As future logistics delivers Same-Day willy-nilly, today, the entire supply chain paradigm shifts to become a fulfillment process that caters cost efficiency through innovative self-driving building blocks. As customers up their shopping game, one business solution is to consolidate less effective remedies commissioned in silo !!
Today, technological advancement plays a key role in all business aspects, core competency and administrative alike, but particularly in e-commerce where markets expand to new frontiers, daily. Even the retail giant Amazon has to tweak its strategy ever so often after a major buyout. The $13.7 billion Whole Foods deal made a big splash in the high-end grocery pool (previous article: Amazon and the new “High-end Grocery”) following Wal-Mart’s long held title to the other larger slice of the same pie; the mass market stronghold. To compete on the downmarket front, too, Amazon Go was deployed to demonstrate AI capacity in raising the bar for convenience store serviceability in the age of accelerated congestion (Previous article: “AmazonGo:The future of shopping store”). This is only one example of technology-driven innovation garnering enormous benefit for business. On the flip side, what would happen if Amazon accepts a hundred million orders with out-of-stock inventory? Maintaining an overview of the whole supply chain gestalt in real time, thus, is paramount to earning customer trust over the long run.
The following 9 key trends for supply chain and logistics that have been forecasted with great certainty to take place in the not-too-distant future, if they haven’t already, i.e., 9 changes that businesses must be prepared for.
1.Same-Day Delivery: Although next-day delivery remains popular today, a same-day capacity is the competitive advantage of tomorrow. 80% of online customers want their stuff fast, partly, because anxiety rises over a possible order-delivery mismatch. Understandably for customers that order from a retailer they are not familiar with, had no physical exposure with the product prior to submitting the purchase and as each vendor carries different levels of credibility. The latter, though, can be easily measured given customer reviews, track records and ratings centered around customer satisfaction in various areas. Testiments to customer reviews effectiveness are such as eBay, Amazon, Airbnb and even Uber, where customers unsurprisingly flock to vendors with better ratings that indicate creditability. Uber, of which, now allows drivers to rate passengers, as well, as only passengers could do so not too long ago. Operator and consumers alike, thus, like nothing less than petulant behavior made public. It is an invaluable feature to e-commerce provided handled professionally and in a systemic way.
2. Amazon Operation Dragon Boat: Amazon leadership has been playing down numerous reports since 2016 that it is building a secret onestop global logistics system to take on Alibaba on the new silk road itself. The move reflects the vision to realize the power of vertical integration (VI) and retain full control of every core competency in the value chain. According to Forbes, Amazon dubs the onestop global logistics system as a “revolutionary system that will automate the entire international supply chain and eliminate much of the legacy waste associated with document handling and freight booking”. The scheme begins with acquiring space on different modes of international transportation, it be vehicles and ships as well as distribution hubs, at a discount for the inventory size that Amazon alone can bring to the table. At scale, it can translate to massive savings from cheap inventory space, minus massive expenses from bypassed middle brokers that otherwise service Amazon through logistics fleets like FedEx and UPS, and, from owning a fleet. The latter being a less appealing option given that the auto industry is currently undergoing a transition of a life time, maily through autonomous and energy technology. The onestop scheme is also described as “revolutionary” and a “one click-ship for seamless international trade and shipping.” We might be on the verge of seeing buyers and sellers alike abandon legacy transporters per se for Amazon’s more competitive price.
3. e-Commerce has changed supply chain and logistics: The growth of e-commerce and crowdsourcing applications means that supply chain management has to be transformed into a cost effective fulfillment process for businesses that ultimately brings customer satisfaction.
4. Visibility to become an important innovation for logistics: Visibility here being a centralized management system that can be tracked from purchase to transport and delivery, where the customer can check operation delivery status via mobile app and coordinate through the driver.
5.Engagement and efficiency to optimize competitive edge: The obvious example is Amazon and Alibaba that are able to manage supply chains with fast, flexible shipping where Uber is also able to create a better service experience for customers, all of which have added a new dimension to serviceability that affect consumer behavior over the long run.
6.Supply chain to become customer-centric: In the era of consumer empowerment where customers retain the power to choose what they buy instead of the retailer choosing what to sell, likewise, supply chain management and promotional activities adjust to meet customer needs, first.
7.Drone will become an important element: Although many companies have been developing a variety of drone transports as of late, namely Amazon that took the initiative, rule and regulations remain the biggest obstacle to implementing the technology safely while respecting municipal security.
8.Logistics operators to develop supply chains and experience unprecedented growth: Operators with core competencies in technology and automation will be expected to continue with BAU (business as usual) operations, maintain customer satisfaction and build long term relationships while the same time develop effective transport route management systems.
9.Technology to drive market competition: All supply chain related processes are to be handled by machines and automation and integrated into one, streamlined, operating system to give management optimized visibility. Therefore, businesses must take part in the decision-making process in the design and development stage to input the needs of both workers and customers while the cost of developing the technology comes out of the company’s investment budget.
Most businesses consider freight-in, or the logistics that take place internally between department and hubs – including the acquisition of raw material and supply for production as well as from production to distribution, a top cost of goods sold above other operational areas. The fact is that the expenditure accounts for a narrow 15%, covering everything from management, warehousing, human asset, expedited shipping and opportunity costs, among other things, that incur under the logistics umbrella. On the flip side, logistics providers face a number of operational challenges that drive up the numbers on the invoice, including truck and warehouse utilization rate. As in-freight and inbound traffic prove to be relatively simple, difficulty lies meaning in managing multiple outbound source-destination itineraries with optimal cargo and overall efficiency. Key performance yardsticks (KPYs) that customers use to gauge how much love the carrier has for them, i.e., punctual delivery with undamaged goods, above all, are a must-hit target. While Full Truck Loads (FTL) make life easier for management, in real life, the number of orders and truck utilization rate vary thus some Less Than Truck Loads (LTL) trips that yield higher expenses per item compared to FTLs are likely to take place. And this is where we get into an interesting analysis and design of the Consolidation Solution.
Consolidation: As the value of the whole becomes greater than the sum of the parts, the good old saying “strength lies in numbers”, or the implication that a group of people coming together is more effective than commissioned in silo, turns out to be true for things as well. Transport consolidation is simply a blend of multiple products from different customers in the same vehicle. Transporters collect scattered orders in a similar geographic area to a central distribution center where collected items are then assigned to a standard itinerary according to destination and loaded for maximum truck utilization rate in each journey. Orders with the same geographical destinations go together while each truck delivers the goods along the planned route or to a receiving distribution center for regional transports, first. Such a model reduces transportation costs, simply, by sharing the burden among multiple customers.
Consolidation Solution is a one stop service that, in addition to basic transportation, includes collecting isolated orders, packaging, inventory and warehouse management as well, all the way to break-bulk capacities to transport extractions of cargo portions from maximum loading and transport effectiveness. All of which can significantly reduce the cost of goods sold for operating customers particularly in peak season as goods are managed from distribution centers in advantageous logistics locations that keep customers organized in advance.
A successful consolidation solution requires effective supply chain capacities in 4 key areas:
1. Network Coverage and Capability: Effective supply chain, firstly, requires effective hardware: warehouse management and layout design, fleet management, be it in or outsourced, fleet size, efficient distribution centers and hubs at strategic locations according to the servicing territory. Optimized best practices, one the other hand, requires optimized software. To implement, e.g., real time in-outbound route design and transportation solutions, requires automated speed and appropriate coverage to carry a streamlined capability that covers the entire operational region in real time. Without it, see protocol breaches in peak time and therefore chaotic bottlenecks and security risks attract a slew of damaged goods and mismatched-late deliveries that put KPYs under scrutiny, chipping away at hard earned trust.
2.Information and Communication Technology:
Integrating every stage of workflow to technology is nevertheless paramount for management to consolidate capacities through automated processies to circumnavigate unnecessary manual, time-consuming and risky work prone to human errors. A couple examples of integrated systems are as follow.
>>Transportation Management System (TMS) can organize received orders and transportation, or be integrated directly with the client’s system, with route and mix & match products optimization for each transport as well as preparing all transportation-related documentation.
>>Warehouse Management System (WMS) automates inventory entries, e.g., in-outbound items, internal warehouse transitioning, handling and racking, as well as storage administration and can be integrated with a Storage and Retrieval System (ASRS). WMS also assigns pallets and appropriate handling for each package by category, dispatch according to inbound orders and produce inventory and summary reports, daily, for review and validation against manual counts.
>>Consolidation Management System (CMS) is a tracking system for integrated transportation that captures transport status at each designated stage as well as vehicle status, e.g., empty truck or out of order, by-day/by-shipment transportation, cargo up-download at destination (with photo for future reference), speeding alerts, e.g., above 60 km/h, etc., transportation document return and documentation tracking and administration.
>>The Delivery Management System (DMS) is a transportation management system for drivers that use mobile applications to manage transports. It displays all related transactions on a daily basis. Each transport trip also displays the itinerary of each destination along with the address and adjust to alternative routes according to traffic and road situations in real time . Although the system is automated, the driver can manage suggested solutions through the app as appropriate. Upon reaching the destination, the driver simply scans the barcode to confirm the delivery accuracy, location and status of the goods which also prevents shipment errors such as switched or mismatched destination.
Businesses can also develop interface systems to tailor to unique operational aspects of their business, e.g., adjusting radio-frequency identification (RFID) instead of destination product dispatches, while in so doing, rest be assured that the system automatically stores all transactional data for easy access and management, information of which hold invaluable insights that can be used for marketing planning, operational enhancement or customer service in tandem with Artificial Intelligence (AI) capacities in the future.
3. Operation Excellence: There are many processes behind a combined transport model such as sorting, route planning, transport, picking and packing according to order, etc., all of which requires manpower to plan and a system to administrate. Thus, stakeholders must strictly adbide by standard operating procedures (SOP) and Key Performance Indicators (KPIs); the control and tracking tool for all work processes, such as on-time inbound transportation, on-time outbound transportation and on-time truck delivery. All processes need continuous improvement to reduce turnaround time and increase quality of service which are both key skills to consider for performance evaluation, as well.
4. Engagement and Satisfaction: Customer-Centric is the key perspective that lies at the heart of quality service. Customer satisfaction is a top KPI that service providers must manage to meet. Post-service satisfaction survey is one technique that international businesses employ to measure the performance level achieved. Providing a solution to customer complaints through either corrective or preventive action, however, is difficult to do but must be taken to action with the greatest intent and speed possible.
As e-commerce grows consumers have more choices to shop from. Businesses need to adjust and keep up with viable trends that emerge dilly-daily. As business competition grows, however, businesses should focus on core competency strengths and try to improve the quality of their products to offer better value for customers and differentiate from the average option on the market. Cutting down or outsourcing time-consuming non-revenue activities to third party service providers is an easy way to reduce costs. Third party service provider outsourcing to cut time-consuming non-revenue activities is a good way to cut costs. Choosing the right partner, on the other hand, is not only important it is difficult to do considering long term growth. Today, many transport providers developing their services through technology to better accomodate customers with a smartphone as well as grow with digital-savvy operators together, sustainably, overtime.
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Compiled by BLOG.SCGLogistics
Photos and references forbes.com, cerasis.com, Presentation from SCG Logistics Company Site Visit CDC Wangnoi, 9 Mar 2018, supplychaindrive.com, supplychain2467.com