Digital transformation has left a positive impact on e-commerce today and it is also increasingly playing a bigger role in delivering the purchases. Muneerah Bee checks in with Joseph Ng, CEO of Skyfy Technology, to get more insights into what retailers should be aware of when it comes to logistics for e-commerce.
Logistics is often considered the biggest bottleneck to e-commerce growth in Southeast Asia and no retailer would want to lose a customer because of a shipping delay that was out of the company’s control.
Logistical complexity is one of the challenges of e-commerce logistics that Joseph Ng, CEO of logistics enabler Skyfy Technology, has identified as increased service requirements have led to more offered delivery options and models. “Whereas one delivery option used to be the norm, usually delivered from one fulfilment location (typically a dedicated e-commerce distribution centre), nowadays we see at least three delivery options (standard delivery, express delivery and pickup), with multiple fulfilment locations (e-commerce distribution centres, directly from suppliers and from stores),” he observed.
To overcome this, Ng suggested focusing on competencies, and a good strategy requires a study of the needs of customers, an in-depth marketing research and the ability to generate fresh ideas. He said: “Finding the right competencies for your company can take a lot of time and effort. Then putting all the pieces together to form a successful e-commerce team is often difficult. But if you develop an effective strategy combined with the right IT, HR, marketing and logistic competencies, your chances of success in e-commerce increase significantly.”
In some cases, there is no real-time coordination between the warehouse and customer service when technology is not implemented to manage the entire fulfilment process. Ineffective technology application and the reliance on administrative work makes collaboration between multiple parties challenging and ultimately has a negative impact on service delivery to the customer, Ng opined. “For example, the visibility of deliveries from the warehouse to the customer can be better managed with a fleet management system that keeps track of the field workforce delivering the goods. Customer service can easily track the location of the goods and update customers on the expected time of arrival of the delivery without the need to make a call to the driver, who could be unable to pick up the phone as he is driving,” he said.
When it comes to choosing an e-commerce fulfilment and logistics service in Asia, technology and integration service level agreements (SLAs), logistics network of third-party logistics companies (3PLs), automation of order fulfilment and fulfilment reports are some of the important factors to consider, Ng advised.
For example, when choosing a third-party logistics company, it is important to consider its geographical presence. “Companies with operations in multiple countries within a region may want to work with a provider that is similarly located. Third-party logistics companies and carriers alike are investing more and more in expanding their own logistics network, technology and services. As a result, they too have surfaced as key players in perfecting the last mile,” he commented.
It is also important for companies to re-think their operating model for logistics and take on more of an orchestrator role for their fulfilment function, according to Ng: “For effective third-party performance management, it’s therefore instrumental to have enabling technology in place and the right set of key performance indicators (KPIs) and SLAs with the logistics partners.”
Optimising last-mile deliveries starts with a fit-for-purpose fulfilment network or technology solution, he added. This solution should be based on relevant service requirements that have an impact on the online conversion. “As such, it is essential that the design of the solution will be an integrated effort of both category management and supply chain management to balance the needs and the possibilities.”
Leveraging technology also helps to streamline the fulfilment process. For example, when an order is placed, the solution can automatically notify the person or company responsible for shipping the item(s). Users are able to create multiple fulfilment reports — one for each fulfilment provider and the group of products they are responsible for shipping. The fulfilment report displays the customer’s contact information, shipping information, and the quantity and name of product(s) ordered.
What the future holds for e-commerce logistics
JOSEPH NG, CEO of Skyfy Technology, shares his predictions for the future of e-commerce logistics in Asia.
- Last-mile logistics will get commoditised
South-east Asia has seen plenty of venture capital funding spawning last-mile and on-demand delivery start-ups such as Ninja Van, Ascend Group’s Sendit and Skootar. Even cab and bike hailing apps such as Go-Jek and Grab have tapped into delivery services as an additional revenue stream. “All this has added pressure to incumbents such as Kerry Logistics, DHL and JNE who are only scratching the surface in the fast-paced e-commerce logistics space,” Ng remarked.
- South-east Asia will drive consolidations in the online payments sector
“The year marks the beginning of consolidation in the payments space in South-east Asia. Cash-on-delivery (COD) dominance — 75% of e-commerce transactions in the region — has inspired a plethora of start-ups like Omise and DOKU and established telcos and banks to build the next PayPal,” Ng added.
- First mile will be important
While last-mile delivery drivers are armed with mobile apps and electronic information, carriers in the first mile rely on paper documentation that spans driver information and consignment details. Ng predicted that this is set to change as companies look at ways to leverage technology to make the first mile more efficient.
- E-commerce 2.0
The opportunity in e-commerce will increasingly shift towards ‘E-commerce 2.0’. Ng expounded: “This means that firms will base their competitive advantage not on traditional economies of scale but on a mix of what [apparel company] Bonobos’ founder, Andy Dunn, calls proprietary pricing, selection, experience, and merchandise. Whereas E-commerce 1.0 is a game of brute force and strength, E-commerce 2.0 exploits 1.0 loopholes in many creative ways to avoid the zero-sum game against the likes of behemoths such as Alibaba and Amazon.”
• Brands adopting own online strategies
By using digital tools and platforms that are empowering brands to open new channels and broaden their customer reach, brands no longer need to rely on traditional retail and wholesale distribution and sales channels. “For example, by going direct to their consumers via e-commerce, BuildDirect.ca, which provides building materials that have been traditionally available for purchase at home improvement retailers, is now able to leverage data analytics to increase efficiency in bringing new products and services to the market,” he shared.