This post was contributed by Kenneth Kowal, the founder of ShipStarter. Kenneth is a 25+ year professional of the supply chain industry. He writes content for many of the world’s largest logistics companies, as well as on his own blog site.
Are You Up With The Trends?
Drinking matcha tea yet? Wearing wood sunglasses or bamboo hooded baby towels? If that’s not you, consider this. That shirt you need to buy for the summer may not have been designed yet.
Rapidly emerging trends demand a flexible supply chain that can harness new technology and find new efficiencies. And yet, the mechanism behind this, the business of logistics, is underappreciated.
The Pace Setters
Online retail has had a striking effect on manufacturer and retailer supply chains, changing how they work. The pressure on companies’ logistics networks to drive out cost and time from the shipping process is greater than ever before.
It’s attention to the details of logistics that determine the success or failure of companies today. Amazon has revolutionized online retail through its supply chain infrastructure which includes over 70 fulfillment centers – filled with both people and robots – to become a one-stop logistics solution for online retailers and their customers.
And, top fast fashion brands like Zara and UNIQLO know the key to their success is based on running a best-in-class logistics operation. These companies are known for the speed a new item can be taken from design to store shelves – often 25 days or less. This was unheard of in the industry less than a decade ago.
These trends have pushed innovation, and the need for new logistics technology up and down the supply chain. This includes everything from advancements in how technology is used by shippers and logistics services providers (LSPs), to the adoption of automation in the warehouse and new options for final mile delivery.
The logistics function within shipper’s operations bears the most direct pressure.
For example, the expectation of fast delivery aside, online shoppers expect unreasonably cheap or free shipping. The cost of delivery has become not only an expense but a loss leader for many online retailers. Even Amazon lost a reported $7B on shipping in 2016. This makes both hard and soft cost management at every step in the supply chain even more important.
It’s More Than Having Less Phone Calls
Outside of the logistics industry, few appreciate the key role that shipping and supply chain technology plays in enabling these trends, and how it’d be impossible for companies to keep up without it.
Successful logistics companies expect more from new logistics technology.
Yes, improving logistics is about improving the tactical, like better on-time deliveries performance or lowering shipping costs. But expectations are higher than that today and big picture improvements must be derived from technology in more strategic ways.
New logistics technology has to mean more than fewer phone calls and faxes.
This, unfortunately, is what most logistics technology discussions always seem to digress to. For this same reason, the dated term TMS (Transportation Management System) is the default acronym the industry uses to describe most logistics technology. The problem is TMS systems are primarily transactional tools. Innovation should be about enabling collaboration and supporting decision making throughout the logistics function too.
Let Data Do The Heavy Lifting
Technology helps to optimize logistics costs by supporting better decision making. This happens when technology provides access to, and transparency for, key logistics cost drivers.
Data enables high-level performance management through KPIs and benchmarking, as well as daily decision support with better information. Cost data and rates in global shipping are notoriously complex and opaque. New technology platforms that enable a clearer perspective on carrier rates and carrier schedules supports better load planning, as well as carrier and mode selection. This ensures every routing is the most cost and service efficient it can be for the shipper, regardless of mode or location.
Technology is also providing ‘soft’ benefits to shippers through better access to other types of data. Of course, day to day communication is easier with technology but it goes much deeper. Shippers have access to more accurate and updated shipment track and trace information, which enables better overall control of their supply chain. Companies can now know precisely where their product is at any point in the supply chain.
This improved visibility is made possible largely by better connectivity between shippers and their carriers through both EDI and newer API technology. Which method of data exchange, EDI or API, is better has become a highly debated topic in the industry itself. The good news is data interoperability has improved and is making it easier for companies to connect disparate shipping systems and access data more easily.
A Revolution In The Warehouse
These improvements are helping fast fashion retailers too. For them, shrinking lead times and getting new products to market faster is the goal above all else. This highlights another a micro-trend within manufacturing for more flexible manufacturing and being efficient with smaller production runs. This is just one more thing squeezing time out of – and adding costs into – the logistics process for shippers.
The result is that shippers must improve their warehousing and product fulfillment execution too. This has been made easier by other types of technology like robotics and automation within their facilities, as well as the industrial Internet of Things (IoT).
To illustrate, one interesting application of technology in this environment is the use of Self-Driving Vehicles (SDVs) for material transport. In the manufacturing and warehouse environment, they are helping to optimize the ‘first mile’ as a new way to deal with compressed lead times.
Final Mile Delivery Is Not The Final Word
The logistics innovations getting the most attention today are the solutions aimed at improving final mile delivery. We’d argue much of the discussion is over-hyped compared to the impact of all the other areas we’ve described.
For example, the real impact of drone and robot deliveries for online retailers will be minimal. However, it seems plausible that autonomous vehicles used by companies like FedEx and UPS could change how small parcels are delivered to consumers very soon.
Driving efficiency in logistics is about improving volume and scale. Drones and concepts like the Hyperloop, as they are envisioned now at least, work in opposition to those principles. It’s the opportunity to use technology for carrier selection and rate management that we believe hold the true promise for delivering real impact to the space.
More Than A Trend
Harnessing technology is more than a logistics trend – it’s fast becoming an LSP’s comparative advantage. Today, there is more pressure than ever on LSPs to perform flawlessly – their customers’ supply chains count on it. Leading LSPs are focused on using technology that helps them operate with tiny margins for error, and provide delivery at speeds unheard of even five years ago. Expectations for logistics providers at every step in the supply chain are sky high.
3PLs can utilize and offer their customers logistics technology that supports better inventory management, fulfillment, and shipment optimization as a key service differentiator. In an industry as commoditized as logistics, the technology LSPs provide can also be a gateway for shippers who can’t afford logistics technology on their own.
Technology also enables an asset-lite model for 3PLs and other types of LSPs. This means companies can add true value to shipper’s logistics operations in meaningful ways based on technology and customer experience – a better online portal interface, for example. These companies are disrupting the industry and leading shippers down the path towards more complete technology adoption.
Keeping Up With The Trends? Logistics Technology Is!
The trends we’ve described – the growth of online retail and fast fashion – will not be changing soon. And, consumer’s expectations for speed and lower costs won’t either.
Companies’ success or failure depends on managing the details of logistics execution. Leveraging the advantages of technology is the best way to meet service demands, maintain margins, and differentiate service.
Although rarely recognized as being the catalyst, logistics technology is the key driver that enables shippers and their LSPs to meet these requirements. With time, our industry will get its due as being the innovators we truly are.