Elastic logistics strengthen 21st century supply chains
The ‘now economy’ is causing customer expectations to rise. Products are ready to order at the click of a button, purchases authorised by voice command, and a buy button available right there in your social media feed. Impulse buying is now easier than ever for tech-savvy shoppers, but supply chains the can be the weak link in getting products to customers quickly. As it stands, tech giants like Amazon Prime and Alibaba are getting fast, efficient delivery right. But can smaller businesses hope to keep up?
Many businesses are finding it difficult to keep up. Overwhelmed by logistics and physical infrastructure challenges, they are unable to compete when it comes to scale, network, capacity and innovation. In addition, geopolitical disruption such as Brexit and the US-China trade tensions take their toll on the weakest supply chains and the smallest teams. However, there is hope. All organisations can foster adaptability and flexibility with an ‘elastic’ approach to logistics, one that is scalable, consumption-based and always on.
What is driving supply chain innovation?
For decades, supply chain innovation has been driven by a desire to reduce costs. However, new research commissioned by BluJay Solutions found supply chain professionals expect customer experience to overtake price and product as the number one-brand differentiator in the next five years.
A shift in market behaviour means that businesses, whether delivering packages, experiences or any other product or service, may want to start considering customer satisfaction as crucial to delivering value. In the supply chain, this means focusing up on the all-important last-mile logistics, as well as real-time visibility based on evidence that customer satisfaction is increased by digital communication between supplier and consumer.
Delivering value in this way requires systems that provide seamless partner connectivity and data quality. The technology exists to help businesses adapt to this market shift; it is only a matter of which businesses are ready and willing to rework their priorities.
A good example of this is Danone, a leading global food company that partnered with BluJay to address increasing customer demands and complexity in today’s fast-changing marketplace. As customer-demand grew, Danone needed a way to deliver products to supermarkets as quickly and efficiently as possible. This meant tracking hundreds of loads daily across three manufacturing plants, six distribution centres and liaising with numerous trucks from third-party carriers.
The challenge was coordinating the above while meeting customer demands for better scheduling options and increasing on-time delivery windows. With BluJay’s guidance, Danone moved away from outdated processes and systems like communicating via faxes and phone calls between siloed departments to BluJay’s Transportation Management (TMS) solution that allowed for real-time visibility between moving parts.
Danone leveraged the power of data captured in its TMS to support planning, execution, claims and appointment scheduling, enabling end-to-end control and visibility across the entire supply chain.
As the Danone case study illustrates, having an optimised supply chain allows tracking systems to update both businesses and customers alike, while data-driven collaboration between logistics partners helps ensure that goods can be moved efficiently. Instead of focusing on ‘lean’ practices, logisticians should look to flexible systems to expand and reduce capabilities, accommodating changes in demand within the supply chain.
How can geopolitical uncertainty be mitigated?
As it stands, global customs and compliance can be a challenge for businesses. Add to this political disruption, like the US-China trade tensions or post-Brexit chaos, and there is prolonged uncertainty for the supply chain community. Supply chains can survive such barriers with end-to-end supply chain visibility to help mitigate disruption.
A good example of this is the ongoing China-US trade tension, which for the US spurred a surplus of soybeans and other high-volume exports previously consumed by China. The flow-on effect of this lowered the price US producers will be able to get for their products, creating a spiral effect where farmers were unable to meet their financial obligations, reducing related industry purchases such as equipment and likely leading to more government subsidies to keep them afloat. Here, the flow-on effect resulted in higher manufacturing costs and steel tariffs, encouraging companies to implement changes to their supply chain.
Considering the heightened tariffs and instability, many US multi-nationals are looking to alternative sourcing in countries such as India. Here, navigating India’s complex customs rates, which vary according to the product, user, specific export promotion program that’s open to administrative discretion, makes supply chain predictability a challenging task.
Why are elastic logistics solutions the answer?
Disruption—whether it’s political, environmental or technological—has a direct detrimental effect on modern supply chains. However, logisticians can also view this as an opportunity to expand or diversify their footprint. For example, with the China-US trade tensions, we are seeing businesses looking to Vietnam or Indonesia. But, how can businesses set up their supply chains to withstand disruption and capitalise on growth opportunities that may arise?
The answer: become ‘elastic’. Modern supply chains require flexibility to manage fluctuations in consumer demand and disruption, like the aforementioned scenarios. No doubt, operation in a static, closed on-premise transportation solution limits what an organisation can achieve. With the use of elastic logistics practices comes efficiency, visibility, the ability to scale and optimise quickly and increase overall customer satisfaction.
One important step to achieving an elastic supply chain is being part of a network, where logistics software applications are connected to a global trade network. The power of network lies in its ability to bring clarity and visibility to everything that is happening within the supply chain, while offering on-demand connections to potential carriers that have execution capabilities when needed.
For example, when partnering with BluJay, customers gain the advantage of a cloud-powered portfolio of application services, hands-free customs, real-time data analytics and the visibility and velocity to adapt quickly. This includes access to a network that spans more than 40,000 members globally—including shippers, carriers, forwarders, suppliers and 3PLs—that can be easily tapped following a surge in consumer demand or unexpected disruption.
Global transportation management platforms built for this type of network connectivity can scale with your business, helping experts create frictionless, high-performing supply chains where goods cross borders quickly, information is shared easily, users operate efficiently and cost is reduced from operations.
Every business should consider an elastic approach
Many organisations will believe that, because they do not have a modern website or they aren’t using the newest social selling channels, elastic logistics is not for them. They will assume that having a supply chain that is optimised for the ‘now economy’ is only for those at the forefront of modern-day e-commerce. But business is changing, and customer experience is more important than ever. Those unwilling to modernise their processes and systems could become the Kodaks and the Topshops of this world: unfit to operate in a fast-paced and rapidly changing commercial landscape. The winners in the ‘now economy’ may well be those who put customer experience first, and use elastic logistics to adapt to fluctuations in consumer attitudes with ease.
Jan-Paul Boos is SVP Sales, BluJay Solutions
DHL and UPS: How is 3PL Evolving in 2021?
To optimise their supply chains, many companies have turned to third-party logistics providers—3PLs—to outsource how they manage inventory, stock warehouses, fulfil customer orders, pack pallets, and handle returns. Especially in the midst of the pandemic, corporations have struggled to satisfy their customers, mitigate shipping delays, and react to rapid spikes in demand. In short: if logistics isn’t your core competency, rely on the experts.
To examine the current state of 3PL, we decided to have a quick roundtable with Philippe Gilbert, President of UPS Supply Chain Solutions, and Phil Roe, Chief Customer Officer and Strategy Director at DHL Supply Chain. Here’s what they have to say on the subject:
What are the fundamental benefits of partnering with a third-party logistics provider?
‘Proper supply chain visibility and planning is one of the key challenges facing modern supply chains’, says Phil. ‘Supply chains now cover multiple jurisdictions across significant distances. They’re also omnichannel, meaning that it’s now standard practice for there to be multiple routes to the customer’. Philippe adds that, ‘3PLs can deliver efficiencies and resources across the supply chain that are difficult for most businesses to replicate’.
According to a study from UPS Global Logistics, five major challenges drive companies to outsource:
- Limited Space
- Increased Customer Expectations
- Faster Order Fulfilment
- Reduced Labour Costs
- Multiple Fulfilment Channels
Now, the pandemic has accelerated 3PL adoption. In that same UPS survey, 29% of respondents indicated that they’d switch to outsourcing their logistics as a direct result of the past year. ‘One of the biggest issues impacting our current customers is the timing on inventory levels’, says Philippe. ‘Production delays out of APAC have pushed receipts and built back orders of products’.
How are 3PLs helping businesses cope with broader disruptions, such as Brexit, transport logjams, and driver shortages?
‘We can categorise supply chain disruptions into three broad areas’, explains Phil. ‘Demand-side, supply-side, and environmental. Some of these are easier to control than others, but all benefit from proper oversight and the ability to quickly adapt’. When the Brits finalised Brexit, for example, DHL scaled up areas that needed specialist support, such as customs processing. ‘We can leverage our network and redeploy on demand’, he explains.
As for UPS, the company developed a post-Brexit SCS solution that enabled its clients to keep inventory closer to their UK customers. ‘We can maintain a broad portfolio of carriers and providers to quickly adapt to supply chain disruptions’, Philippe says. ‘This allows customers to avoid service delays, added costs, and administrative burdens associated with customs clearance’.
Next, this conversation would be incomplete if we didn’t talk about how the boom in e-commerce has affected 3PL.
Do you anticipate that e-commerce growth will continue?
‘The growth of the past 18 months shows no sign of slowing down’, Phil says. ‘Consumer habits have altered, in some cases, permanently. Over the last eight months, DHL has seen a 150% increase in its fulfilment division—reflecting the soaring demand’. To keep up, the company has focused on data and automation, as well as deploying robotics solutions alongside its employees. ‘Whether that’s automated pallet systems or pick-and-pack robots’, Phil explains, ‘we’ve coupled technology and data to manage demand, meet customer expectations, and smooth out labour requirements’.
Fundamentally, e-commerce is driving demand for additional labour and space. ‘This presents a unique opportunity for 3PL’, Philippe says. ‘New entrants in retail platforms, though currently small, will look to disrupt the giant retail players. They’ll be closer to their customers in the city. And they’ll try to unify and digitalise SME brick-and-mortar retailers’.
How are shifting customer expectations - such as the next-day “Amazon Effect” - impacting 3PL?
‘We see 3PLs expanding their networks to be closer to consumers and integrating fulfilment with last-mile delivery’, says Philippe. ‘They have to expand their reverse logistics, including investments in warehouse space’. He suggests that data analytics can enhance visibility and help 3PL companies address inefficiencies. ‘With the right technology’, he says, ‘businesses can access accurate, connected data and derive actionable insights’.
Predictive and prescriptive analytics, when coupled with artificial intelligence and machine learning, can help companies understand when, why, and how supply chain disruptions occur. ‘This way’, Philippe adds, ‘they can prepare for them—or better yet, sidestep them completely’.
In addition, customers now expect companies to follow through on their social commitments...
Can 3PLs help organisations deliver on their ESG objectives, such as reducing carbon emissions?
Absolutely. Through UPS’s Eco-Responsible Packaging Programme, for instance, the company evaluates its clients’ packaging processes to determine the best way to protect their products and the planet. In addition, the corporation works with carriers on creative, lower-emissions solutions. ‘By 2025, we plan to source 40% of all ground fuel from sources other than conventional gasoline and diesel’, Philippe explains. ‘That’s nearly double what we used in 2016’. By then, 25% of UPS’s total electricity will come from renewable sources.
As for DHL, the company offers a portfolio of GoGreen solutions, which offers its customers a range of ways to minimise their impact on the environment. ‘This includes everything from carbon reporting and analytics solutions to investments in internationally-recognised climate protection projects’, says Phil. ‘Sustainability provides us an opportunity to collaborate with our customers’.
Yet, it’s often challenging to serve customers in highly regulated industries. How can companies overcome those hurdles?
‘Companies operating in highly regulated industries such as pharmaceuticals and life science face extra pressure on their supply chains’, Phil explains. ‘Dealing with rapidly growing changes then requires depth and breadth, which is something a global business such as DHL can offer’. To overcome regulatory challenges, DHL offers its clients dedicated sector specialists who understand niche industries but still have access to its global network.
At the end of the day, Philippe comments, 3PLs must take responsibility for running compliant programmes and services. ‘Licensed or not’, he says, ‘they’ll need to work with their highly regulated customers to ensure that SOPs (Standard Operating Procedures) and audit processes are in place’.
What do the next 12 months hold for 3PL providers?
‘Providers will focus on mastering omnichannel e-commerce’, says Philippe. ‘You’ll see faster last-mile delivery, more sustainable logistics and packaging, and better forecasting for risk management’. Overall, he notes, 3PL providers will invest in data analytics and new warehouse technologies to provide greater visibility into their supply chains.
For example, UPS is rolling out a new suite of digital engagement tools. According to Philippe, the company introduced a new UPS Forwarding Hub, UPS Customs Brokerage, and CoyoteGo portals to help their supply chain solution clients. In addition, its e-Fulfilment and Ware2Go products help small- and medium-sized businesses outsource with ease. ‘We’ve focused on adopting technologies to improve our operations’, Philippe says.
Finally, UPS’s Advanced Technology Group (ATG) has implemented robotics, drones, artificial intelligence, autonomous vehicles, new software platforms, and sensor technologies to increase its 2021 revenues and cut bottom-line costs. Says Philippe: ‘With these tools, we can meet customer expectations for real-time tracking, end-to-end visibility, and personalised service’.
And there you have it: the future of 3PL.