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Understanding E-Commerce Fulfillment

July 15, 2013 EC Milo Category : , , , , , , , , ,


Much has been said regarding the e-commerce growth in Malaysia, from foreign entrants that are making big names such as Groupon, Zalora, Rakuten to local heavy weights such as Lelong.my to individual websites, are all anticipating rapid growth as more and more consumers join the online marketplace.

However as the product you purchased moves virtually from one screen to another seamlessly, most online shoppers tend to forget about the people involved behind the screens in moving the tens of thousands of physical products daily for all of these online purchases. The bridge that has been connecting the virtual marketplace with these physical goods is Logistics.

Logistics will continue to play an important role to the growth of e-commerce worldwide. In fact, it is so vital that the recently step down CEO of Alibaba Group, Mr Jack Ma who has played a critical role in the explosive growth of e-commerce in China, official launches and spearheads as the chairman, a logistics initiative named China Smart Network (CSN).

Jack Ma's new initiative on Logistics
What is Jack Ma doing after "retirement"? Logistics
The network, which will be able to deliver shipments to any city in China within 24 hours, is backed by 100 billion yuan (about $16.3 billion) in funding and slated for completion in 8 to 10 years.

A stronger logistics network is crucial for China’s e-commerce economy because 70% of its current logistics warehouse infrastructure was built before the 1990s and cannot keep up with the speed and volume of current online transaction.

Source: TechCrunch


What is E-Commerce Fulfillment?


When we talk about logistics, the first thought that comes into most people's mind would be – Delivery, and companies such as Poslaju, Skynet, FedEx and DHL comes into play.

The truth is logistics for e-commerce is much more than just that. It encompass the whole process from receiving a sales order to fulfilling / processing it to shipping it out to the customer individually. This B2C (business to consumer) process adds a layer of complexity that challenges the traditional B2B (business to business) logistics industry. As the orders becomes more complex and the variety of goods increases, a new approach is needed and this is where eFulfillment comes into play.

eFulfillment is generally made up of 3 main components as shown in the chart below:

eFulfillment comprises Warehousing. Order Processing, Delivery
eFulfillment comprises Warehousing. Order Processing, Delivery (click to enlarge)

Third-party logistics provider (3PL) that provides fulfillment services are not rare in countries where e-commerce are growing rapidly. Amazon, the world's largest online retailer has an upwards of 40 fulfillment centers worldwide and growing (some of this centers also provide fulfillment services to other merchants, through FBA).

Hard to imagine? Just check out some of the photos below taken from Daily Mail's article on Amazon's human robots.

Amazon warehouse

Amazon warehouse

Warehouse workers can each walk between 7 and 15 miles a day

If we study closely at the movements of other giant online retailers such as Amazon with its world class fulfillment facilities that has help dominating the US market; Rakuten's acqusitions of French logistics solutions provider ADS last year and US based fulfillment company Webgistix recently; 360Buy establishing its own express delivery team; Alibaba investing 100 Billion RMB, we can see that serious resources are being allocated into logistics and its not hard to see why.

With the continues growth that e-commerce in the region is experiencing, there is no doubt that we will see more industry being introduced that will further support and spur the growth of e-commerce, and for sure fulfillment will be playing its own vital role in this saga as it unfolds.

This article was written by Joe Khoo, co-founder of iSiS Logistics, which focus on providing eFulfillment services (via istoreisend.com) to e-commerce businesses. He can be contacted at joekhoo@isislogistics.net.

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