What Impact does eCommerce have on Supply Chain?

Freight shipping is a huge part of the current economy. Online shopping has been booming for some time now, making up an increasing proportion of retail, both in Australia and abroad. While online sales accounted for 17.8% of Australian sales in 2020, that share is projected to climb to 21.9% in 2024.

So, how have freight practices evolved to keep up with skyrocketing demand? Especially in light of supply chain challenges and shifting consumer demands.

1. Changes in Supply Chain
2. Increased Demand for Last-Mile Delivery
3. Inventory Management Challenges
4. Sustainability & Green Transport Solutions

Changes in Supply Chain

No doubt we’re all sick of talking about it by now, but the COVID-19 pandemic has had a lasting impact on the global supply chain and distribution channels. While the pandemic turbo-charged the eCommerce industry in many ways – as consumers and companies alike sought remote shopping solutions – it also exposed several ongoing challenges when it comes to eCommerce freight.

Recent events haven’t necessarily introduced ‘new’ supply chain challenges, so much as amplify existing vulnerabilities. In any case, companies don’t want to risk being caught out to that extent again. A few notable shifts in supply chain practices have occurred:

• Bringing operations closer to home

  Logic dictates that the wider spread your operations are, the more variables that are out of your control in terms of getting goods to customers. The more dots that need to be joined from A to B, the more vulnerable you are to disruptions – whether it be weather and natural disasters, geopolitical challenges and conflicts, or indeed a pandemic.

  The solution? Switching to locally sourced materials and/or bringing manufacturing back onshore within Australia. Or, at the very least, adjacent regions, such as south-east Asia.

• Further investment in tech solutions

  There’s no longer any margin for disconnect between suppliers and distributors. Delays are a strong cue for customer dissatisfaction, especially when not communicated clearly and promptly. Visibility is key. Companies know they need to keep a close eye on what’s happening across their supply chain to be able to identify and adapt to any potential disruptions that might arise. If implementing holistic freight management software wasn’t a priority for businesses a few years ago, it certainly is now.

• Less reliance on ‘Just In Time’ packaging

  Just In Time (JIT) is a concept that basically means carrying minimal inventory, effectively saving on storage costs and wastage. With the recent challenges we’ve seen in under-supply and increasing demand, however, the JIT philosophy has become too much of a risk. The cost-benefit ratio no longer made sense, leaving businesses susceptible to even minor disruptions.

  The downside is that by housing more stock, the added costs are invariably passed down to consumers. During a cost-of-living crisis, with inflation an ongoing concern, many brands – especially those selling non-essential goods – face a challenge to find the right balance.

Learn more about Enterprise eCommerce Logistics Challenges & Solutions.

Increased Demand for Last-Mile Delivery

Last-mile delivery refers to the final leg of a shipment, from distribution hub to customer. With increasing reliance on eCommerce shipping, alongside growing consumer expectations for speed and convenience, the squeeze is really being felt in last-mile delivery.

For context, the last mile delivery market in Australia is expected to record a compound annual growth rate (CAGR) of more than 10.55% between 2022-2027.

It’s not just big global distributors anymore. With delivery now very much the expected norm, smaller retailers have been forced to utilise the supply chain mechanism and add shipping to their offering. Changing consumer habits have also had a big influence.

Just as a small example, a lot more people get their groceries delivered now. Not long ago, this was very much the exception. This change may have been prompted by the pandemic, but the habit has carried on once consumers gained trust in the service and grew accustomed to the convenience. Typically, supermarkets use their own vehicles for this service, so it doesn’t affect standard freight carriers. But extrapolate these consumer habits across every industry, and you can start to see distribution channels becoming substantially busier.

Inventory Management Challenges

As touched on above, many companies have shifted from a Just In Time inventory model, to a ‘Just In Case’ approach, housing more stock to cope with spikes in demand.

But there are a number of other inventory challenges to consider, including:

• Inaccurate or inconsistent tracking
• Manual processes
• Packaging rationalisation
• Limited visibility
• Warehouse inefficiencies

As your business grows and customer demand increases, it’s vital to have an intuitive system that quickly tells you where everything is, where it’s going, how much it costs, and which shipping labels go with which consignment.

These issues are much more easily solved if you have a streamlined freight software platform to do the bulk of the heavy lifting for you. Find a freight management platform that enables you to automate the conversion of orders (originating in your shopping cart or ERP) into consignments. This eliminates the need for double keying and costly user errors while also allowing for fast ingestion by creating consignments in bulk.

MachShip can integrate seamlessly with your existing tech platforms and shipping carriers to improve overall efficiency.

Learn more about MachShip’s API integrations.

Sustainability & Green Transport Solutions

Sustainability remains an emerging, yet largely unregulated space in the Australian business landscape. However, it’s an increasingly influential factor in purchase decisions.

Freight transportation accounts for up to 8% of global greenhouse gas emissions, rising to 11% when warehouses and ports are factored in.

Changes are taking place, from electric vehicles to carbon offsetting and compostable packaging. Maximum data visibility is important to help you minimise the environmental impact of delivering your goods. This is obviously a positive for your own corporate responsibility, but also something you can add as a selling point to your customers – either as a standard guarantee, or as an incentive for them to pay slightly more in order to reduce the emissions of their order. This way, you can manage expectations as well as providing cost transparency.

Speaking to McKinsey in an interview about transport disruption, Einride CEO Robert Falck said the following:

“Electrification is maturing, but it is quite expensive compared with other technologies. That said, in heavy-duty trucking, we’re starting to reach cost parity in terms of performance, at least as it relates to short-haul, middle-mile applications.”

“Moving forward, it is vital to get electrification, batteries, and 5G connectivity to interact. If they do, then we can deploy route optimisation and track capacity across the entire fleet of vehicles, optimising cost savings and carbon emissions. This creates the potential to reduce GHG emissions by 90 percent.”

“Once you get this level of connectivity and digitalisation in place, you have the means to rewrite the map,” Falck said.

What’s clear is that eCommerce shipping is rapidly evolving due to changing consumer habits, changing technology, and a changing world. Wherever that change takes us in the future, it’s important to equip yourself with the tools that give your business the best chance to thrive.