Logistics

Feb 06, 2020

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By John Monarch, Special to the AJOT

According to Material Handling & Logistics, digital transformation was highlighted as the underlying trend for future predictions - within the next two years, half of manufacturing supply chains will have invested in supply chain resilience and artificial intelligence (AI).

Global supply chains have gone through quite a rigorous evolution in the recent past by being subjected to one disruption after another. Digitalization is the only way forward and customers are at the heart of what shapes any digitally touched business and will be for the foreseeable future. Being able to read the market, serve the customer, and manage their expectations separates companies that succeed from those that fail.

What Is Wrong with Planning for Disruption in Logistics?

Long-term planning requires a comprehensive outlook of the future of an organization. Theoretically, the process is relatively simple, considering where an organization wishes to be in the future and working backward to determine the strategic assets needed to achieve that goal. Unfortunately, the strategy does not take into consideration two major factors — the future is too uncertain for management to agree upon, and the details of that future are sketchy at best, which does not allow for precise strategic planning.

Moreover, organizations need to adopt future solutions without necessarily breaking the bank through investing in all new systems, cannibalizing existing revenue streams, business models, billions of dollars of investments in stores, salespeople, production facilities, and other assets.

Adding to this, each supply chain represents an individual business, and executives tend to read their own market reports only. They focus on similar-industry conferences and survey consumers of their own products and services. Thus, the issue becomes self-evident - supply chain executives are too focused on their own operations. To stay competitive, prepare for the next disruption, they need to have a broader outlook and understand how external technology solutions can impact and even elevate their current processes.

What Can Businesses Do to Better Understand the Influencers in the Industry?

Supply chain evolution is a dynamic process. Changes occur at the macro and micro levels. Businesses need to pay equal attention to the big, pervasive changes that affect customers, as also the small shifts that affect one market or industry. As customer behavior changes, globally, it will inevitably influence the working of supply chains. The supply chain will always bend to the whims of customers, not their competitors. Instead of focusing on competitors, business leaders should focus on studying customer behavior as this will dictate the future trends in the global supply chain.

Take Your Own Shopping Routine as an Example

Worldwide, e-commerce sales were $572 billion in 2010; they hit approximately $3.53 trillion in 2019. That’s 504% staggering growth in the decade. The continued growth of e-commerce has greatly changed consumers’ needs, behavior and expectations. Customers expect faster delivery, which is now a credible sticking point before they decide on a purchase. At the same time, delivery volumes continue to skyrocket, putting added stress on last-mile delivery and efficiency. Both expectations and increased volumes put a lot of pressure on shippers to decrease costs and remain proactive towards customer demands.

For logistics companies, this changed customer behavior has put the last-mile delivery into focus and made it a theater of disruption. The last mile delivery is where the most important piece of the supply chain puzzle lies today. People are becoming accustomed to frequently receiving packages, and an increasing number are using services that deliver groceries and other household goods within a same-day timeframe. This usage pattern is only expected to increase in the coming years, meaning that the changes occurring to last-mile logistics will only continue.

Additionally, e-commerce has ensured growing expectations from the last-mile. More people are purchasing items traditionally left to brick-and-mortar stores online. With these new trends in customer behavior, the last-mile has become the most challenging aspect of the supply chain and, therefore, holds the largest potential for disruption. Events may occur that could lead to a missed delivery, such as no safe and secure place to leave the package. For larger, more expensive items, last-mile may take on new forms through product installation, removal of old debris, and even product setup.

Furniture, smart appliances, hot tubs, and other items may comprise the average online order ticket, and so, last-mile delivery must evolve. The way shippers manage the last mile must enable disruption-free, fast and traceable last-mile processes. Research launched recently found that 3.6 million Internet shoppers in the UK have had a delivery go missing in the past 12 months, while over 18 million have had a parcel lost in the last five years. The research commissioned by Direct Line Home Insurance estimates that these missing or undelivered packages equate to £250 million (approx. US$ 330 million) of retail sales.

Shippers and logistics service providers will need to continue to explore innovative ways of serving their market adeptly, improving efficiency, and transparency. Moreover, they will be expected to provide better customer service, lower supply chain costs through fewer errors, guaranteeing product authenticity and making it easier for everyone to understand and interact with the supply chain.

Blockchain Open the Door

Among other emerging technologies, blockchain technology will be one of the solutions to some, and in some cases, to all these issues as it has the potential to offer a disruption-free future and lasting success. Decision-makers would have access to an unchangeable, lifelong resource to understand what really happens within the supply chain. Imagine the possibilities of connected analytics and artificial intelligence within blockchain-based systems. Using blockchain also opens the doors to ironclad contracts, holding parties accountable and lowering operating expenses through fewer invoicing and accounting errors. Additionally, a blockchain-based platform will provide insights into how to better serve customers, connect to shopper loyalty programs and avoid losses as new disruptions arise.

The impulse to wait and see how any new technology such as the blockchain evolves is high in risk-averse organizations. We urge you as business leaders not to wait. If you want your future supply chain to allow for transparency, privacy, direct and trusted engagement with your customers, you need to lay the groundwork now. The development of technologies is not waiting. Customers are not waiting. Markets are not waiting. And because they are not waiting, no business leader can afford to wait if they prefer to be disrupters rather than disrupted.