Opening the next frontier for e-commerce logistics

OVER the last few years, e-commerce supply chains have seen an era of unprecedented growth as digitalisation takes hold and customer expectations evolve.

With at least 102 key logistics providers - both existing and emerging players - operating in South-east Asia today, we are clearly witnessing the development of a robust e-commerce logistics ecosystem, where the introduction of innovative technologies such as artificial intelligence and Big Data promise to offer greater cost and operational efficiencies. And all the signs suggest that the entry of new logistics players and technologies will help alleviate the accelerated demand for e-commerce.

On the other hand, this has also generated questions about the sustainability of the e-commerce logistics ecosystem. While the presence of more logistics players can help meet the demand for e-commerce, we are currently facing a situation where some players exist to fulfil a single role in a highly interdependent supply network, while others are edging towards a full-service model that remains focused on specific sales channels. A key question arises from this situation: Are we scaling the right way to meet the demands of small businesses and evolving consumer needs?

If we are to overcome these constraints and create a sustainable path for growth, we need to consider a new growth paradigm for e-commerce logistics. We need to adopt an integrated platform approach to enhance the sustainability of the industry.

Think of your parcels as passengers travelling on bus routes owned by different bus companies. Currently, the fulfilment of an order is analogous to a passenger getting from Point A to Point B via one bus operator running their own bus route. In some instances, this can result in longer commute times and perhaps longer walking distances just to use that bus service. However, with the introduction of a bus interchange, passengers can hop on any bus service that is at their doorstep, and switch to another route that can get them to their destination more quickly.

The analogy of a bus interchange in this context lays the foundation for an intelligent, integrated logistics and supply chain network that allows a more efficient and customer-focused e-commerce experience. Most importantly, the application of such a concept to e-commerce logistics carries the potential of breaking through the challenges associated with a highly fragmented market - where despite the currently collaborative nature of e-commerce partnerships, the ecosystem is unable to achieve cost and operational efficiencies in the truest sense, just like how different bus operators continue to run bus routes which may not be the most efficient. The current challenges associated with e-commerce logistics underline the importance for ecosystem players to re-invent themselves not just from a technological perspective, but also to re-calibrate their business and operating models for sustainable long-term growth.

HIGHLY SEGREGATED

As the logistics of e-commerce remain highly segregated, establishing one's own end-to-end logistics network and facilities involves dedicating substantial capital expenditure to maintain and operate. These are costs that a small business can typically ill afford. Working with a player that provides multi-channel logistics services can be a solution. A single stock fulfilment solution can help e-commerce enablers and brands to fulfil across all e-commerce channels seamlessly. It can be highly beneficial for smaller e-commerce players and sellers, who might face high barriers to entry when it comes to building their own logistics capabilities.

In addition, with scale and end-to-end capabilities, e-commerce platforms can incentivise their sellers and partners to provide expedited services, such as rewarding sellers who fulfil their orders faster with increased store visibility and higher traffic. This will in return result in shorter delivery lead times and an overall better customer experience when buyers can get their orders faster.

The e-commerce logistics industry has come a long way over the past decade. From managing orders with Excel sheets to having a centralised data management platform, the industry has evolved tremendously to meet the needs of sellers and customers alike. As the e-commerce and logistics industries ride on the growth potential of the South-east Asian market, they must do more to set in place the foundations that will help us offer diversified services and better cater to evolving, varied customer demands.

If we are to create a sustainable and inclusive e-commerce logistics ecosystem, integrating logistics activities both within and beyond a business will be key - it is about planning resources and manpower as one single entity. Achieving that will help reduce the cost of doing business and empower brands, sellers and small businesses to better compete on a global stage.

• The writer is group chief logistics officer of Lazada Group