The E-Logistics Problem

While Lance Armstrong was riding triumphantly over the Paris cobblestones, I was struggling to keep up with a few other middle-aged crazies on some back roads leading to Stone Mountain Park. I caught up with one at a light that refused to change and asked my friend what he did.

He said he worked in e-logistics. This field is actually much older than the web and represents the biggest change in American business practice over the last decades.

Using barcodes, scanners, networks, and new warehouse designs (among other miracles), e-logistics lets you get more stuff from factory to customer cheaper and faster than ever before. Despite the growth of our economy, net-warehouse space remains stubbornly stable, and it’s thanks to e-logistics.

The e-logistics revolution has given us well-stocked WalMarts; it’s given us the warehouse store revolution; and it’s given us McDonald’s in closet-sized spaces. (They’re re-stocked each night.) It’s e-logistics, in fact, that makes e-tailing possible.

Unfortunately, few e-tailers have really tied into this revolution. Most small merchants still fulfill orders by hand from a single warehouse of inventory. They’re profitable, but they’re not scaled. The larger merchants, meanwhile, are getting beaten-down by their own marketing expenses.

There’s been some deliberate confusion on this point. Naturally, Amazon.com has been at the center of it. Amazon started as a conventional e-tailer with Ingram filling book orders. But it has since become a pure e-logistics play, with a network of warehouses capable of selling just about anything and networked computers to track it all. (The confusion came when Amazon stuck some of its shipping costs into the marketing column to make its margins look bigger.)

While anyone can play in e-tailing, e-logistics is something else again. You need capital for warehouses, for stock to fill them, for computers and software and scanners to tie it all together. It’s not a game for the faint at heart.

That’s why the fate of Webvan should concern everyone in this space. They’re one of two e-logistics companies (Kozmo.com is the other) that is trying to extend this revolution to its last mile.

Ironically, what Webvan needs most today are some good e-tailers. Convenience is not a russet potato at 36 cents each. Convenience is a collection of menus for busy households (along with everything else a la carte), all the ingredients, plus the recipes, plus a check-off shopping list of your staples, all delivered to your kitchen within a half-hour window.

If you knew you’d gotten everything for the dinners you planned to make over the next week (including the kids’ lunches, the recipes themselves, and the wine), you would have something much better than what a grocery store can be. But so far, Webvan is competing head-to-head with grocery rivals, and in that competition it could be ground-down.

On my ride Sunday, we passed by several Webvans making deliveries. Atlanta is full of these small brown trucks. They’re the most visible evidence I know of that e-tailing has changed the way we live. I hope Webvan succeeds, and I hope you take a lesson from their effort. Don’t just worry about getting them to click, worry about getting them the merchandise.

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