The logistics industry needs a single cohesive solution that streamlines the shipping process and improves the customer experience
e-Commerce is booming, making supply chain efficiency increasingly important—and also more complex. With U.S. e-commerce sales predicted to top $350 billion in 2015, the stakes for logistics professionals to keep up with growing consumer demand and expectations have never been higher.
Industry executives regularly juggle various supply chain challenges—consumers who want a quick, transparent and inexpensive delivery process, carriers with proliferating offerings, and the hassle of balancing the books while ensuring a positive experience for everyone involved in the supply chain ecosystem.
The rising pressure on efficient supply chain management and growth has produced several trends that are straining the supply chain landscape as we know it, highlighting the need for new technological solutions that can help the logistics industry develop a single cohesive network that streamlines the shipping process and improves the customer experience.
Here are the top five trends affecting the supply chain right now—and what to do about them:
1. Increasing Product Diversity, Static Standards
Large retailers have long dealt with the challenges that arise from maintaining a diverse array of goods that cannot be easily shipped together. But now smaller retailers in both the business-to-business (B2B) and business-to-consumer (B2C) marketplaces are accommodating a wider range of products to reflect their customers’ growing demands for variety.
Many companies have stopped stocking inventory, instead leveraging drop-shipping services across the U.S. to ensure fulfillment. But what happens when these smaller sellers are confronted by carriers who still hold strict standards for the type of shipments that can be placed on each truck? Since carriers’ terminals were designed to handle specific freight types, retailers are often forced to employ a variety of service providers to ship the diverse range of goods their stores now carry—introducing a large amount of complexity into the average supply chain.
2. Membership Programs: Shipping Bonuses as a Competitive Advantage
Amazon Prime is beloved by consumers for its free, two-day shipping policy on many items for members. The program has attracted millions of people and has spurred copycats by companies like Walmart and Sephora, who are competing not just with each other, but also against more adaptable marketplace sellers leveraging Shopify, eBay, and the like.
While seemingly a good idea on the surface, offering free shipping has deeper financial implications that should certainly give retailers pause. Amazon Prime may have millions of subscribers, but analysts estimate the program posted a loss of more than of $1 billion last year. While large corporations like Amazon and Walmart can afford such a loss, and Amazon recently turned a profit, evidence that their overall strategy is working, most retailers can’t afford to forego the costs of shipping just to draw customers.
Smaller sellers have therefore begun to distinguish their services in other ways, providing better and more bespoke services, appealing to local markets, or utilizing social media to create an enhanced customer experience. When smaller-sized retailers do end up competing on price, they are forced to optimize their logistics processes to keep margins intact—a move that is helpful in the long run.
3. Higher Customer Expectations for Shipping
For better or worse, Amazon’s Prime offering is now the new normal when it comes to consumers’ expectations of retailers—an especially important development considering that research shows shipping concerns now account for five of the top eight reasons customers abandon their shopping carts.
Consumers don’t fully grasp the enormous undertaking required by logistics executives who strain to make consumer expectations a reality. While carriers such as FedEx and UPS have robust infrastructures that make expedited delivery and shipping transparency possible, the vast majority of carriers don’t have the means to facilitate such an operation. This in turn puts increased pressure on smaller firms’ supply chains, which struggle to make them cost-effective and efficient. The Amazon Syndrome has caused retailers of all sizes to struggle to adapt and manage fulfillment successfully.
The ecosystem has already responded with a range of new shipping options, from locker-box pickup and services like FedEx Location to on-demand delivery services, allowing smaller companies to remain somewhat competitive in the marketplace.
4. Proliferation of Shipping Options
The explosion of available shipping carriers and options should streamline the process and help meet the needs of retailers. But, in reality, an ever-increasing array of distribution options has often led to more confusion, research by logistics professionals, and manual outreach by employees to determine the best solution in any given circumstance.
Many retailers believe they must offer all available delivery options in order to keep customers happy. But there is a curse in choice: Where there was once a simple parcel delivery option, now there are numerous options, each with its own processes and systems that are often too complex for a retailer to manage from within a single Excel spreadsheet. High-end furniture marketplace Viyet, for example, had been employing two full-time staff to manage its quoting and shipping process before it automated its logistics system. Doing so enabled the company to free up those employees for other client-facing work—and lower its overall shipping costs by 20 percent.
5. Omnichannel: Many Channels, Too Many Systems
The ability for retailers to sell products to consumers via multiple channels (i.e., online, brick-and-mortar stores, and mobile apps) is a boon for customers, but can result in a logistical nightmare for retailers, with orders coming from multiple systems that need to be coordinated and fulfilled in a timely and organized manner.
Traditionally, omnichannel logistics networks have been set up in a hub-and-spoke model, in which all inventory is brought to a central processing facility and then distributed from that facility to its destination. While this method is simple, logistics professionals are finding that they are often better off utilizing a mesh network, in which each channel interacts with all the others so goods and data can flow more efficiently and create a faster, more flexible delivery grid. Still, even this type of network often lacks transparency for logistics professionals and customers, since the constant flurry of activity in different sections of the network are not necessarily updated in real time or in a single platform.
The Role of Technology in the Changing Landscape
These are just some of the trends causing growing pains for the retail and logistics industries. Whatever path a retailer takes, it will likely encounter bumps in the road amid the increasing complexity of carriers, shipping options, retail channels, and evolving customer expectations. Thankfully, help is on the way in the form of new technologies that are helping to automate, streamline and optimize the entire shipping process, allowing retailers to successfully ride the wave of the e-commerce boom. Eventually, the technologies that are now optimizing individual aspects of the supply chain landscape will work together to create one unified entity—and isn’t that the logistics holy grail?
Jeremy Bodenhamer is the co-founder and CEO of Shiphawk, a shipping distribution automation platform. You can see how ShipHawk is helping retailers like Viyet lower their shipping costs through automation technologies.