Published Tuesday 26th March 2019
The opportunities presented by e-commerce are transforming every aspect of the business world. As a total share of retail in the UK, the percentage of online sales has risen dramatically, from 12% in 2011 to over 20% in 2018. With 20p in every pound now being spent online, businesses have had to adapt not just their offering to consumers but also their internal distribution structures.
While e-commerce has presented many opportunities to businesses, it has also created new concerns that need to be addressed. A study of distribution centre operators by Antalis in early 2019 found that 20% of those questioned considered the ‘snowballing costs’ of online shopping to be their main concern over the next few years. As the business world continues to move forward, logistics and distribution companies are tasked with not just keeping up with the changes but also staying ahead, ensuring their efficiency and longevity.
Distribution Centres Facing Rapid Industry Change
Many of the reasons why distribution centres are focused on future operating costs concern a developing consumer experience and increasing online demands. One-third of respondents to the Antalis survey mentioned that they were in the process of introducing new packaging recycling procedures, alongside more eco-friendly packaging options. The global climate is a topic that has received a lot of public attention over the last few months, with growing concerns about the impact of materials such as plastic on the environment. This focus will likely lead to increased demand in the future for eco-friendly packaging. Therefore, despite its increased costs, distribution centres are forced to consider these items to keep up with trends, an example of the future-proofing that is set to sweep across the industry over the next few years.
While the development of more sophisticated online shopping habits brings new focuses, the sheer volume of orders creates many challenges in itself. In the same survey, 17% of respondents stated that reducing the level of damages associated with online shopping was a key focus for the next twelve months. This issue has been steadily on the rise, especially as distribution chains get pushed to their limits through increased sales and a rising expectation regarding delivery times.
Technology in Supply Chain Management
Many outdated distribution centres can struggle in the fast-paced world of online shopping. However, integrating technology into internal systems has become a vital part of the distribution industry and continues to be critical to success. According to a study by ABI Research, technology in the global supply chain will create a revenue compound annual growth rate (CAGR) of 11% over the next five years, as centres start to integrate systems to create a hugely efficient service.
There is a range of exciting technologies that are having an impact across distribution and supply chains. Some of these are widely commonplace, such as robotics and the Internet of Things, which has helped to integrate different parts of the supply chain. However, these examples are continuously developing, and when put alongside other technologies, such as augmented reality and blockchain, the possibilities are almost endless.
The reason why technology is so important is summed up by Nick Finill, Senior Analyst at ABI Research. He says that “supply chain operators must find innovative ways to deliver the three primary tenets of a successful strategy: visibility, intelligence, and efficiency.” One of the main advantages of integrated technologies is its increased visibility, particularly in the case of blockchain. Unchangeable by nature, blockchain will create new levels of accountability throughout supply chains, helping to improve trust over the long-term.
By far the most promising technology, however, is AI. The use of artificial intelligence in supply chains can lead to increased automation and smarter decision making, predicting forecasts and optimising planning procedures to create improved results across the board. When integrated into an e-commerce operation, AI can also assist customers and provide a stronger link between them and the distributor, allowing for a more enjoyable consumer experience and a centre that can keep up with rapid demand.
Technology is opening up brand new avenues for logistics companies and other businesses looking to make their operations more efficient. Here at ERA, we are experts at helping UK businesses reduce distribution costs and can help you streamline your supply chain through effective procurement strategies. It is vital that companies look to modernise their distribution chains before it is too late, so if you are interested, why not get in contact with our experienced distribution team and see what we could do for you?