capture (AIDC) and lot based technology improve order fulfillment process. These technologies are more effective to use. RFID technology is used for whole delivery process from storing to warehouse till delivering to the customer. RFID technology in warehouse is used to identify the order status and location of order placed as per customer wise, as order is easy to detect. RFID sensors is also used to detect the shipping location and order status of the product. As, installing technology is costly, but usage of RFID technology could lead to increase in accuracy of the delivery process and increase customer satisfaction. AIDC is used to update shipment status and shipment process through the product delivery process. Under AIDC, whole process is held automatically with the help of scanners and shipment location, estimated time of delivery, reason of delayed delivery can be tracked. These technologies would improve current logistics process and help to determine alternate ways to reach to the destination


This article has been authored by Sharad Prakash from IIM Kashipur


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