e-Fulfillment will breed new distribution services

By Staff -- Logistics Management, 6/1/2000

The sky may seem to be the limit when it comes to electronic commerce and online retailing, but merchants that sell over the Internet would be well advised to keep their eyes on the road-where the trucks are. That advice comes from professor Martin Anderson of Babson College in Wellesley, Mass. "The real money in e-business is still in moving stuff around," he said in a presentation at the Coalition of New England Companies for Trade (CONECT) annual Northeast Trade Conference held recently in Newport, R.I. "Wall Street eventually will realize that logistics is e-business."

The widespread failure to recognize that electronic commerce must be supported by a solid logistics foundation is one reason why e-business may be well on its way to a service breakdown, Anderson said. The explosive growth in online sales has not been matched by concurrent growth in distribution capacity. To understand the magnitude of the potential problem, he suggested, consider that in the largest retail networks in existence today, there are about 20 billion retail transactions or "stocking events" each year. Now that customers can order almost anything from anywhere over the Internet and consumers who make purchases online are buying small quantities in multiple transactions, we are looking at as many as 450 trillion possible "delivery events" annually in the United States.

Individual retailers' fulfillment systems could well break down trying to meet such demands, Anderson said. But it won't be long before logistics entrepreneurs will have solutions up and running. Ironically, those solutions will introduce a middleman into a business that is built around the concept of disintermediation-bypassing intermediaries in the buyer-seller relationship.

Anderson foresees "pickup points" emerging as "the next best thing." These will either be locations within major retailers' stores where consumers can pick up and return items that were purchased online, or they may be independent outlets along the lines of Mailboxes Etc. that would handle the same responsibilities for a variety of e-tailers. "Last mile" delivery services-so called because they manage the final delivery to residences-will also quickly proliferate as online retailers find their existing distribution models don't work for business-to-consumer deliveries. "This concept is probably going to tweak Wall Street in the next 14 months," he predicted.