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Australian e-commerce growth presents new logistics challenges



Sydney, 30th April 2013 - Australian e-commerce is set to enjoy strong growth according to a recent report by IBIS World.

But  the on-line industry is still hindered by a lack of infrastructure as logistics service providers attempt to catch up, according to logistics software company ORTEC.

IBIS World predicts that revenue to Australian online retailers will reach $10 billion in the next five years, increasing 8.6% each year.

Strong consumer demand and a dramatic increase in the range of goods available on-line will be the major catalysts for this e-commerce growth.

One example is Australia Post, which has highlighted the e-commerce boom as a major contributor to its increased annual profit, and to the decline in its traditional mail volumes. It recently announced an overhaul to its parcel delivery services, and forecasts a doubling of on-line spending on its delivery services in the next five years. It expects revenue from its parcel business to hit $2 billion by 2015.

But road humps in Australia’s logistics infrastructure are around the corner, often literally. One example is traffic congestion, which is a significant logistics cost. The Australian Department of Transport and Regional Economics predicts the avoidable cost of congestion in wasted time and fuel could reach $20 billion annually in 2020, more than enough to eat into the online revenues predicted by IBIS World.

Flattening the humps, sidestepping infrastructure bottlenecks

The solution comes in part from new-style logistics planning designed to fit a world in which fulfilment and delivery are almost instant, and in which the historic approach of having intermediate logistics stages in the form of distribution centres becomes less important.

Australia’s logistics service providers and retailers might look to US retail giant Wal-Mart for insights into future operations. The growth of e-commerce and increasing fuel costs are forcing Wal-Mart to increase efficiency and improve customer service.

By implementing a route scheduling solution in its grocery operations, Wal-Mart has improved trailer use and reduced empty mileage. With approximately 7,500 drivers, the Wal-Mart fleet drives round the world 30,000 times each year. The new planning system has seen Wal-Mart drivers log 49 million fewer miles last year, transport 57 million more cases, and save four million gallons of Diesel fuel. This is equivalent to removing 412 trucks from the road.

Wal-Mart also avoided emitting over 40,000 metric tons of CO2 greenhouse gas emissions, the equivalent of 121 Hindenburg Zeppelins.

Quotes from ORTEC

From Alan Thomas, Joint Managing Director of ORTEC ANZ

“The continued growth of e-commerce is attractive to Australian retailers of all kinds, and perhaps the last chance of survival for some. But this growth will put pressure on logistics preparations and infrastructure alike.”

“E-commerce heralds new trends in logistics, and retailers will have to consider their operations and how these need to change, ahead of the changes also required in large infrastructure. Unfortunately, retailers will not be able to stop operations to take stock. “

“Flexible logistics operations that accommodate the ebb and flow of e-commerce demand, and which support rapid fulfilment, will become more important. Staging operations will present their own challenges: companies need to balance having this expensive infrastructure, the contribution it makes to fulfilment and operational flexibility, and how it integrates with national infrastructure.”

“Australian retailers and e-commerce operations will need to consider the special characteristics of Australia’s logistics operations, including the highly localized population centres and distance.”

ENDS

 

References

        http://www.powerretail.com.au/news/ibis-world-australian-e-commerce-revenue-to-reach-10-billion/http://www.powerretail.com.au/news/ibis-world-australian-e-commerce-revenue-to-reach-10-billion/

        http://www.ie.unimelb.edu.au/matrix/about.html

        http://www.ortec.com/us/The-Library/Press_Releases/2013_03_27_ORTEC_Walmart_Host_Webinar.aspx

        https://www.gov.uk/government/publications/2012-greenhouse-gas-conversion-factors-for-company-reportinghttps://www.gov.uk/government/publications/2012-greenhouse-gas-conversion-factors-for-company-reporting

        http://www.ecogeek.org/component/content/article/3511-visualizing-co2-emissions

        http://cta.ornl.gov/vtmarketreport/pdf/chapter3_heavy_trucks.pdf

 

Assumptions

Total turnover of the Wal-Mart transportation company is approx. US$ 4 billion per year. The claim of a saving of 49 million miles is based on driving 55 miles/88 km per hour, saving 900,00 hours of driving time, which equates to 350 full-time-equivalent employees. Assuming a salary of US$30,000, this saves an estimated US$10 million. The saving of four  million US gallons of diesel is based on an average price of US$4.25 per gallon, equivalent to a saving of approx. US$17 million per year. For Australia, 4 million US gallons = 15,142,164 litres. With a median diesel price of AU$1.4/litre, this equates to savings of approx. AU$21.2 million per year.

About ORTEC
ORTEC is one of the largest providers of advanced planning and optimisation software solutions and consulting services. ORTEC systems optimise fleet routing and despatch, vehicle and pallet loading, workforce scheduling, delivery forecasting and network planning. ORTEC has over 1,650 customers worldwide and employs over 650 employees and offices in Europe, North America, Australia and Asia. For more information, visitwww.ortec.com.

Media contact:
Alan Smith, alansmithconsulting@gmail.com, 0404 432 700.
Issued on behalf of ORTEC ANZ.