Guest Commentary: The Logistics Story for 2012 and Beyond

The lasting image of the supply chain in 2012 is one of a consumer with a smartphone engrossed in making an online purchase. The story that goes with that image is all about the rapid changes that this new “connected consumer” has injected into our industry in 2012. So let’s take a deeper look at this evolution and some key things to watch for in 2013.

Historically, transportation has been treated as an ancillary function, but due to its importance in providing value to customers, organizations are increasingly taking a holistic view of the entire chain. They are looking for ways to reduce cost, retain service levels, and create agility and resiliency. In the past, businesses spent more time focusing on up-front challenges such as the customer’s web experience, while leaving transportation as an afterthought. Now, organizations need to look at the impact and opportunity that the connected consumer brings to the supply chain.

Up until this past year, the key topics facing the transportation industry have centered around the long standing cyclical areas of fuel costs, network capacity and the health of the economy. I believe that 2012 marked a major turning point or “cementing” of the attitudes and expectations of the connected consumer. Consumers have now grown firmly entrenched in the “fast and free” home delivery offered by Amazon and other online retailers, as well as other flexible options for taking delivery of goods.

To meet the expectations of this emerging demographic, many companies are finding that their traditional transportation solutions are simply not built to serve the demands of the connected consumer. This is driving the rapid adoption of transportation analytics – the integration of external and internal data gathered from the user experience, enabling more effective responses.

By using this data, companies can better provide the low prices and high service that are needed to win in a highly competitive marketplace. This combination of price and service will allow retailers and their manufacturing partners to succeed, both in the short-term sale and in longer-term customer loyalty.

As we leave 2012 behind, we have a world of new data to analyze and a fresh set of challenges to meet.

Things to watch in 2013:

• Alternative Delivery: This year we can expect to see a push from the large providers to consider alternatives to at-home delivery. Before, shippers would deliver something to you and try a few times if they couldn’t find you, but this is no longer the case. Locker services and centralized pick-up locations are on the horizon. Traditional brick-and-mortar retailers with e-commerce websites may create temporary local “pop-up” stores where products can be picked up by online shoppers during periods of high seasonal demand.
• Cost Awareness and Reduction: Retailers are going to have to look at cost reduction within their transportation chain, without sacrificing service. Businesses are recognizing the cost of delivery to their bottom line and are looking at ways to reduce it.
• End-to-End Approach: This year, companies should strive to plan dynamically. In doing so, companies will enter a new era of building and maintaining resiliency. This end-to-end approach will allow companies to make more sophisticated changes on the fly, such as re-planning remaining delivery legs as goods are in transit.
• Partner Approach: Moving forward, one of the key strategies for retailers and manufacturers will be increasing their level of collaboration and information sharing. Advanced technology solutions will help analyze demand and identify patterns that retailers and their suppliers can respond to more proactively. In responding to this data, manufacturers have a real opportunity to differentiate themselves and demonstrate their value to their retail partners by helping them manage the challenges presented by the connected consumer.
• Speed and Agility: Both manufacturers and retailers will increase their overall supply chain flexibility and responsiveness to meet the increasingly impatient and fickle demands of consumers. In terms of transportation, this means relying on more flexible schemes and multiple modes that might include private fleets, third-party truckload carriers and parcel carriers — and even mixing modes in new and creative ways.
• Innovation: Perhaps the most critical imperative for both retailers and manufacturers is to focus on true innovation as they rethink the most basic tenets of how they deliver their products to consumers around the world. With today’s delivery addresses spread over a large geographical area, the advent of many small and low-cost packages, and the frequent need to repeat deliveries when consumers are not home, it’s clear that direct-to-home delivery will not remain a profitable option if online shopping continues to grow at its current pace. Manufacturers and retailers simply will not be able to absorb the associated parcel shipping costs, even as their leverage with shippers grows.

So what are the lasting images from 2012 for you and your organization? And what is top-of-mind for you in 2013 and beyond?

Fabrizio Brasca is vice president, global logistics, JDA Software. He is responsible for developing innovative transportation and logistics strategies across all industry verticals.