Five Forces Reshaping Logistics as We Know it
Because warehousing and transportation represent significant cost centers, intelligent logistics decisions are critical. And, more than ever, these decisions have to be made on the fly, in real-time. As logistics managers grapple with their own challenges, including labor shortages and emerging commodity marketplaces, the logistics function has never been under more pressure to deliver.
Forget what you knew about logistics. Even before the emergence of COVID-19, next-day and same-day delivery promises from mega retailers, as well as new delivery models such as store pick-up, were driving increasing customer expectations — not just in retail, but in every industry. Every day, retailers and manufacturers are challenged to balance ambitious customer service promises with profit margin protection.
In my Logistics Viewpoints article in April 2021, Building Profitability with Agility while Digitally Transforming the Supply Chain, I mentioned that we will continue to explore here the concrete steps in the digital journey and examples of determination from the top in addition to logistics operations.
Uberization: Exploring On-Demand Transportation, Labor and Warehousing
In the consumer sector, few recent trends have been as disruptive as the new on-demand marketplace for commodities like transportation and lodging, driven by Uber and VRBO. In fact, the on-demand industry was estimated to account for $75 billion in 2018. Now that same concept is poised to similarly disrupt the world of distribution.
While the need to keep up with the delivery promises of mega-retailers has made many companies blind to the true costs of their transportation, labor and warehousing activities, digitalization is opening their eyes. Today the concept of on-demand distribution is increasing companies’ ability to gain a marketplace perspective on these capabilities, treat them as commodities and compare the financial contributions of various options. This is foundational to achieving profitable agility as demand and supply remain volatile.
IoT capabilities have long helped to track the location of transportation assets, communicate with employees and support real-time collaboration in the warehouse. But the real financial value of advanced technology resides in its ability to sense real-time demand and monitor supply availability ― then secure on-demand transportation, warehousing and labor assets dynamically, re-planning flexibly as conditions change.
Today’s expanded transportation, warehousing and labor networks provide companies with many more options, which means greater bargaining power. Transportation assets, warehousing space and human workers can be optimally scheduled, and rescheduled, based on real-time or near-term demand signals. Extending visibility of available capacities in the market enables a more effective result, often delivering win-wins for collaborative trading partners.
How great can the impact be? Consider warehousing space. Historically, companies needing greater warehouse capacity would have invested in new construction ― a large capital expense that typically requires five years of operation to achieve a full return on investment. Or they might have leased space, which traditionally requires a long-term commitment and involves a one- to three-year payback on the investment.1
In today’s fast-moving, on-demand marketplace, the warehousing capacity commitment can be made on a monthly basis, via short-term outsourcing. This means that not only is the financial investment low ― making a fast return on investment (ROI) fairly likely ― but that the supply chain has maximum flexibility as conditions change. Capacity can be easily ramped up or down due to product seasonality, holidays and of course global events such as the COVID-19 pandemic.
But the on-demand concept does not end with transportation, labor and warehousing. Extended offerings around value-added services, co-packing, co-manufacturing and even 3D printing will continue to deliver options that allow agility and scale in supply chain operations, with third-party logistics providers coordinating much of this capacity as they morph into super-grid logistics services providers.
As the supply chain becomes increasingly digital and collaborative, new partnerships may be formed by retailers, distributors and manufacturers to collectively source services and capitalize on economies of scale. This will help drive agility, optimize the customer experience, and ensure profits for all trading partners.
A Top-Level Vision Is Key to Enabling Agility
While the advanced technologies are widely available to support the extreme level of agility required for an uncertain world, often the barrier to successful adoption is cultural. At both the executive and lower levels, there may be resistance to adopting AI, ML, automation, analytics and other concepts that threaten to replace “the way we’ve always done things.”
In a McKinsey surveyed, 59% of participants stated that a lack of executive vision was a significant obstacle to the digital transformation of their organization. In the “average” and “below average” companies in a CSCMP publication, 20% of respondents said a lack of management support, funding and resources was hindering supply chain innovation ― double the rate of the most innovative companies, where only 10% called this a significant challenge.
When DHL Supply Chain determined that automation and robotics could play a critical role in increasing customer value and workforce productivity, CEO Oscar de Bok announced a $2.2 billion commitment to advanced robotics implementations. The company also created a digitalization plan, stretching to 2025, which was shared with customers and employees. In an interview with Supply Chain, de Bok said, “We believe to be truly innovative, an idea has to be rolled out throughout the entire organization…we are not going to wait for customers to tell us what will happen tomorrow, we will tell our customers.”
Supply chain technology investments were once delegated to a specific function such as procurement or logistics. But in the extremely unpredictable post COVID-19 business environment, these investments are critical in delivering the essential capability of agility. As such, they must be a priority for every supply chain stakeholder, from the shop floor to the C-suite ― and beyond the walls of the enterprise. The payoff is well worth it. A recent survey by PWC demonstrated that the most innovative supply chain leaders ― called “Digital Supply Chain Champions” ― fully recoup their financial investments in digitalization in just 1.8 years.
Today, every supply chain has the ability to adopt the advanced technologies needed to drive agility. Those who act quickly will seize a powerful advantage in identifying and capturing opportunities via supply chain digitalization. Those who hang onto traditional ways of doing business ― including manual processes, siloed functions, fixed assets and best guesses ― will fall behind as the world around them continues to be completely transformed.
Enabling Agility via Advanced Technologies.
The five advanced technologies highlighted below are emerging as competitive imperatives in establishing agility and resiliency across the logistics organization. Whether they’re retailers, manufacturers, or third-party logistics providers, companies must adopt and master these five technologies in order to:
- Identify and manage disruptions
- Deliver ecommerce-caliber service levels
- Implement successful omnichannel strategies and business models
- Achieve end-to-end visibility and control
- Make optimal decisions that protect profit margins
Fortunately, the world’s leading logistics teams are already implementing these advanced technologies, creating a wealth of expertise and best practices that other companies can draw upon. The innovations helping this crucial change include:
- Human + Machine: Robotics, cobots, drones, and warehouse automation improve productivity and reduce human errors
- IoT and Telematics: Detection and monitoring tools increase real-time visibility, improve quality, and support optimal decisions
- Autonomous vehicles: Driverless trucks, forklifts and drones deliver enhanced efficiency and safety
- Collaboration and connectivity: Digital partnerships increase visibility and responsiveness across the logistics network
- Intelligent problem solving: Advanced algorithms, AI, and ML detect and manage issues autonomously
Now, logistics providers and shippers are accelerating the pace to adopt new technologies to serve customer-first and eCommerce expectations. The logistics landscape has been completely transformed with consumer expectations driving next day and same-day delivery across industries. For the hyper-connected supply chain to come to satisfying these expectations, unifying logistics and advanced technologies will accelerate the journey to improve. Learn more about acceleration of the journey here.
The acceleration of technology is enough to give anyone pause. The opportunity these advancements present are unprecedented but also forces us to really understand what data is there across the supply chain and how we can use it to drive profitability and growth. In the next article, we will discuss the lessons learned from the customer sessions at our Blue Yonder ICON event this year and on June 8th the 3PL Execution Forum on Delivering eCommerce with Consumer-Centric Era, moderated by Steve Banker of ARC Advisory.
 “On the Unique Features and Benefits of On-Demand Distribution Models”, Pazour, Jennifer A. and Unnu, Kaan
 “The Next Horizon For Industrial Manufacturing: Adopting Disruptive Digital Technologies in Making and Delivering,” McKinsey Digital (November 15, 2018)
 “Focus on Customer Experience Research on Supply Chain Priorities and Investments,” The Council of Supply Chain Management Professionals (2019)
 “DHL: Driving Global Standardisation of Operations with Robotics,” by Georgia Wilson, Supply Chain, January 16, 2020
 “Connected and Autonomous Supply Chain Ecosystems 2025,” PWC Global
Terence Leung is Senior Director, Solutions Marketing at Blue Yonder. He has a keen interest in digitalization and the value it generates throughout the supply chain. In this role, he leads his organization to drive thought leadership and go-to-market strategy for supply chain execution and logistics solutions. In addition, he works with customers to understand requirements and drive best practices in the digital journey.
Prior to joining Blue Yonder, Terence was the leader in product marketing and value engineering at One Network. Previously, he was in leadership positions in industry management at Savi Technology and solutions and management consulting at i2 and Deloitte Consulting respectively. Terence holds an MBA from the University of Texas, Austin and an Electrical Engineering degree at MIT.