"Logistics is a driver for future purchasing"

E-commerce and e-fulfilment

Source: CxO Magazine; April/May 2014 edition

"Many companies want to tap into the 'e-commerce market'. The question is how they will organise themselves in order to supply new customers and markets, as many have no integrated fulfilment processes", says Robert Boute, Professor Operations Management at Vlerick Business School and member of the CxO Expert Group Logistics.

E-fulfilment is part of 'e-logistics', the mechanism that integrates and automates logistics processes. "E-fulfilment is the process that begins once the customer has completed an online purchasing transaction", explains Robert Boute, who teaches programmes including ‘Operations Management’ and ‘Supply Chain Management’ at Vlerick Business School. "This includes the organisation of the picking process in a warehouse as well as delivery to customers."

A different way of thinking

A correct e-fulfilment process is not self-evident. "Most companies are used to delivering to customers in high quantities, often in a B2B environment. If they want to supply through online shops, they may encounter unpredictable quantities and a different way of organising the fulfilment process. After all, online shops need to respond to demand that is more difficult to predict, often with large differences. There are also strict delivery deadlines and zero margin for error: if the quality is not acceptable, the product will be returned without a second thought, resulting in an extra reverse cost. In other words, the better the e-fulfilment, the greater the chance of a new purchase from the customer. So logistics is a cost, but it is also a driver for future sales. In a B2B environment, handling large quantities, the margin for error is less strict. A small error in the fulfilment process is more likely to be tolerated."

Omnichannel logistics

Robert Boute distinguishes between three trends in e-logistics. "More and more companies are evolving towards omnichannel logistics, but they are struggling with how they wish to organise this", says Robert Boute. "Choosing separate logistics processes for their e-commerce activities raises the question of whether it is feasible to manage two sets of stock, for example. So companies are looking at ways to integrate the logistics processes for their existing commerce with e-commerce. It is a challenge the logistics sector is also working to solve.

I also predict an e-commerce breakthrough in the world of household goods. Various supermarkets in other countries are successfully offering home delivery of household goods. There are not many similar examples in our region, despite lots of good 'collect & go' systems. The future will tell whether home delivery of household goods will also break through here. Currently, many items are collected from one central location or at the shop.

A third trend is fast delivery times: order today for delivery tomorrow. But how much faster could it get? I don't know if consumers are waiting for same-day delivery, for example. This requires enormous flexibility and high costs from a logistics perspective.

In the US, a pilot is being conducted in which one resident of a street or neighbourhood can collect all the online purchases for that street or neighbourhood in one go. Again, the question is to what degree this trend will reach us. I think we can conclude that e-commerce is gaining momentum here but that we cannot rest on our laurels and we must continue optimising."

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