March 2, 2023
AGI News
Over the last 10 years, e-commerce giants like Amazon, eBay, Walmart and Alibaba have promised customer deliveries with just a few taps on a screen, often with next-day delivery and sometimes even same-day.
Covid-19 had a huge effect on the e-commerce industry; for example, Amazon’s UK sales increased 82% on the £13 billion they made in 2019, pre-pandemic, and this was driven by business closures and restrictions driving shoppers to order items online.
The exponential growth of the e-commerce sector has required businesses in the logistics sector to diversify their operations, and offer new solutions for delivering cargo quickly. But what exactly does that look like? In this article, we’re going to explore exactly how the boom of e-commerce affected freight and logistics, positively and negatively, across the globe.
A change in customer expectations
15% of global retailers now provide same-day delivery, and 62% of consumers say they expect next-day delivery when ordering online (up from 44% in 2020). In turn, logistics companies have had to adapt strategies to meet new customer expectations.
Just in time (JIT) delivery has pushed traditional, long haul deliveries down the priority list, leading to businesses preferring single-warehouse options as opposed to multiple distribution centres. Fleets belonging to freight forwarders are also adapting to be suitable for short and more-frequent delivery requests, investing in trucks, trailers and vans. Freight forwarders have also had to modernise tech usage, as customers now expect their delivery process to be transparent end-to-end, with alerts and notifications now the norm for every step of the way.
An increase in air freight
Transporting cargo by air has become increasingly popular for the faster delivery of customer orders. Pair this with an increase in customer demand and new expectations making sea freight too slow an option, many freight forwarders have been forced to seriously consider an increase in air transit; a more costly mode of transportation that requires more collaboration and coordination.
Sea freight has long been the go-to freight choice for large volume shipping, but when it can take anywhere from 20-45 days to complete a journey, these metrics just won’t work anymore. However as ecommerce increases global freight demands, cargo capacity levels must grow with it. A statement by the IATA highlights a major problem in air freight:
“Air cargo demand grew 9.1% in September [sic: 2021] compared with pre-COVID levels. There is a benefit from supply chain congestion as manufacturers turn to air transport for speed. But severe capacity constraints continue to limit the ability of air cargo to absorb extra demand. If not addressed, bottlenecks in the supply chain will slow the economic recovery from COVID-19. Governments must act to relieve pressure on global supply chains and improve their overall resilience,”
– Willie Walsh, IATA’s Director General.
With more people than ever making daily online purchases, developments and advancements will be required to increase cargo capacity in air freight to meet customer demands; companies like Amazon have even begun taking matters into their own hands by purchasing their own freighter planes.
A change in operational facilities
The ways businesses are operating is changing, and as such the way warehouses and distribution centres are being utilised has also been forced to adapt to the ecommerce boom, requiring the development of completely new categories of distributions facilities.
E-fulfillment centres have been designed specifically to cater to these new requirements, servicing large volumes of assorted orders, within one facility. These centres usually manage the end-to-end service of the delivery service; storing, picking-and-packing, and shipping.
The organisation in these centres varies from the typical processes of warehouses and distribution centres; stock is stored randomly on shelves, with locations stored in digital systems.
Since most online orders are placed for a single item, shipped in single parcels, the random organisation of the products works for the quick retrieval of that product. This new storage strategy has reduced the footprint of a typical warehousing since inventory can be stored in any unallocated space, increasing storage capacity.
Increased shipping costs
A prolonged period of bottlenecks within the supply chain has led to years of turbulent shipping prices, with costs ending up higher than they started. This could be blamed on transportation capacities being squeezed due to increased demand, a shortage of containers, as well as busy ports and airports slowing down processes.
And according to ShipBob and CensusWide, rising shipping costs pose the biggest risk to UK brands:
“Ecommerce entrepreneurism is booming in the UK but turbulence in the shipping sector is posing a significant threat to this latest generation of online brands,”
– ShipBob EMEA GM Enda Breslin said.
Research shows that 48% of UK ecommerce brands said growing shipping costs was the biggest risk to their business growth, with the cost of sending a shoebox-sized parcel overseas increasing over 30% (from £15.73 to £20.56).
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