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Minimal inventories of products and maximum in the consumer hands are the critical components of a successful distribution model. From automation to robots the modern warehousing era has just begun but it will be key to the future of the industry
E-commerce sector’s strive to survive and excel has not only seeded wonders, but it has brought innovations that are completely changing business verticals associated with the journey of goods from factory to the consumer. Storage and supply chain management is one such key area where e-commerce industry has turned upside down the traditional way of goods distribution. To give an example of how fast e-commerce sector is reacting to challenges, is the precision management of Cash-on-Delivery, a solution that was introduced to beat reservations of buyers to pay in advance, and lack of plastic and online banking penetration. In the mid of last decade when e-commerce industry were just making an entry, one biggest challenge was to closely match the product delivery time of a brick and mortar store. Hence, it began the journey of new age warehouses called fulfillment centers for product storage, sorting and distribution.
Tapping Untraditional Modes
Companies like Amazon have pioneered safe, precise and timebound delivery of goods. In 2016 when the American E-tailing major launched Prime service in India, it assured Prime members to deliver goods in a day and two-day timeline, which sounds unbelievable in Indian conditions! But still with India’s legendary infrastructure bottlenecks, e-commerce companies have made it possible. The secret lies with the highly efficient goods storage and distribution network backed by a strong IT infrastructure where information exchange continues uninterruptedly and status of an intransit good is relayed at each stage. Additionally, e-commerce industry is supported by an army of technologyenabled 3PL and 4PL companies like Ecom Express, Aramex, Delhivery, Gati, FedEx, Blue Dart who take care of the critical last mile connectivity and door-step delivery of goods. And many of them are start-ups who bring fresh ideas to the industry which are frugal yet effective. For example, Amazon and later other e-commerce companies have discovered a goldmine in the India Post network, which has a whopping reach through its 1,55,000 post offices, an underutilized infrastructure largely over sighted by logistic industry till the beginning of current decade.
Things don’t stop with this. At a time where warehouse automation has just started in India, Amazon had already launched its 8th generation fulfillment centers way back in 2014 in the US and has started work on the 9th generation. The robot called, Kiva, which can move around goods-laden shelves is one of the many technological innovations that Amazon relies on to fulfill huge rush in demand during festival and sale seasons. These new generation fulfillment centers, apart from using thousands of Kivas are also backed by many wonders like Robo-Stow, one of the largest robotic arms on the planet moving large quantities of inventory. It has a new vision system in place that enables unloading and delivery of an entire trailer of inventory at breakneck speed. Apart from the hardware part, high-end graphically oriented computer systems help its employees to dispatch goods with little error. These automated warehouses have helped Amazon to drastically reduce order shipment time, improved warehouse capacity, save in operational expense and increase in sales. The company has not stopped with just e-commerce and market place, rather in a bid to bring down ideal time for its infrastructure and squeeze the maximum out of its warehouse and distribution system, it has started Amazon Now, where it delivers grocery from ones neighborhood stores.
The Bigger, the better Amazon started with one Fulfilment Centre (FC) in Bhiwandi in June 2013 and now with its 41 fulfillment centers across 13 states has doubled its storage capacity to over 13 million cubic feet. Ecom Express, another major player in the modern fast paced goods distribution scene, services over 17,000 pin codes across 1,600+ cities/towns through a network of 1,700+ delivery centres. This network and reach makes it an indispensable logistics and preferred service partner for the e-commerce Industry. Talking about business model and distribution infrastructure, K Satyanarayana, Cofounder and Director, Ecom Express Private Limited said, “The idea behind Ecom Express was to set up a dedicated logistics firm to take care of the diverse shipping and delivery needs of the e-commerce industry which was largely catered by the traditional courier service providers. We provide end-to-end solutions starting with parcel pick-up (first mile), network connectivity (mid mile), delivery (last mile) and return solutions. The extensive network panning across metros, Tier I, Tier II, Tier III and Tier IV towns allows us to serve the growing needs of the industry by providing end to end order fulfilment services and facilitating the industry growth.”
Speaking about the market growth for the cargo distribution and warehousing business in India, Satyanarayana said that the ecommerce industry is compelling warehouses to upgrade for faster turn-around time of cargo, greater reliability, higher efficiency and better customised solutions for customers. The company has launched Ecom Fulfilment Services (EFS) earlier this year. It currently operates three facilities and its largest warehousecum- pickup processing centre and fulfilment centre ‘India -1’ in Haryana (National Capital Region) is spread over 2,50,000 square feet and the two other centres are located in Bengaluru and Lucknow, spread over 40,000 square feet. The company has more such establishments in the pipeline to augment further spread in due time. With changing time, logistic companies are also changing their business strategy. For example, Ecom Express claims to be the first logistics solutions provider with operations on 365 days a year, including all Sundays and public holidays. The company prefers last mile delivery staff on the company’s rolls and encourages them to grow in their career, and the strategy has yielded rich results with front line delivery associates growing within the organization to lead positions in a short span of four years since the company has come into existence. A key consideration for this decision has been the lack of formal talent pool and education for the development of logistics professionals in India.
The young companies serving logistic needs of e-commerce industry believe in the growth potential of Tier IV and rural areas as they believe that the next generation of online buyers will come from there. In the near future, Ecom Express aims for distribution in urban and rural areas through 3,000+ delivery centres and over 25,000 delivery staff directly on its payroll reaching out to over 1.5 million customers and 2,00,000 sellers at a daily level. By 2019, the company aspires to setup a logistics network spanning the entire length and breadth of the country for which it plans to launch 7 large, and 20 small and medium warehouses with stateof- the-art technology and automation solutions.
Getting GST ready
Moreover, with GST just about a month to go, the industry has started to realign strategy to make the most out of the new tax law. Shrichand Chimnani, Senior Director, Logistics – Schenker India said, “Investment decisions will no longer be dictated by the comparative tax advantages of various states. Most warehouse occupiers are expected to take decisions purely on the basis of reach-to-market, quality and size requirements. The need for so many layers of agents will decrease and there will be a shift towards organized sector – one principal company, a good logistics player and last-mile retailer.”
Similarly, another major MNC logistic service provider DHL Supply Chain is hopeful that it will be possible to operate large scale shared facilities with multiple users which will set the platform for consolidation in the post GST scenario. DHL Supply Chain is in fact, has already invested in several large Multi-Client Sites (MCS) in all metros. These offer a wide range of additional services that improve the performance of a customer’s supply chain. From subassembly, co-packing, customization, postponement, kitting, sequencing to pre-retail activities across all industry sectors, DHL MCS solutions aims to help businesses lower costs, reduce inventories, and suitably match supply with demand. Vikas Anand, Managing Director, DHL Supply Chain is hopeful that there will also be a move towards a containerized mode and larger capacity vehicles which would result in reduced pilferages and greater efficiencies. DHL Supply Chain has already begun using such vehicles inter-state leading to higher productivity in transportation.
Disruptive innovation here to stay There has been an ever-increasing emphasis on service levels, reliable transit time, customer-centricity, geographical reach and penetration especially in tier-II, tier-III cities and rural markets, surged Cash on Delivery (COD) services capabilities and end-to-end supply chain visibility and security requirements. The growth will be fueled by rural areas and remote locations backed by growing income, access to technologies and aspirations for quality products. For ecommerce companies to win over this burgeoning consumer market, they need to have right end-to-end supply chain strategies in place and engaged partnership with logistics service providers. Necessity is laboratory of innovation, and this sector has compelled the supply chain to be more responsible and reliable even in India conditions!
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