How is logistics adapting to new consumer habits? what happens between your click on a website and the delivery at your doorstep?
E-COMMERCE HOW WILL IT CHANGE LOGISTICS?
E-commerce open geographical barriers for your business to reach globally. Online sales are expected to grow 19% yearly, to reach 16% of overall commerce in 2021, from todays 10%. E-commerce provides challenges to logistics, a historically low-tech industry. How is logistics adapting to new consumer habits? what happens between your click on a website and the delivery at your doorstep?
MAKING THE ORDER ON-LINE
From consumer’s side, online purchasing is simple, no matter it is domestic origin or shipped from overseas. The process is similar on all websites: choose product, input your address, choose a delivery method and make a payment – easy !
From e-tailer’s side, order is received and the company will arrange following steps to get it delivered. For small company with one warehouse, this step is: picking the right item, packing it and prepare the shipping information (invoice, customs document, label). Big companies may have multiple warehouses/locations. They check available stock and select from which location to ship for best transit times and cost. Order being prepared and a delivery method chosen. Smaller businesses often propose one option, while some companies may provide a choice from express and economy shipping services. Can also be option for a delivery at home, at work, or at a pick-up location.
TRANSPORTATION – Products will transit through centralized distribution and fulfilment centers on way from seller to consumer.
Manufacturer produce goods in bulk which will be shipped to the distribution centers. The latter will then split it in smaller quantities for the different fulfilment centers they serve. At each step, goods will be split further and carried on shorter distances to next location. Generally, at the end of process, private companies will transport individual orders to the consumers. Efficiency decreases as goods get closer to consumer since the costs will increase – AT Kearney estimates the last mile to account for nearly half of total logistics costs.
CUSTOMS – In the past most of the goods was sold domestic. With the opportunity to buy online at lower price comes the possibility to have the goods shipped internationally. Majority of goods crossing international borders are subject to Customs handling, duties and taxes from the importing country.
Duties & Taxes are imposed to generate revenue and protect local business from foreign competition or both. An item purchased online could cost much more once it reaches the consumer and taxes are applied.
The two general customs terms: DDP (Delivery Duty Paid) and DAP (Delivered At Place).
DDP = e-tailer has dealt with all Duties & Taxes that are to be paid in receiving country.
DAP = any payment for duties & taxes will fall on consumer, most likely at delivery.
More and more e-tailer’s now provide service to calculate all duties and taxes in order to collect payment by the customer directly when placing order online. Depending on destination, the website will then calculate the amount to be paid.
The industry is rapidly changing with technology and the way people view the transport of goods. E-commerce is a major driver to transform logistics industry. Operators are constantly looking for ways to have the goods delivered as fast as possible to their customers and at lower costs. They are aware of logistical challenges like the payment of duties and taxes, providing information of return policy, etc. Bringing efficiency and visibility is essential.
NGL want to help with its expertise on all these subjects – Email us us or fill in our online contact form to get in touch with us!