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How The Rise of Ecommerce in Asia Impacts Traditional Logistics Chains

The writing is on the wall: Internet sales is no longer a trend in Asia, it is a new norm; one that brings a host of logistics-related challenges that most companies still struggle to adapt to.
Some of the key factors are illustrated below.

1. Inventory Challenges Among E-Commerce Retailers

Volumetric weight

Why do they feel a need to build their own infrastructure solutions as soon as possible, as opposed to relying on service providers?

The main reason is the small parcel deliveries. Unlike traditional retail, where large orders are consolidated, e-commerce logistics revolve around disparate numbers of small packages, all to be sent to different locations. Hence, the warehouses they use must be optimised for small parcel deliveries. This means an emphasis on top-end location management systems, and dedicated software for a high volume of storing and picking requirements. Ideally, warehouses must have smart systems, systems that are able to consolidate multiple small orders into a single delivery. At present, most warehouses are still catering to traditional offline retail, despite the evident shift. However, Rhenus Logistics’ custom Warehouse Management System (WMS), for example, is flexible enough to be tailored for these needs.

2. Centralised Distribution Centres

In traditional retail, customers go to a central store to pick up their purchases. With e-commerce, customers expect the purchases to be delivered to their specific location. This can be problematic and cost-intensive. For example, the need for a delivery person to park the vehicle in a common area, complete a security pass application, access the elevator, find the right unit, and make the delivery. When spread out over several hundred small packages, this results in significant costs of time and expended effort. Furthermore, some percentage of deliveries will be rejected or sent to the wrong address, requiring a repeat of the entire process. There have been attempts to eliminate this. Taobao agent Ezbuy set up a central location that customers must go to to pick up their packages.

One key advantage of this system is the lower rate of returned deliveries: there is no need for a second delivery run when the recipient is not present. However, CDPs can be costly. Those that are unmanned run the usual array of problems, from theft and vandalism, to customers who are not tech savvy and struggle to unlock their packages.

3. Unconsolidated Deliveries

A single shopper may order a dozen products from a dozen different online companies. It is a challenge to consolidate these orders into a single delivery, and failure to do so adds substantial costs to the buyer. There may be similar difficulties even when purchasing from the same online retailer- if separate orders are made a day or two apart.
Marketplace sites often have different shipment options to cater to this. For example, Taobao allows users to have their purchases - all from multiple sellers - consolidated into a single delivery. To cater to this rising demand, Rhenus is in the final stages of setting up a European road freight gateway to consolidate e-commerce cargo bound for Asia. Eventually, this service could be used to partner with large e-commerce retailers and platforms.

4. Customs Delay

Singapore and Malaysia constitute about half the e-commerce transactions in the region. An inevitable problem with cross-border e-commerce is customs clearance. E-commerce stores often sell to an international market, but leave the responsibility of customs to the buyer. This results in an added layer of complexity, when several packages need to move quickly. There are often long delays in processing while an item waits to clear customs. If too many shipments are held back for inspection, this can create a long backlog of goods to be delivered. A potential solution is the ASEAN Single Window (ASW) project. This is a joint effort by ASEAN nations to create a single website that handles cross-border customs approvals. Until the project succeeds however, customs paperwork remains an ongoing hazard.

5. Varied Transport Infrastructure In The Region

However, countries may be lacking in rail and road options, which makes the final delivery the most difficult. Even developed countries are not fully spared from the problem. For example, roads in Singapore and South Korea can be congested, making delivery times just as long despite the excellent network of highways and flyovers.

This can be solved by either setting up a collection point or by logistics companies using environment specific solutions (e.g. using smaller vehicles, such as delivery bikes, instead of vans for small packages).

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