Why is the internet marketing accelerating logistics innovation?

The so-called IT revolution is changing the landscape of logistics.  With the advent and diffusion of broadband services, the scale of internet sales has expanded tremendously, and calling for a new distribution system. The sophistication trend of IT environment is now accelerating innovations in logistics. This time around, we’ll take a look at the evolution of logistics system brought about by internet sales, and needs for the improvement of warehousing.

Innovations in logistics system brought about by internet sales:

In recent years, various enterprises are accelerating the new construction and expansion of distribution hubs, and revolution in logistics system is becoming more relevant to the progress of respective enterprise. A world-famous management guru, Peter  Drucker once commented“ logistics is the last dark continent in management.” alarming the lack of attention to logistics among a large number of business entities. Majority of companies has placed emphasis on product development and marketing functions allocating a large portion of budget and staffing. In the past, those engaged in the two functions have been treated as star players. However, the age of internet marketing  has arrived where consumers can purchase any merchandise 24-7 from anywhere, and they now desire to get the merchandise faster and more surely.  Now that it is not enough for the customer to get satisfied that merely good merchandise is provided at a reasonable price. Currently prompt response on the side of the marketer is highly in demand as well. An explosive spread of the internet has upgraded the importance of efficient logistics system as we now realize the building of such logistics system as an essential element for the customer satisfaction.

Mitsui Real Estate and Muji ‘s foray into the logistics business arena and their strategic visions.

Mitsui Real Estate is planning to build 20 large distribution facilities centering in and around the three mega cities in Japan until 2017. At the present, those facilities located I Ichikawa City in Chiba Prefecture and Yokohama City in Kanagawa Prefecture are already operational.  This indicates that the company has entered the distribution industry market in a full scale.  Likewise Muji  is also planning to put up a new distribution center in Hatoyamacho, Saitama Prefecture  in addition to its own facility in Urayasu City, Chiba Prefecture.  Rationale behind this move is a tremendous increase in the volume of merchandise and optimization of small package delivery in the internet sales.  Both companies are aiming at better response to the expansion of the internet sales by putting up those distribution centers.  They are intending to realize the same-day delivery for the following two reasons.

(1)  To narrow the gap between on-line shopping and in-store shopping.

(2)  To address the correlation of the longer days for delivery and the occurrence of cancelation

Most of online shoppers tend to confirm the merchandise by actually visiting the store prior to making an actual purchase, particularly for such items as apparels, electric appliances, etc.  So if the delivery takes a long time for the merchandise bought on line, the customer tends to turn to a store due to no waiting time for delivery.  According to the survey conducted by Amazon, it was found that correlation exists between the longer time lag between order and arrival of the shipment for the merchandise and cancelation. Amazon’s patented anticipatory logistics system is meant to minimize the time lag. That is to overcome this time lag problem with on-line sales, and close the gap with shopping in a store in terms of delivery speed. This will directly lead to the improvement of  the customer satisfaction and reduction of  the opportunity loss.  According to the survey on the suppliers/vendors in terms of the customer satisfaction conducted by the Japan Productivity Center, Amazon was listed at the top in the customer satisfaction in the sector of comprehensive distribution, while in special distribution sector, Olvis was ranked at the top. These two companies are highly ranked also in terms of brand loyalty.        

However, establishing own logistics system is easier said than done. There comes in the third party logistics operator which can handle a comprehensive and wide-ranging aspects of distribution related duties and the designing of efficient logistics system as a whole. The recent move by Mitsui Real Estate and Muji in their plan to put up strategic distribution facilities reflects their serendipity and insight for the rosy prospect of future in the 3P logistics business.

Start the distribution innovation by improving warehousing system.

A warehouse can often become the bottleneck of the distribution channel, since it is located in a crucial part of its route. Establishing an optimal warehouse management system needs to serve operational efficiency, cost reduction and improvement in cash flow. But if such purposes are pursued individually, total optimization is hard to be realized. It should be noted that 3PL operators must take into account both inventory control and transport control comprehensively.  Therefore, total optimization starting with the improvement of the warehouse management system is a key to innovation for logistics as a whole.

References:

Muji put up its new distribution cen ter in Hatoyamacho, Saitama Prefecture:  Material flow plus.
http://www.mf-p.jp/news_center/252.html

Mitsui Real Estate is developing advanced and sophisticated distribution facilities .
http://www.mitsuifudosan.co.jp/corporate/news/2013/0117_02/

Retail logistics: challenges and challenges (PDF)
https://www.google.co.jp/url?sa=t&rct=j&q=&esrc=s&source=web&cd=7&ved=0CEwQFjAG&url=http%3A%2F%2Fwww.researchgate.net%2Fpublication%2F241410437_Retail_logistics_changes_and_challenges%2Flinks%2F004635298aff5ab5eb000000&ei=JlBTVOmLC4WQmwXuxYLoDw&usg=AFQjCNFLTftOd7VgIN4GcBj7WzjeNqkfqQ&sig2=UZXpzLt59ZyX0B93jM1cTQ&bvm=bv.78597519,d.dGY&cad=rja

Customer satisfaction survey (JCSI) by the japan Productivity Center
http://consul.jpc-net.jp/jcsi/jcsi510.html