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Logistics and E-Commerce


Logistics is being impacted by E-commerce, particularly by its consumer to business segment. In a conventional retailing supply chain, customers are responsible to purchase their goods at the retailer's location; they are assuming the "last mile" in freight distribution. Because location is an important dimension of retailing, significant costs are assumed by the retailer to retain such an accessible location (e.g. rent). These costs are reflected in the final costs of a good which is assumed by the consumer. The retailer is the only segment of this supply chain interacting downwards, although retailers are keen to accommodate the demand signals of their customers.

The emergence of e-commerce has changed the relationship between customers and retailers (e-retailers):

Actors. In some cases, entirely new e-retailers have emerged (particularly in the music, book and electronics), but the adoption of an online strategy by conventional retailers has also been very significant. In the emerging distribution system, the e-retailer is at the same time a retailer and a distribution center.Locations. The location choice is much more flexible, permitting the use of lower cost locations that would not have been considered otherwise.Purchasing. Customers are virtually interfacing with a store and the orders are shipped through postal and/or parcel services. Figuratively, the customers are directly linked to the supply chain since their action of ordering a product reaches directly the distribution center.Tracking. Customers want accurate time-in-transit information for the various shipping options. This challenges the distribution industry to implement information systems to track parcels as well as vehicles.

The consequences of e-commerce on logistics are little understood, but some trends can be identified. As e-commerce becomes more accepted and used, it is changing physical distribution systems:

The standard retailing supply chain coupled with the process of economies of scale (larger stores; shopping malls) is being challenged by a new structure. The new system relies on large warehouses located outside metropolitan areas from where large numbers of small parcels are shipped by vans and trucks to separate online buyers. This disaggregates retailing distribution, and reverses the trend towards consolidation that had characterized retailing earlier.

In the traditional system, the shopper was bearing the costs of moving the goods from the store to home, but with e-commerce this segment of the supply chain has to be integrated in the freight distribution process. The result potentially involves more packaging and more tons-km of freight transported, especially in urban areas. Traditional distribution systems are thus ill fitted to answer the logistical needs of e-commerce.

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