12/16/2019

Future-oriented E-Commerce

Requirements on the logistics chain

Since actually all products and services in B-to-B and B-to-C are suitable for e-commerce, almost every industry deals with this topic. However, this business area is still gaining in importance due to the enormous growth that is taking place in online trade. However, success does not come automatically, especially as there are many pitfalls. Customer expectations are shaped by the "instant availability principle", which has been established as a standard by "players" such as Amazon. The possibility of being able to choose transparently between various providers at any time on the Internet forces us to meet standards, as negative ratings in portals and in social media lead to "lost sales" and bad reputation as a provider. The old wisdom that it takes a long time to build trusting business relationships, which can, however, be quickly and permanently damaged by whatever, is particularly true in e-commerce. Operators also have to master all the processes that trigger orders in their merchandise management and delivery management systems. Supply chain optimization involves many aspects, and a holistic approach from procurement to delivery is required to survive in B-to-B and B-to-C. Above all, this includes smart, efficient returns management that also reflects the risk class, embedded in professional "customer service" structures. 

In this sense, some interfaces have to be considered, which refer to the original ERP system and range from the supplier, to service providers for web support and logistics, to the customer. In addition, portals, digital marketplaces and payment service providers with differentiated channels and conditions must be integrated. All this requires a great deal of know-how. Added to this is efficient receivables management, which is indispensable, especially in B-to-C, in order to be financially successful on the net. When it comes to returns, the effort required to carry out a 100 percent incoming goods inspection, book the transactions, repackage them, book their receipt into inventory and return the goods is often underestimated. Especially in the textile industry, which chronically struggles with returns, this process is decisive for success or failure. Furthermore, the basics of e-commerce include the ability to display the delivery status and the payment process by invoice, cash on delivery, credit card or immediate bank transfer in a way that is transparent and comprehensible to end customers at all times. Special attention must also be paid to intralogistics, which in terms of packing and invoicing can be either very complex manual or further automated, which incidentally affects the interfaces to the delivering companies, so that networking is also involved. Powerful IT systems that guarantee a fast, flexible connection in order to merge relevant data are just as important as lean processes that are precisely tailored to the business. In all this, the customer and his needs must be the focus of attention. Therefore, the interlocking of the supply chain with the integration of returns management is of great importance. In order to handle the dispatch, return and reintegration of returns efficiently, the warehouse and order picking solutions should be flexibly scalable, because this ensures higher availability of goods and goes hand in hand with logistics concepts that may already be robot-supported in order to achieve leaps in efficiency in the mass business. Another important factor is the choice of the right logistics professionals who can take on tasks for small "web shops" or provide full service for mail order giants. 

The most important keywords in the context of packaging, delivery and invoicing are "same-day delivery", i.e. delivery on the day of the order, "dropshipment" (direct trade), if suppliers have ordered goods delivered by the manufacturer, "click & collect", the collection of online orders in retail stores, "Click & Reserve" ("Check & Reserve", "Reserve & Collect"), if the testing, purchase and payment of the goods is carried out in stores, and "Order-in-Store", a pre-order that is placed online, in order to then collect the assembled goods from the store. Such increasing service offerings and the striking differentiation from potential competitors present complex challenges for logistics, which relate to process transparency and the accuracy of predicting where goods are currently located and when they will arrive in order to reduce customer waiting times. With regard to optimising delivery times, it is a question of which goods (consumer goods, spare parts) "overnights", i.e. deliveries within 24 hours, are common today. Customers expect ever shorter delivery times not only in the spare parts business, but also for the delivery of medicines and other goods critical to their needs, so that "same-day delivery" is now part of the standard repertoire. Any supplier who cannot guarantee constant availability with prompt supply runs the risk of losing the current purchase with the customer. Both criteria are extremely relevant for the expected buying experience. Professional networking that allows direct access to data and information is the prerequisite for flexibility and agility in companies and an absolute success factor in e-commerce. Modern digital planning and control allow goods to be inspected on a daily basis, collected and processed, returned to the goods cycle and complaints processed holistically. These skills are essential. With regard to their sales and procurement markets, large suppliers have to decide where to set up central warehouses and consignment stores in Europe. The most cost-effective constellations are determined in an integrated strategy by taking an overall view of the supply chains including returns handling, order cancellations, multi-part orders and from the recipient's perspective. Precautions include using optimum packaging for returns and pursuing measures that help to reduce the returns rate. Returns management is of absolute importance in value creation as part of inventory management, as a poor returns cycle and an overly expensive second delivery of returned products can cost a lot of money. 

The role of artificial intelligence

As the developments in e-commerce continue, the issue of continuous change is also driven. The market for intelligent software is growing rapidly and contributes to the acceleration of global supply chains. As the use of artificial intelligence can be integrated into system landscapes, it becomes possible to make decisions in real time, ensuring the optimal distribution of each individual item in the "supply chain". Powerful algorithms precisely match demand with supply, which also makes new business models possible. Under these circumstances, companies that still operate manually will hardly be able to survive on the market for long. It is always a matter of offering customers perfect services. Efficient processes orchestrated in the "cloud" thus ensure profitability and success. 

Thomas Schmölzer, Partner, and Alexander Schell, Senior Consultant, Kerkhoff Consulting GmbH, Düsseldorf

Unternehmermagazin 5/6 2019
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