Shipping and logistics management have long been segregated into disparate categories, creating an illusion that these areas of operation are highly divided in nature. In practice, shipping and logistics processes are heavily dependent on one another, and digitization is making unification across all aspects of the supply chain more critical.
The 2019 23rd Annual Third-Party Logistics Study found that shippers and 3PLs are increasingly working together to meet the demands of today’s customers. The simple reality is that new customer expectations for rapid responses to digital transactions are putting pressure on the entire supply chain. Businesses need visibility and flexibility to accelerate operations and keep costs under control, and modern supply chain management solutions are needed to deliver these goals.
Modernization is key as organizations across the supply chain recognize the importance of change. Approximately 51 percent of shippers responding to the 2019 Third-Party Logistics Study said they need to take new approaches to the supply chain. What’s more, 42 percent of those polled said they have not made significant changes to improve operational agility within the past four years.
The time for a supply chain overhaul is now. Here are four of the most prominent reasons why:
1. Last-mile and last-yard shipping is becoming more complex
Last-mile shipping has been a thorn in the heel of businesses for a long time, and it has only become more complex in recent years. A recent report from MIT News highlighted the last mile as a growing challenge because brands are facing pressure to establish multi-tier distribution networks. While many companies have moved warehouses outside of cities to reduce real estate costs, higher shipping volumes have forced organizations to rework their fulfillment strategies to create multiple tiers of distribution and fulfillment centers to streamline last-mile delivery.
These challenges are evident in the 2019 Third-Party Logistics Study, where more than 70 percent of shippers and 3PLs participating in the study said they need better metrics for last-yard delivery. Last-yard shipping refers to the process of getting a package from delivery into a customer’s hands. For example, a parcel may arrive at the reception area of a multi-housing dwelling. Tracking the last yard would be a matter of getting visibility into how the asset goes from reception to the customer. Just over half of shippers said they are handling last-yard shipping effectively, and only 34 percent of 3PLs think their customers handle these issues effectively.
In practice, last-mile and last-yard shipping is a daunting challenge because improving operations pushes organizations to:
- Gather more data from across locations, including details pertaining to everything from package delivery to driver-related data.
- Integrate information coming from diverse fulfillment centers.
- Differentiate between different types of destinations – retail stores, production locations, homes, multi-family dwellings and other building types.
- Communicate relevant data to diverse stakeholders who play a role in optimizing shipping processes.
Parcel management technologies lay the groundwork for strategic improvements in the last mile and the last yard. They can improve visibility across the supply chain, optimize the supply network and reduce the costs associated with getting goods to their destination.
2. Businesses must grasp technological opportunities
Updating operations in light of today’s digital technologies is not only necessary in response to changing operational demands – it also stems from a need to take advantage of marketplace opportunities. The 2019 Third-Party Logistics Study explained that shipping specialists are working more with 3PLs to seize upon their IT capabilities.
This is leading to a rise in outsourcing, particularly in areas such as domestic transportation, warehousing and freight forwarding.
The Internet of Things (IoT) is a prime example of the opportunity, and challenge, of leveraging modern technologies in the supply chain. On one hand, connected devices provide essential visibility into operations. Shippers can use a sensor in a truck to track environmental conditions for a regulated good automatically, receiving regular reports and creating an automated audit trail.
These types of process improvements can resolve a variety of pain points across the supply chain, and the IoT enables organizations to transform that potential into reality. In fact, PricewaterhouseCoopers found that businesses spent $215 billion on IoT solutions in 2015. That figure is estimated to grow to $832 billion by 2020.
It is not too late for shippers to start modernizing logistics and supply chain operations to take advantage of technologies such as the IoT. However, rapid growth in sectors like the IoT highlight that it is vital to move quickly to avoid falling behind competitors in the marketplace.
3. Multi-warehouse strategies are now necessary
As highlighted in the discussion about last-mile delivery, businesses are becoming more reliant on multi-layered fulfillment networks. They need to get products to customers faster, avoid spending too heavily on real estate and manage operations across multiple sales channels. Instead of having a monolithic facility to centralize distribution, these complex channels are pushing brands to shift toward moving goods between a variety of smaller storage and distribution centers, including small storage areas at production sites or in close proximity to customers. These kinds of strategies are forcing companies to:
- Increase the volume of both internal and customer-facing shipments.
- Create inventory visibility across a wide range of facility types.
- Optimize purchasing and deliveries across the supply chain to ensure production teams always have the assets they need in a timely fashion.
- Determine the best locations to store various assets based on sales and usage data.
Leveraging multiple warehouses comes with a heavy adjustment in the early stages of the process. When processes and technologies are updated around this strategy, organizations can streamline a wide range of processes, leading to dramatic cost savings, reduced errors and greater productivity. Achieving these gains hinges on adopting multi-modal logistics capabilities alongside parcel management and strategic technology investments to improve operations across every phase of the supply chain.
4. Customer expectations are constantly evolving
Most of the issues we have covered stem from a common problem that has been discussed thoroughly in recent years: Shifting customer expectations for product delivery has put pressure on businesses in all sectors to invest in transparency and efficiency throughout the supply chain.
The initial changes – two-day shipping as a default option, package tracking as the new normal, etc. – are established by now. The growing challenge today is to move beyond the initial shifts and preparing for consistent evolution in how customers engage with businesses.
Not only do organizations need to digitize supply chain and logistics operations in the moment. They also need robust data reporting so they can constantly track changes in their processes alongside market dynamics to make informed decisions at any given time.
Taking a holistic approach to modernization
One of the most prominent themes of the 2019 Third-Party Logistics Study was that shippers and 3PLs are increasing their collaboration with one another. These businesses are recognizing that they need to blend their operations and take advantage of modern digital technologies to keep up with industry demands.
This trend represents a major step forward in the sector, and it underpins our philosophy at Transportation Insight. We blend shipping, logistics, parcel management and supply chain management into a holistic vision for operations. This combination requires powerful technologies and a close, collaborative working relationship with clients, which is where we at Transportation Insight excel. Our greatest asset is our ability to blend our diverse services with access to modern technology, years of specialized experience in the field and a deep understanding of shipping best practices to modernize operations in an efficient, operationally sustainable way.