SUPPLY CHAIN

E-COMMERCE SUPPLY CHAIN DESIGN – A FACTOR IN CITY PLANNING

The substantial and ongoing increase in the e-commerce sector poses a challenge for existing supply chains in terms of efficiency and sustainability. Warehousing and last-mile delivery solutions are particularly affected, which in turn has consequences for cities and urban structures. To meet with consumers’ new demands, today’s footprint of warehouses, terminals and collection points may need to shift considerably.

This article looks at the e-commerce supply chain’s impact on city planning using excerpts, perspectives and recommendations from the Sweco Urban Insight report “Signed, sealed, delivered – analysing the impact of e-commerce on urban areas”.

WHY NEW E-COMMERCE SUPPLY CHAIN STRATEGIES ARE NEEDED

Consumers’ new purchasing behaviour and demands due to the growth of e-commerce often has a negative effect on supply chain efficiency as well as the journey towards a sustainable society. For example:

• Warehousing operations are profoundly affected when individual products must be stored, handled, packaged, and delivered.

• Inefficient solutions and poor fill rates in last mile distribution are common. The growth of e-commerce risks increasing traffic load from distribution vehicles and regional road transports. For parcel deliveries, time is the constraint on achievable fill rates.

• Increasingly high demand for fast deliveries further amplifies the difficulties in achieving a high fill rate, due to problems for logistics companies to consolidate efficiently.

• E-commerce involves increased energy use for packaging and product returns.

• Returns result in additional transports and handling throughout the entire reverse supply chain. Increased return volumes also add new complex functionality for the retailer: processes, space and equipment for receiving returns, quality checks to determine whether the goods are resalable, repackaging, and finally reintroduction into the warehousing system to prepare the goods for redelivery.

• The increased volume of home deliveries, combined with consumers’ wishes not to be tied into a delivery window, also places new demands on the logistics interface in individual homes.

In short, the new needs and expectations generated by e-commerce serve to move the supply chain’s “centre of gravity” closer to the consumer. Today-s footprint of warehouses, terminals and collection points may alter considerably as a result of this.

RECOMMENDATIONS

The need for efficient supply chain solutions extends across the spectrum, ranging from warehousing and delivery networks all the way into the consumers’ home. There is no question that many aspects of today’s solutions are highly inefficient. Innovative thinking will be required to find solutions for improving supply chain strategies and design and develop efficient distribution principles.

• To improve the efficiency of e-commerce logistics, smart packaging solutions would play a natural part in reducing waste, enabling reuse/recycling and improving fill rates.

• The entire supply chain will benefit when stakeholders look beyond their present boundaries and find efficient solutions that involve collaboration and coordination, as well as co-location and co-transportation.

• An intra-urban positioning of logistics hubs, relatively close to the end delivery point, is another aspect that will decrease the traffic load – and support the use of more sustainable transport modes.

 

THE E-COMMERCE EFFECT ON URBAN AREAS

It’s important to note that not all areas are equally affected. In residential areas, for example, there will be an increase in freight traffic as home deliveries become more prevalent. This leads to a similarly increased demand for parking spaces.

Interestingly however, while e-commerce in the US doubled between 2007 and 2013, urban freight traffic levels remained more or less constant. This apparent decoupling effect may be due to greater logistics efficiency and capacity, although e-commerce still constitutes less than 10 per cent of total US retail trade.

Meanwhile, in the UK, the use of light commercial vehicles has increased steadily over a long period of time. This may be due to the increase in e-commerce, as well as tax regulations and licence requirements.

On the other hand, as e-commerce deliveries increase, brick-and-mortar shopping and personal travel should logically decrease. It has been argued that brick-and-mortar closures in the US are not a consequence of e-commerce, but rather representative of a structural shift in consumer preference and purchasing power. A decrease in brick-and-mortar revenue for consumer durables has been seen in Sweden.

The effect of increased e-commerce on traffic and infrastructure remains unclear, as mobility chains are complex, and the area is relatively new. The effect may be smaller than expected.

A study that compared energy use in e-commerce supply chains with traditional brick and mortar operations concluded that the net effect of energy consumption was positive for the e-commerce alternative, compared with conventional supply chains, in most of the cases studied. The energy saved in personal travel to and from brick-and-mortar stores was greater than the increase in freight transport energy expenditure for e-commerce.

Nonetheless, the last mile transport is the most inefficient part of the supply chain. Increased urban freight traffic directs focus to potential for efficiency improvements as well as requirements for off-loading zones for delivery trucks in urban areas.

 

RECOMMENDATIONS

E-commerce affects urban areas, and the impact will become more and more apparent as volumes continue to increase. Incorporating new trends and needs into urban planning and design will benefit citizens as well as e-commerce businesses.

• Those responsible for urban district planning and stakeholders in urban logistics need to be coordinated when requirements for future urban logistics facilities are specified, in terms of location and function.

• Compared to more traditional arrangements, the e-commerce supply chain has different requirements for space and location.

• Other key stakeholders, such as public authorities, can work to support new and innovative thinking regarding efficient supply chain strategies and design.

• Information to citizens about the effects of e-commerce on urban areas is another responsibility that falls on public authorities.

E-commerce supply chains and logistics needs to be given high priority on the political agenda in urban regions, as authorities can guide development in the right direction through incentives and regulations.

Read full report: SIGNED, SEALED, DELIVERED – ANALYSING THE IMPACT OF E- COMMERCE ON URBAN AREAS