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Last Mile Warehousing for Next Generation E-Commerce

Last Mile Warehousing for Next Generation E-Commerce

E-commerce is evolving and even more than expected due to the impact of the pandemic.

Performance of Logistics Activities Affects the Performance of E-Commerce

The three basic processes of e-commerce are receiving the order from the customer, preparing the order and delivering the ordered goods to the consumer.

The second process, order preparation or, in popular parlance, fulfillment, is a process that starts with the customer placing an order, continues in the warehouse and ends with delivery, and includes the storage of goods and picking of orders, value-added services if necessary, packaging (special packaging such as gift wrapping if necessary), and preparation of the order for delivery. The third process, the delivery of the order or, in popular parlance, Last Mile Delivery, involves the delivery of the products (the order) to the consumer.

Two of these three processes, namely the preparation of the order and delivery to the consumer, include logistics activities for e-commerce, so it would not be wrong to say that 90% of e-commerce involves logistics activities (e-commerce is actually logistics) and that the performance of e-commerce is positively or negatively affected by the performance of logistics.

Unless there is irradiation, the ordered goods must be stored somewhere and somehow transported and delivered to the consumer. Therefore, the logistics of e-commerce is the process by which “virtual” trade, i.e. e-commerce, becomes “real”. Trade can be “virtual” but logistics cannot be “virtual” until teleportation is invented.

Customers’ Preferences (Wants)

Customers who used to buy and pay in advance based only on screenshots (and comments, if any) are now asking and demanding “how soon can I get it?” and “how environmentally friendly are the products and their delivery?”.

As retail evolves, the logistics of e-commerce must also be restructured to address direct concerns about logistics performance, avoid problems and complaints, and respond to customers’ preferences for cheaper, faster, greener choices.

Faster and Shorter Time

As Amazon’s delivery time has decreased from “9 or more” days to “2 or less” days since it first launched in 1994, the size of the US e-commerce market has increased nearly 20-fold. Did shorter delivery times improve and grow e-commerce or did delivery times get shorter as e-commerce improved and grew? I think the development and growth of e-commerce may have forced even Amazon to develop more competitive delivery times.

Amazon’s introduction of “free two-day” and “low-cost one-day and next-day” delivery alternatives in 2005 actually triggered new customer expectations regarding the delivery time of e-commerce products, and many people may have even said, “No way, Lebron” when Amazon introduced the “two-day delivery” model for the first time in 2005. Since then, customer expectations for “shorter delivery times” have become one of the most important challenges for e-commerce companies to meet.

According to The Fabric’s “The 3 Biggest Last-Mile Challenges the Retail Industry is Facing Today” report, 61% of customers define “fast” delivery as “next day or less” and 33% define “guaranteed 2 days or 2-3 days” for “click to delivery”, while for e-commerce companies, these rates are 23% and 73%, respectively. Again according to this report, 10% of customers define “next day or less” delivery as “2 hours”, 27% as “same day” and 24% as “next day”, while these rates for e-commerce companies are 1%, 4% and 18%, respectively.

The difference between customer demands for delivery “speed” and the approach of e-commerce companies stems from the inadequacy and lack of “can-do” competence (infrastructure, capacity, way of doing business) required by e-commerce companies to meet these demands.

There is a difference between what customers, especially Generation Z, expect “today” and what e-commerce companies implement “today”, and e-commerce companies also make a significant mistake by planning to do “in the future” what customers want “today”. Because customers want their requests to be met “today”, not 2-3 years later. Customers want e-commerce companies to respond just as quickly.

Faster and Shorter Checkout Time

E-commerce shoppers now prefer and will prefer products that are delivered correctly in less time. According to “The 3 Biggest Last-Mile Challenges the Retail Industry is Facing Today” report by The Fabric:

  • 92% of customers say that they would prefer e-commerce companies that offer “free guaranteed 2-day delivery”, 23% of them say “if they don’t, I won’t buy from them”, 35% say “I will only buy from them if there is no other alternative” and 24% say “it is not a must but it would be good if they do”. 60% of e-commerce companies are able to offer “free guaranteed 2 day delivery”.
  • While 68% of e-commerce companies say that “free guaranteed 2-day delivery” is not really a competitive advantage, this contrasts with the 58%%23+%) of customers who say that “free guaranteed 2-day delivery” is a “must have”.
  • 81% of customers stated that they would make more e-commerce purchases if “same day” delivery was provided.
  • Only 25% of e-tailers are able to offer ‘same day’ delivery, despite 67% of customers saying they would pay extra for ‘same day’ delivery (37% ‘$1-4’, 23% ‘$5-10’, 7% ‘$11-20’ and 2% ‘$20 or more’).
  • While 36% of e-commerce companies see “same day” delivery as a competitive advantage “today”, 73% of these companies believe that being able to respond to “fast” delivery expectations (requests) that customers want “today” and are willing to pay a price for will be an absolute necessity for competition “in the future (2-3 years)”.

When it comes to customer satisfaction and loyalty, many companies are looking for ways to speed up e-commerce order fulfillment and logistics operations.

Pay for Greener Delivery

The Sustainable Last Mile, Faster. Cheaper. Greener” report by Accenture, 43% of customers say they would choose e-commerce companies that offer more sustainable and greener delivery options, while 60% of customers say they would buy brands that offer environmentally responsible delivery options and 42% would pay extra for environmentally responsible delivery or 31% would forgo “free” delivery, according to “Sustainability in the Final Mile, Consumer Survey 2023” by UPS & Ware2Go.

Existing Logistics Practices

Customers want quicker responses to order changes, shorter delivery times, environmentally responsible logistics and hassle-free returns. E-commerce companies must meet these demands, but unfortunately these demands are very difficult to meet with current e-commerce logistics practices.

As in Turkey, e-commerce companies and cargo distribution companies around the world are trying to find solutions by focusing only on the “wheel turning” part defined as “Last Mile Delivery”. However, solutions should be developed and implemented by looking at the whole of the second and third processes mentioned above.

E-commerce companies, Virtual Fitting, Internet of Sense, Search and Order by Voice, Search by Image, VR (Virtual Reality) Shopping, Artificial Intelligence Chatboks (AI Chatbots) etc. In addition to these, it should focus on and implement logistics solutions that will ensure “delivery within maximum 2 hours (or even 30 minutes)”, “free delivery”, “hassle-free, effortless, instant return”, “zero environmental, air, noise pollution due to product delivery” that customers will say “no way Lebron”.

Current logistics practices and logistics structuring are not sufficient to address the aforementioned concerns, to prevent problems, to avoid complaints, and to respond to customers’ demands for cheaper, shorter and more environmentally friendly products. Different, radical and technology-oriented solutions must be developed and implemented to address these concerns and even to make customers say “No way Lebron”. This solution could be the “Last Mile Warehousing ” model created by DepOrtak.

Last Mile Warehousing

In e-commerce logistics, instead of “centralized” structuring for delivery to the customer, “distributed” structuring should be adopted with the strategy of “being close to the customer”. In other words, for the logistics of the ordered products, small storage areas located close to the customer (consumer), even within walking distance, can be used instead of large square meter storage areas located far from the point to be delivered to the consumer.

Last Mile Warehousing is the positioning of micro e-commerce warehouses where value-added services can be provided in addition to basic warehousing services for e-commerce products, in a way to deliver to customers (consumers) within a maximum of 2 hours, to respond immediately to order changes and especially to ensure that returns can be made effortlessly (this time can be reduced to minutes with mobile warehouses).

Instead of using equipment (forklift, conveyor, sorter, order trolley, order picker, order picker, racking system, etc.) and large square meter storage areas or fulfillment centers where many people work, micro e-commerce warehouses of 500 – 2000 m2 can operate digitally connected to each other without the use of equipment and with a maximum of 5-9 people, and can also start to serve within a maximum of 4 weeks instead of waiting for a long time to build or rent large square meter warehouses.

Last Kilometer Warehousing can be the solution to address existing concerns, prevent problems and ensure that there are no complaints; it can provide better, easier and leaner management of distribution and returns for e-commerce; it can realize the “shorter time” and “greener” desire of e-commerce customers; instead of leaving a “We came, you were not at home” note on the door, it can provide delivery at the time or place requested by the customer, and even the consumer can pick up from micro e-commerce warehouses within walking distance if they wish; it can be an effortless and fast solution for returns by simplifying the return process. If the consumer wishes, they can bring the product they wish to return to the micro e-commerce warehouse within walking distance, where it will be checked by experts and an immediate exchange can be provided. As a result of the shortening of the logistics process and especially the elimination of cargo transshipment, the movement time and distance of the products will be shortened and risks such as delay, damage, loss and the costs associated with these risks can be eliminated.

Last Mile Warehousing with DepOrtak

DepOrtak Last Mile Warehousing solution is an optimization-based integrated digital solution that facilitates e-commerce order management with micro e-commerce warehouses.

Last Mile Warehousing is the creation and distribution of micro-ecommerce warehouses close to the consumer that enable delivery within a maximum of 2 hours of order placement.

These micro e-commerce warehouses will provide warehousing services like the large fulfillment centers currently in use, provide value added services and delivery of products (orders) from there to the consumer, and also act as a returns management center. These micro e-commerce warehouses may be “Micro Fulfillment Centers” managed by DepOrtak, or they may be Gray Warehouses used for short periods of time by e-commerce sellers who want to deliver to their customers in a shorter period of time, for example only on special occasions such as Valentine’s Day or during special campaign periods. Either way, these micro e-commerce warehouses are digitally connected to each other via DepOrtak technology in a physical internet environment.

Those who want to do e-commerce will be able to store their products in micro e-commerce warehouses equipped with DepOrtak Last Mile Warehousing technologies and then ship orders. How much of which product should be in which warehouse will be determined by artificial-intelligence-supported customer purchase behavior data. Customer experience and customer buying behavior will come together on the DepOrtak platform to create UX-W (User-Experienced Warehousing).

NOTE: A customer is the person or organization that purchases the good by making a payment, while a consumer is the person or organization that uses the good. A customer need not be a consumer, while a consumer can also be a customer.

This article was written by DepOrtak co-founder Oruç Kaya.

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