China’s E-Commerce Explosion Calls for Stronger Distribution Strategies and Systems

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Tompkins International Podcast Weighs Strengths, Weaknesses of E-Retail Supply Chains

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In 2015, the world’s total e-commerce is expected to be $1.4 trillion; $380 billion will come from China. This growth will have a huge impact on distribution in China.

China’s rise in e-commerce is straining e-retailers’ distribution systems, according to a new Tompkins International podcast which pinpoints the hurdles for E-Commerce in China.

“In 2015, the world’s total e-commerce is expected to be $1.4 trillion; $380 billion will come from China, while only $260 billion will be from the US,” says Jim Tompkins, President & CEO of Tompkins International and host of the Global Supply Chain Podcasts. “This growth will have a huge impact on distribution in China.”

Currently, about nine large online retailers in China are competing to maintain and grow their businesses. All offer the same low price but do not have distinct service differentiators, so they use delivery frequency as their competitive advantage. And with logistics in China extremely fragmented – the largest logistics provider has less than 1% of the market – e-retailers have been forced to develop their own distribution networks.

Generally, deliveries are made to small depots regularly throughout the day. “From the depot, the orders are taken by bicycle, motorcycle, three-wheeled cart, or whatever means are available for delivery to the customer,” says Jim Serstad, podcast guest speaker and principal of Tompkins International-Asia. “While these networks provide impressive delivery times measured in hours, much of the country is not serviced at all.”

With China looking at 200% growth of customer orders in the next couple of years, they will not be able to handle the throughput just by putting more operators in the warehouse.

“Adding more workers to the facility will be physically impossible. Meeting these growth challenges will require some major redesign that their home-grown warehouse management systems may not be able to accommodate,” adds Serstad.

Listen to the E-Commerce in China podcast here, or subscribe to receive the Global Supply Chain Podcasts as they become available.

About Tompkins International
Tompkins International transforms supply chains to help create value for all organizations. For more than 35 years, Tompkins has provided end-to-end solutions on a global scale, helping clients align business and supply chain strategies through operations planning, design and implementation. The company delivers leading-edge business and supply chain solutions by optimizing the Mega Processes of PLAN-BUY-MAKE-MOVE-STORE-SELL. Tompkins supports clients in achieving profitable growth in all areas of global supply chain and market growth strategy, organization, operations, process improvement, technology implementation, material handling integration, and benchmarking and best practices. Headquartered in Raleigh, NC, USA, Tompkins has offices throughout North America and in Europe and Asia. For more information, visit http://www.tompkinsinc.com.

CONTACT:
Keri McManus, 919-855-5516
kmcmanus(at)tompkinsinc(dot)com

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Keri McManus
Tompkins International
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