Technologies to provide solutions for the change in consumer distribution and e-commerce

Blog post
Arttu Lauhkonen

Have you ordered something from an online shop to be delivered either to your home or to a pick-up point? Or can your company’s products perhaps be ordered online for home delivery? If your answer is yes, you have contributed to a change in which the rapid growth of e-commerce and the new ways of providing services made possible by the Internet are shaking up traditional consumer trade.

As part of this trend, the delivery of consumer products from the manufacturer or wholesalers to the end-customer is increasingly taking place without “intermediary” retailers or, for example, central warehouses.

However, the demand for direct-to-consumer delivery and related services is growing faster than the supply. E-commerce deliveries are not always perceived as flexible and often require setting schedules or retrieving goods from a pick-up point far from your home. More flexible and consumer-centric delivery services and their ancillary services are emerging, but not at the same pace with the growth of e-commerce, for example. The OPEN MODE research project (co-funded with Business Finland) aims to find solutions to prevent distribution activities from creating a bottleneck in the midst of the change pushed by e-commerce.
Traditional consumer trade, especially in growth centres, has been based on large, ever-growing shops or shopping centres. This operating model involves a lot of effort on the part of consumers as well as large investments in shops, warehouses and related infrastructure. A new type of distribution logistics, with a focus on direct consumer deliveries, offers significant opportunities to improve the overall efficiency of the retail sector. With the need to invest in expensive warehouses and retail shops reduced and supply chains geared more directly towards the end-customer, both time and cost savings are achieved. To the consumer, this is visible simply as a diminished need to spend time and energy searching for and transporting goods.

Digital solutions to support distribution

However, the benefits envisioned above cannot be achieved without efficiently organised home deliveries. Solutions are being explored with VTT, the University of Helsinki and corporate partners eNexus, Hakonen and OGOship as part of the OPEN MODE research project seeking new, more consumer-centric, flexible and efficient logistics concepts for consumer products. The companies involved in the project are engaged in development work on order-delivery chain management. The aim is to create systems that could handle information exchange and manage the flow of goods from the starting point to the end customer. 

One of the project’s research areas is digital-based technologies and related new opportunities in distribution logistics. Early findings from literature and a survey suggest that new service concepts are emerging in the field of consumer distribution, and new digital technologies, some familiar from other sectors, are making their way into e-commerce distribution logistics. The following examples are already taking e-commerce in a new direction:

1.    For example, parcel lockers have appeared in shops, and the arrival of similar types of locker systems in the common areas of housing cooperatives, among other places, together with smart locks is making last-mile distribution more and more flexibly available to the end customer.

2.    Another example is drones, which have become increasingly common in private hobby use as well as in the world of logistics. Drones have been utilised, for example, in observing storage areas, and the world’s first service experiments in food home delivery have been carried out. It will be interesting to see how the legislation concerning radio-controlled aircraft evolves, how the challenges related to their limited load-carrying capacity and battery life are met, and how people respond to this technology. 

3.    A third example are entities based on satellite positioning and crowdsourcing, which can be used to develop means to reach free distributors in the event of a capacity shortage during demand peaks for delivery, for example.

Results of the survey answered by delivery experts in Finland, show that there is potential for even greater use of technologies in consumer distribution than is currently the case. More specifically, versatile distribution logistics solutions are needed for attracting new consumer groups to become e-commerce customers, but also for meeting the growing quality requirements of existing customers. For companies, being at the forefront in developing new solutions offers an opportunity to gain a competitive advantage in the already highly competitive world of consumer trade and deliveries.

Arttu Lauhkonen
Arttu Lauhkonen
Research Scientist
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