E-Commerce is Here to Stay

In 2001 we ran an article “E-Commerce, Friend or Foe of The Forwarder.” Over the past 15 years or so, e-commerce has become a bigger and bigger part of the logistics and supply chain world. The expansion includes both domestic and international transactions. We have seen major e-commerce companies like Amazon expanding into areas that were previously the domain of freight forwarders, airlines, truckers, warehousemen and even integrators. Not only have the number of transactions been growing, but so has the size and type of commodities being sold. Thus, more transactions now include business to business, as well as, business to consumer.

As an industry, we make adjustments and find ways that we can participate in and benefit from the expansion of e-commerce. Trade organizations, such as the Air Freight Forwarders Association, have formed the E-Commerce Committee to help members understand and participate in e-commerce. The WCA has formed a new agent’s network that focuses on e-commerce.

The ever expanding use of technology, at all levels of life and business will continue to expand, and with it, e-commerce will also expand.

This new way to purchase products continues to have a significant effect on today’s retail market.  Consumers can already purchase everything online. From the staples of life such as food, medicine and clothing to virtually all consumer products, including the continually expanding array of high-tech products, electronically.  We are now seeing e-commerce expand rapidly into the commercial marketplace, as well.  This growth of e-commerce is not only changing the way consumers and manufacturers purchase and market products, it is also having an effect on supply-chain management.  The logistical support needed by companies involved in e-commerce is rapidly changing.  These changes will have an effect on the traditional freight forwarder in two ways.  It will affect how their services support this new way of doing business and how forwarders themselves can use this new medium to market their own services. 

We should first look at how e-commerce affects the forwarder’s business.  To many forwarders, it does not appear that this new way of doing business will be beneficial to them.  They feel it is only the small package companies and integrators who will benefit.  While this is true for some small package companies such as FedEx, UPS, USPS and others who currently handle over 75% of all the e-commerce deliveries, it is important to look at what segment of the supply-chain this business is coming from. This significant expansion in deliveries handled by integrators and other small package companies is generally coming from the last leg of the retail supply-chain, which is delivery from the retailer to the consumer.  In the past, this portion of the delivery system was actually handled by the consumers themselves. Traditionally, a consumer would go to a retail store to purchase a product and, unless it was too bulky, heavy or inconvenient, the consumer carried the majority of the purchases away. 

When an item is purchased on-line, the consumer cannot provide this last leg of the delivery system and an outside carrier must be utilized. In general, items that the consumer would not have carried away with them in the past are still not handled by the small package companies.  Larger, heavier or more difficult to handle products are still being delivered by common carriers and, in some cases, forwarders.  If as a forwarder, we were to concentrate only on this segment of e-commerce, there may not be significant opportunities available. 

To find the opportunities we must look at the overall needs of companies who are involved in e-commerce.  In order to explore the potential, we should separate companies into three general categories:

1. Companies, large or small, who actually manufacturer the product being marketed over the Internet;
2. The large, and in some cases, multi-national companies, such as, Toys-R-Us, J.C. Penney, Home Goods, etc. who do not, in most cases, directly manufacture the products they sell.
3. Smaller to mid-size companies who are not the manufacturer, but offer the

      products of other manufacturers or products specifically manufactured or

      produced for them. 

This last category may present the greatest opportunities for the traditional forwarder. 

The companies in this last group require a transportation and logistics provider to retrieve the product from various manufacturers and supply points to bring them into their distribution or order fulfillment center.  In many cases, they will not be running these fulfillment centers themselves and will look for a third party logistic provider to perform this service.  The needed service will not only include the physical handling within the distribution center, but will involve the logistics provider in various aspects of the order fulfillment process.  While many of the orders leaving the fulfillment center may go out by small package companies, there is always the opportunity to provide delivery services for larger orders.  When looking at their needs from their perspective, you can see that opportunities exist for a forwarder that go beyond delivery to the consumer. 

The actual company marketing the product can be located anywhere in the U.S. or around the world.  This would give forwarders the additional opportunity to market services to overseas companies who can receive orders electronically from anywhere in the world.  They can have an order fulfillment center here in the United States for U.S. orders without actually having to go through the complexity and expense of setting up their own facilities within the U.S.  U.S. based companies can receive orders from around the world and provide international order fulfillment through the forwarder ran distribution center. 

In addition, for U.S. based companies filling international orders, the forwarder can further provide consulting services to insure that all exports are done in compliance with U.S. export regulations.  They can further arrange for any services required in the country of destination.

Forwarders who are experienced and aggressive in the area of distribution services can capitalize on this need.  Opportunities also exist for forwarders to handle deliveries to, and in some cases, from the distribution center and even establish order fulfilment and distribution centers for clients.

If a forwarder looks beyond the last link of the supply chain, considering more than the final delivery to the purchaser, e-commerce presents a new world of opportunities for the forwarder who is willing to partner with their clients to assist them in growing with this new marketing medium. 

Team has had a number of successes in this area from establishing order fulfillment centers for clients, supporting an actual e-commerce company based in Singapore and in the various “home” delivery programs branches have across the U.S. As a company, we will continue to monitor the e-commerce market and look to develop ways that our clients and branches can capitalize on these opportunities.