E-commerce is transforming modern supply chains

E-commerce in Asia has exploded, bringing significant benefits to consumers and businesses alike, according to an Asialink Business report into supply chains. One of its authors, Gabrielle Burgess, argues the effect of the growth of e-commerce and rising consumer expectations is to put traditional supply chains to the test.

There are significant opportunities for Australian businesses looking to expand into Asia through e-commerce. Rising incomes, growing internet penetration, and COVID-19 lockdown measures have accelerated e-commerce growth. Nearly two thirds (62 per cent) of all e-commerce sales in 2020 took place in Asia-Pacific compared with just 19 per cent in the US and 13 per cent in Western Europe.

Our survey of businesses with supply chains across Australia and Asia showed that China remains the focus for businesses that are investing in e-commerce, with 65 per cent of respondents indicating they were interested in expanding their presence in China. But other high-growth markets like India, Vietnam and Indonesia and more mature markets like Singapore, Japan and South Korea also present significant opportunities.

Whilst e-commerce is changing the way that consumers shop, it is also disrupting the traditional retail fulfilment model. Supply chains have shifted away from the movement of bulk goods from warehouses to stores, to faster delivery models where orders are picked and packed in fulfilment centres and delivered to a consumer’s preferred location. Reverse logistics for the return of goods has increased complexity.

A recent report from Asialink Business argues that to remain competitive, Australian businesses need to ensure that their supply chains can meet consumer demands for speed, convenience, traceability, service and personalisation.

Consumers want their orders delivered quickly and platforms are responding accordingly.

Major players such as Amazon and JD.com have built extensive logistics networks to provide next day, same day and even within the hour delivery options. As fast delivery becomes the norm, businesses must optimise their supply chains to reduce lead times. For example, some are moving fulfilment centres closer to consumers or utilising stores to fulfil orders. Having an efficient last mile delivery partner is also key.

Consumer demand for a wide assortment of products, as well as a range of delivery and return options is placing increased strain on supply chains.

For platforms to offer greater product choice, supply chains must be capable of handling thousands of stock-keeping units. Businesses should partner with platforms or third-party logistics (3PL) providers with real-time inventory and warehouse management capabilities that can manage the flow of SKUs, meet spikes in demand and ensure fast delivery of orders.

As well as product choice, consumers want the flexibility to choose delivery locations. E-commerce sites now offer multiple options from home delivery, ship to store, ship to locker or to another convenient location. This creates a complex flow of products and requires excellent planning and last mile delivery services.

Increased convenience for consumers has had a significant impact on logistics flow. Image credit: Igor Grochev, Shutterstock.

Returns are another aspect of convenience that have a significant impact on customer satisfaction and loyalty. Logistics partners need to be able to manage reverse logistics flow and where possible merge forward and reverse logistics to increase efficiency and reduce operational costs.

Business will need to adjust to consumer interest in knowing the origins and delivery status of products. Most large e-commerce players now offer real-time tracking to meet this demand. However smaller providers often do not have good visibility over their supply chains and can struggle to capture this information. To remain competitive, e-retailers are investing in new technologies such as Radio Frequency Identification and other sensors that can collect real-time data that they can share with consumers on websites and app platforms.

As e-commerce becomes widespread, offering superior customer service becomes more important. Good service means different things across Asia and requires businesses to take a nuanced approach to their supply chain strategy. For example, good service during last mile delivery in markets like India and the Philippines will require cash-on-delivery services. The professionalism of last mile couriers also influences consumers perception of a brand and can impact the likelihood of further sales.

Personalisation of the e-commerce experience is a growing trend across Asia. Brands are looking to create a unique shopping experience for consumers at various touchpoints. Personalised product packaging, especially for higher value purchases, is one area where brands can add value and give customers a memorable unboxing experience. Businesses should check to see if e-commerce partners offer personalised packaging services.

As e-commerce grows, businesses will need to adapt their supply chains to meet the changing demands of consumers. Choosing the right partner such as e-commerce platforms that have in-house logistics operations or 3PLs who have the capabilities to provide efficient and digitally connected warehousing, transport logistics and fulfilment services, will be vital to their success. Failure to adapt risks losing market share to competitors that can better fulfil consumer needs.

Gabrielle Burgess is Associate, Advisory and Insights at Asialink Business.

Banner image: Warehouse workers overlook packed boxes and goods. Credit: Pressmaster, Shutterstock.

Read the full Disruption & Innovation: Reshaping Regional Supply Chains report on the Asialink Business site.