Optimization of e-commerce logistics chain



The development and growth of online commerce in recent years has given way to new consumer habits, which are becoming more and more established as a result of different reasons: the widespread use of the Internet and various devices (PC, tablet, smartphone); the deployment of the network at a global level and the increase in transactions security.

Sergio Güerri - ITENE


All this has led many companies to change the dynamics of operating their business (from an offline model to a mixed model). In short, it has meant the digital transformation of shops through the implementation of virtual stores in which the catalogue of products offered is displayed at a single "click" from the customer.

The result is evident in the turnover forecast for 2019 in Spain, with an amount of nearly 33,500 million euros (European Ecommerce Report-2019 Edition). Specifically, according to a study developed by the communication association IAB Spain, 7 out of 10 Spaniards between the ages of 16 and 65 claim to be online shoppers (e-shoppers), which represents more than 43% of the population. Of these, more than half make their purchases through both channels (offline and online), with those between the ages from 35 to 44 having the greatest presence in e-commerce.

In terms of the electronic devices used, although the computer is still the most widely used, online shopping by mobile phone continues to grow each year, reaching 53% of e-shoppers.

However, this e-commerce boom is also associated with an increase in commercial competition, which forces the need for differentiation, as well as for maximum efficiency. In line with the above, because of the evolution of users' purchasing habits, their expectations have also increased, which requires companies to adapt their strategies. Specifically, consumers have become more empowered, increasing their level of demand. In fact, new technologies allow users to make their purchases with greater freedom, being able to compare between the different existing alternatives, that is, giving them greater decision-making capacity. In this context, companies are forced to strengthen their all-channel sales strategies in order to facilitate contact with the customer.

Returning to the IAB Spain study, the main reasons why consumers choose the online channel are convenience, practicality and time saving. In turn, price and product variety are also key factors when deciding to buy online. Otherwise, the above aspects can be summarized in competitive price, high quality and good service.

Specifically, and with regard to what is considered a good service, aspects such as transparency and clarity have become key points in order to obtain consumer confidence, and not only with regard to security in terms of payment, but also with regard to the monitoring and traceability of the product purchased.

But, how can these challenges be met with a high level of efficiency? In this context, one of the critical aspects to ensure such efficiency is to have an optimal supply chain. As mentioned above, currently consumers have a more demanding purchasing mentality that requires a frictionless service and fast shipping. Since some retailers like AMAZON have set high standards with fast delivery and free returns, other competitors are forced to adjust their supply chain to be competitive. With increasingly complex value chains and more players involved, technology and integration are key for an efficient supply chain management.

In this scenario, transparency is vital. When a customer places an order, he expects to be able to track its status in real time, from the screen to the door. From a business perspective, having the technology to manage supply chain systems with multiple carriers, warehouses, stores, or users is no longer an extra, but a necessity.

At the same time, security when carrying out transactions is another important factor. In fact, payment problems are one of the leading causes of cart abandonment. For that reason, e-retailers are turning to technology to find faster, smarter, and more secure payment methods.

In the last few years, we have seen monumental shifts away from traditional payment methods like credit cards. At the same time, there has been a widespread rollout of alternative payment methods like PayPal and Buy Now or digital currencies like Bitcoin.

Recently, several developing technologies are actively contributing to the promotion of e-commerce, significantly improving the above processes. One of these technologies is the blockchain.



Blockchain and its potential for e-commerce

What is the blockchain technology? Besides being a recent trending topic in the technological field, it is a concept that poses a huge revolution in all economic areas.

Specifically, this technology is based on the creation of a distributed and secure (encrypted) database that can be applied to all types of transactions, beyond the economic ones. In a simple way, it is a single, agreed upon and distributed registry in several nodes (blocks) of a network. Each block stores information about several activities and their records, as well as their linkage to the previous and subsequent block.

Finally, the existence of several users in charge of verifying these transactions is essential for their validation. In this way, on the one hand, as a distributed chain, each node keeps an exact copy of the chain, and on the other hand, as an agreed record, it is practically unalterable. In short, this technology provides true information that cannot be modified or eliminated.

Since its emergence in 2008, the main application of this technology in the e-commerce field has focused on the development of economic transactions (payments), by removing the activities associated to foreign exchange. To this end, through the creation of crypto-currencies, such as Bitcoin, Ethereum or Litecoin, users can acquire in advance a specific number of crypto-currencies, personal and non-transferable, to carry out their transactions. Therefore, it is possible to trade without currency exchange, and without intermediaries, which means time and money savings.

However, the potential of this technology goes far beyond economic transactions, since it allows the different agents involved in the logistics chain to operate and exchange information globally, permanently and without central bodies, and maintaining an incorruptible and unalterable historical database. As a result, the flow of information along the chain is much more efficient.

Thus, the blockchain provides three important benefits in the supply chain management, regardless of its complexity: greater trust between the participating agents (suppliers, retailers, logistics operators, consumers), since the information provided is validated and incorruptible; improved traceability (greater transparency), providing true and contrasted information; and cost reduction, through the inefficiencies depletion in the different processes. In fact, it is possible to set up smart contracts between different agents, whose validity and compliance can be verified in real time. A smart contract is a software that runs in each of the blocks a blockchain network, which, due to the characteristics of the system, is verified within a distributed trust model, without the need for a third party. In short, the blockchain is a powerful tool for building trust.

Currently, there are a wide variety of projects carried out with the aim of implementing blockchain systems in different supply chains, from multi-product to agri-food. In this context, the Packaging, Transport and Logistics Research Center (ITENE), in cooperation with the Information and Communication Research Center (ITI), are working in a project called BLOCKMARKET, which aims to develop a blockchain system for on-line trade lines, mainly focused on the retail sector, for complete traceability of products. Additionally, it enables the generation of secure digital certificates that facilitate bureaucratic procedures between the different agents in the value chain.

Within this framework, pilot tests of the solution obtained will be carried out in the coming weeks for their validation in a real operating environment. This project is financed by the Valencian Institute of Business Competitiveness (IVACE), through the European Regional Development Fund.


Other technologies that will mark the future development of e-commerce

In addition to the above-mentioned blockchain, there are other disruptive technologies that are expected to have a considerable impact on the development of online commerce in the years to come. All of them are aimed at improving the user experience, boosting sales, and optimizing the various processes that take place in the value chain.

One of these technologies is artificial intelligence (AI), which allows to define different profiles of purchasing habits by generating and analysing consumer data, together with the use of other cutting-edge technology, such as big data. In this way, companies can make sales suggestions and encourage loyalty.

Other technologies to be highlighted are augmented reality (AR) and virtual reality (VR), whose application allows to improve the customer experience and get closer to them, offering them the possibility to check the effect of the product or service acquired in a virtual way and integrating it in their environment (e.g. check how a garment feels).

Besides this, in order to facilitate access to the online channel and the purchase process, there is an increase of the m-commerce (mobile commerce), a term that refers to commerce conducted through mobile devices and computer applications (apps). At the same time, to simplify the steps associated with the purchase operation for users, voice commerce technology allows commercial transactions to be carried out using voice recognition.



Impact of the COVID-19 crisis on e-commerce

Finally, in order to analyse short and medium-term trends in e-commerce, it is necessary to take into account the significant effects of the coronavirus pandemic in the last months. Mainly, it has been a significant economic impact on many sectors, mainly due to the inactivity of the offline channel. Nevertheless, some sectors have grown significantly, as is the case of food, strongly promoting its sales on the internet.

According to a survey carried out by IdeasActionLab in Spain during the third week of March, 4% of the interviewees had gone online to make purchases for the first time. This boom shows that digitalization is a necessary action for the optimal development of commercial activity.

At the same time, it seems logical to think that this temporal growth of e-commerce will suffer a decline at the end of the health crisis, but part of it will be consolidated.

The result of these circumstances will be probably the impulse and acceleration in the implementation of these technologies, which represents an outstanding opportunity for the deployment of digitalization in the majority of economic sectors, since a greater technological development of the companies will allow them to face with greater solvency the periods of uncertainty like the one we are living, maintaining high levels of efficiency and competitiveness.






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