Customer

3PLs: Going the extra mile for customers

The customer is king! Long live the customer!

It is words like these that have become a constant for business across all industries. With customers being more discerning, fickle, and less brand loyal, coupled with the ease of product information and reviews online, it’s no wonder businesses have to constantly stay ahead of the curve to retain them.

To ensure greater customer experience (CX), companies have to regularly keep up-to-date with their clients. Through online discussions, social media chats, feedback, and word-of-mouth, the process of keeping customers satisfied all the time is no mean feat.

So what is CX? “Similar to, but different from customer service, customer experience is unique to your brand. It carries both a tone and an image specific to your company. It’s a feeling as opposed to a result and it is becoming an important part of both the retail sales process and the way service providers attract new customers. In addition to becoming an important part of the consumer facing aspect of retail, it is also an important way for service providers to build a relationship with both existing and potential customers.”

For 3PLs this is clearly the case. Depending on where in the supply chain the providers lies (or within more than one), is where they need to create positive customers experiences. Across the four main areas – Transportation, Warehousing, Distribution, and Shipping and Receiving – there are multiple areas of interest.

First, is the question of speed of delivery to the end customer. Here, location is key and if so, can express services be implemented. Also, even if the warehouse is suitably located the inventory needs to be in regular supply to ensure adequate stock.

Further, the issue of price is always pertinent. From a customer’s point of view there needs to be transparency on any additional costs incurred. From the 3PL’s standpoint, where the price lies is within extra services or “kitting (putting several products in special packaging).”

Customers also want to know whether their goods are properly insured. Also, “Will they be insured during delivery, return, and while in storage?” Is there a limit to the insurance or is there a cut-off for the insurance? These specifics need to be made clear upfront as it is evident that customers dislike surprise costs.

Customers services

For e-tail customers and online shoppers the experience is key. From the look and feel of placing an order, to the correspondence up to delivery, and finally, the delivery itself, the entire process can make to break loyalty. In fact, “the buying journey doesn’t end when they [customers] click ‘Complete Order’. They want the products delivered quickly and if there are any problems with their order they want to be kept informed. [Thus], the true shopping experience occurs after they’ve actually placed their order (consider the global unboxing phenomenon).”

Here, 3PLs can capitalize on the delivery process through clear communication, ideally, on-time (or early) deliveries (or direct channels of correspondence during delays including sincere apologies), and even extra customer incentives.

For the front-end to be worry-free the back-end needs to work smoothly. Thus, the technology, processes, and efficiencies must be seamless. Packing, loading, managing, and quick decision-making are key to the overall smooth operating of the entire supply chain and given that one hiccup can have a severe domino effect, it is imperative that the functioning of the chain continues regularly.

Just like retailers, hotels, and other direct customer-facing sectors, 3PLs also need to go the extra mile to out-run the competition. Incentives, gifts, loyalty programs, etc., have all been used but they can still change the perception of a company. These could be as simple as a birthday wish or greeting, a discount on a delivery, or even a free product. 3PLs, like all businesses, also need to rely on reputation management, especially online, and regularly monitor social media chatter and ensure that feedback is addressed quickly and efficiently.

Another standard for most 3PLs is the issue of tracking and reporting of goods. Though almost all companies provide customers with online tracking features through an app, website, or code, not every experience is the same. Here, 3PLs need to examine their customer experience through the look-and-feel, dashboard, ease-of-use, and user experience (UX). Customers who have not received goods already paid for or those whose parcels have been misplaced are not to be messed with! Thus, apart from simply tracking there are other features that can be added including “access to real-time data about inventory. [Thus] if an item is running low, you can quickly order more [and if] it means customers aren’t purchasing items that you don’t have in stock and you can quickly and effectively replenish your supplies, making sure you can always meet demand.”

Further, for 3PLs, it is not just a case of tracking, real-time updates, and personalized gifts. For customers, there is much more to brand loyalty and retention. Packaging of goods, delivery-person attitude, demeanor, and politeness, and even type, frequency, and duration of communication. All of these can add up in a customer’s mind and play out across various negative scenarios. It is key to keep up with customer expectations, their requirements, and where they feel improvements can be made. Customer listening is imperative and can shape the way the brand is perceived. Feedback, whether positive or negative, needs to be understood and acted upon. The same concern seen repeatedly will drive a customer away. Customers understand imperfections and business problems but they do not care for insincerity, disregard for their time/money, or inaction. It is key to be in constant touch, especially, during crises as saying nothing can sometimes be worse than saying the wrong thing.

Though 3PLs may not always be as in-your-face as retail brands, with online shopping, eCommerce, and digital payments becoming the norm, customers are now directly facing and experiencing providers within this industry. Thus, the experience must be positive along the entire supply chain similar to what retailers called the omni-channel experience across all touch-points.

Big Data

How Big Data & Analytics are transforming 3PL

With multiple sources of data and information available across the entire supply chain, 3PL businesses and providers are continuously trying to make sense of it. From CXOs to sales managers and finance VPs, the ability to leverage Big Data has become paramount. However, before any sort of analytics can be undertaken, the data (both structured and unstructured) needs to be organised and put into context. For 3PL providers, this has become critical as clear and appropriate analytics can greatly impact their entire business operations.

As Big Data and Analytics continue to play a significant role across industries, the recent 21st Annual Third Party Logistics Study, has already made it clear that “98% of 3PLs [have] said that improved data-driven decision-making is essential to the future success of supply chain activities and processes.” Coupled with this is the fact that “81% of shippers and 86% of 3PLs [surveyed] said that using Big Data effectively will become a core competency of their supply chain organisations.”

For an industry that relies heavily on processes, efficiencies, and timeliness, even the slightest disruption can have significant consequences. This is where Big Data can play a major role in helping to overcome bottlenecks and obstacles.

As has also been said, “Big Data allows those within the supply chain to identify and correct inefficiencies, run “what-if” scenarios, and improve the way they respond to disruptions, and mitigate risk.” These actions and scenarios can help streamline processes and ease internal systems and operations. They can also help to build partnerships, whereby companies seeking to work with 3PLs may do so by assessing their Big Data and Analytics capabilities as one of the deciding factors. Thus, 3PLs that are more engaged with and have greater ability to leverage the tools and technology – to ensure better business outcomes – may be more suitably placed to collaborate with such businesses.

For external, customer-facing outputs, the use of Big Data and Analytics by 3PLs can play a significant role during the last mile of delivery. As this route “tends to be the slowest and least cost effective,” there is scope for more specific, data-driven information to be processed in order to keep clear checks and tracks of possible hurdles. Also, with the emergence of more technological tools such as GPS-enabled devices, scanners, and sensors embedded within products through the Internet of Things (IoT), the entire supply chain route can be directly viewed and monitored. In what is known as the “black box” of delivery data, providers can now keep track of delivery data including the earlier inaccessible “off-vehicle” data.

The ability to understand and analyse large volumes of data and information can lead to the better management of deliveries. It can also help create not just better customer service but also incentive employees through appropriate training, skill development, and help to create real value across the entire supply chain.

Additionally, some of the significant steps being used through Big Data and Analytics surround analyzing weather patterns. Here, the earlier unpredictability of disruptions due to freak climatic conditions could severely hamper large parts of the supply chain. However, with more improvements through data monitoring and tracking devices being used in real-time, such occurrences can be reduced.

Big Data & Analytics

Further, other possible areas of concern such as heavy traffic and a lack of parking availability can be detected early. Though most 3PLs already use highly sophisticated apps, analyzing live updates of roadblocks, jams, and accidents can ease pressure on drivers when trying to ensure on-time delivery.

Within CBDs, commercial real estate spaces or busy, high-density areas in big cities, parking is always a major concern. Through various devices and a constant stream of visible data and analytics, valuable time and costs can be saved. In some cases, delivery agents may well be advised to park further and walk or even possibly use alternative routes to avoid delay-prone zones. Such data can be paramount when ensuring the smooth delivery of goods. Of course, all of this can only lead to increased on-time deliveries and heighten customer satisfaction, especially given the cut-throat competition within the industry.

For transportation over both air and sea such remedies serve an even greater purpose. Loading and unloading at ports or airports, time and costs per delivery, and assessing the best routes can make a huge difference to freight charges. By analyzing data patterns and using a concise dashboard, 3PLs managers can examine and understand the situation on the field and seamlessly report back to the on-ground team.

One of the hurdles regarding analysis is the vast amount of data that is present. This, unsurprisingly, can be overwhelming and can easily lead to aversions to its use. There is also the obstacle of costs involved as with current, wafer-thin margins, 3PL providers are reluctant to invest in large data centers and data science resources.

Here, though understandable, there must be a clear path created to advise and guide appropriate players when mining and analyzing data. This is usually best undertaken in a phased manner with a clear focus on a particular area of the business. This could be within a warehouse, along a supply route, or within the last mile.

Further, collaborating with the right data partner is imperative. 3PL providers need to research and understand the capabilities and limitations of both the data and associated companies.

With competition being greater than ever and customers being less loyal and more demanding and fickle, 3PL players need to continuously strive to stay ahead of the curve. Here, Big Data and Analytics can play a valuable part in helping providers gain a competitive advantage.

However, though Big Data and Analytics are here to stay and their value cannot be understated, it still remains to be seen how 3PLs cope and use the tools at their disposal. As with many other new ‘disruptive’ technologies and tools each business needs to find its own “sweet spot” from which to ascertain its own unique requirements to produce benefits for the business.

Block Chain

How Blockchain is revolutionizing 3PL

For those who have been following technological disruptions within businesses there are a number of models to look at. Uber, Airbnb, Facebook, etc. have all played a significant role in reshaping the transport, hospitality, and media and advertising industries respectively.

However, another technology, which has been around for several years, has already made inroads into almost all industries. Blockchain, based on decentralised technology, is a “transparent distributed digital ledger (a replica, of a list of transactions in the network, present on a number of computers across the network but not a central server).”

Though this can be most closely related to the banking, finance, and related services, Blockchain technology has impacted many other industries including the third-party logistics (3PL), supply chain, warehousing and distribution sectors.

As Danillo Figueiredo, VP of International Logistics, AB InBev, has stated “Blockchain is one of the most promising technologies in logistics. It has the potential to digitalize many of today’s paper-based processes and overcome the multitude of different interfaces… Blockchain technology will be transformational to our business and the world. It reduces mistakes, digitizes information and improves the supply chain process so we can focus on our core business of brewing the best beers for consumers.”

With this is mind AB InBev has joined together with Accenture, APL, Kuehne + Nagel, and a European customs organisation to successfully test a Blockchain solution that can “eliminate the need for printed shipping documents and save the freight and logistics industry hundreds of millions of dollars annually.” Thus, the group has already tested a solution where documents are “no longer exchanged physically or digitally but instead, the relevant data is shared and distributed using Blockchain technology under single ownership principles determined by the type of information.”

Given Blockchain technology’s advantage as an alleviator of human error, high speed, and a new way of transacting digitally, many industry players as exploring opportunities in this regard. Though still to be examined more closely there are a number of different types of Blockchain networks: public and private. Public networks are open and allow anyone to participate. Private networks are for a closed group and can be extended to new players by invitation. Based on the requirement, one can choose between public, private or public-private networks.

For many players within 3PL, Blockchain technology has the potential to revolutionise certain systems and procedure, reduce costs, and increase efficiency. In many cases, though yet to catch on to the trend, is has been said that Blockchain technology is a prime candidate for inclusion within the supply chain sector. Of course, this only works across the chain if the network of companies including suppliers, warehouses, manufacturers, etc. are all completely involved. However, given the increased interest this is poised to be a breakthrough for the industry.

Regardless, adopting Blockchain technology is no easy feat. It takes time, costs, and changing an already ingrained work culture. In fact, according to findings of the 22nd Annual Third-Party Logistics Study for 2018, though results showed that while “30% of 3PLs and 16% of shippers see Blockchain as a potential application, they have yet to engage with the technology.”

Part of the hesitation stems from a lack of clearly understanding of the technology as well as embracing its benefits. As Neil Collins, regional managing partner for Korn Ferry’s North American industrial markets unit has said, “The supply chain/logistics leader must now be agile, a strategist, a visionary and a collaborator. The entire supply chain organisation must now compete with technology, and the winners will be those that elevate their people using technology, rather than replacing them with it.” Thus, the leadership must intervene from the top in order to embrace the inclusion of Blockchain.

This, at present, is a big ask and the supply chain industry still needs to place itself within its own context though there are already players working towards this goal. Large companies like IBM, Walmart, and Alibaba have several pilot Blockchain projects in the pipeline. Two of Europe’s largest ports – Rotterdam and Antwerp – have already begun work on Blockchain projects to “streamline interaction with port customers.” However, Blockchain requires the collaboration of all parties to function effectively i.e. to form the link. Here, the technology has to stem from software developers or vendors to be able to successfully “integrate applications used by the largest supply chains companies, in turn creating an incentive for other partners in the ecosystem to come aboard.”

However, once on board, the advantages are clear. Given that the supply chain works in sync with Blockchain technology in a linear or “down-the-line” manner, the transparency of each node and its visibility can benefit the entire chain. As every item can be viewed and traceable within the Blockchain, players merely need to add their own information within each record. This could help reduce fraud, repetitive data duplication, and excess paperwork.

As companies being to see the benefits of Blockchain technology there is a greater likelihood of it entering the 3PL mainstream. However, companies must understand where it can best fit within their own requirements. Finding the appropriate Blockchain partners, calculating costs such as overheads, technological and infrastructure, and ensuring a sound fit within a specific business needs to be carefully examined and addressed. It is a long-term investment and requires a great deal planning, a change in mindset and approach, and a detailed exploration of its ramifications.

Currently, many industries like those mentioned earlier are forming groups and partnerships to ‘test the waters’ with regard to Blockchain usage and adoption. This appears to be a sound point of entry for 3PL players as it provides time to understand and evaluate its merits prior to integration.

Though Blockchain has the potential to be the next big 3PL disruptor its own nature and functioning have ensured that many players are still viewing it with caution and soft hands. Regardless, the undoubted benefits are clearly visible and over the next few years more and more players will look to adopt the technology.

Business of 3pl

Aligning your Business with 3PL

In today’s competitive, tight, and cut-throat business environment, many companies depend on third party logistics (3PL) for their supply chain management in order to reduce costs, improve efficiencies, and ensure smooth operations of their distribution and fulfilment service requirements.

To deliver value and thrive within a difficult market, 3PL providers need to align closely with their parent businesses in terms of mission, vision, and goals.  As the relationship is so significant, most big businesses have well-defined 3PL processes, systems, quality standards, performance, criteria, and best practices already in place and regularly keep a close eye on operations.

In fact, most business are keen to look to partner with vendors who will align and integrate with their own processes and practices. Thus, in a totally aligned relationship, the supply chain “shadows” the processes of the parent company and replicates the parent company’s processes, adheres to their standards, mimics their operating models and becomes an “extension” of the parent company. It is even true to say that they may become fully embedded into the parent company and a “well-coordinated arm” of the parent company.

As this relationship requires careful selection many parent companies have strict and stringent supply chain selection criteria, which they use to screen their supply chain partners. In some cases companies may also train supply chain providers in their best practices and operating procedures to ensure that the vendors understand their business priorities and their own way of operating.

Some companies also craft a strategic plan for the alignment and for the relationship, describing the capabilities that they wish their partner supply chain to develop at different stages of the relationship. These capabilities could be operational, technological, or behavioural.

In order to maintain a sound relationship it can help to carefully define the work flows at the parent-supply chain interface as well as specific goals, outcomes, and expectations. It may also be beneficial to define the responsibilities of the parent company and that of the vendor that may include responsibilities for effort, for job, for the entire system, and for business outcomes.

Wroking in business of 3pl

Sharing performance benchmarks and baselines with the supply chain vendor and of clear unambiguous expectations can also help both parties understand what is expected in terms of performance.

Aligning may also entail integration with a company’s web servers, applications and electronic data interchange standards. This allows for seamless information flow and exchange and utilisation of information between the parent’s business and the supply chain.

Such an integration would allow a 3PL partner to use this information to track and trace shipments and direct this information to the parent company’s website; thus, providing customers with the vital information they need as well as helping to improve customer satisfaction.

Of course, there is the obvious check on physical integration, which ensures that the 3PL has the capabilities to manage the business in questions. Here, some internal questions to be answered could include: “What modes of transportation and what services will you [the business or parent company] need?” “What volumes do you plan to ship and where?” “Do you have specific security or visibility requirements?” and “Are your shipments time-sensitive?” Though these are basic questions given the nature of the business they will be able to filter many potential 3PL providers, which may not be suitable.

Also, the 3PL should be capable of matching the specific needs of the business. Many providers have a variety of strengths and weakness and it is imperative that those most closely aligned to the business’s requirements are at the forefront of its strengths. If the business relies on door-to-door deliveries, intra-warehouse, or last-mile, it is important to understand that the 3PL is on par with this and its strength lie in a particular area.

Additionally, it may be necessary to check on the number of modes the 3PL provider actually has and utilises. The four common modes – rail, road, sea, and air – may be a given on paper by a 3PL but it is wise to ensure that the inter modal services being offered have the right size or fleet as well as hands-on experience to be properly handled.

Further, businesses must undertake thorough research about possible 3PLs prior to confirmation. Reputation, reliability, and responsiveness are key, especially in the logistics and supply chain arena. Also, businesses may opt to review use cases or examples within various scenarios to confirm the handling of specific situations by 3PLs. There must also be a cultural fit and the agreed recognition and understanding of the appropriate protocol, procedures, and hierarchy cannot be understated.

Finally, though clearly a given many businesses fail to check a 3PL’s customer service record. Given the scope for disruptions across the supply chain, the crisis management capabilities or the reputation of the company needs to be maintained and carefully managed. To this end it is paramount that the 3PL knows the plan of action, can ensure regular flow of goods or services, and does not lose control during a crisis.

As businesses rely more heavily on 3PLs getting the right fit to align with both business needs and present-day demands is not an easy feat. Many partnerships have failed, especially when a business has recently moved from one party to another. In this regard and given the high demands on the relationship, both parties need to be on the “same page” prior to any business commitments.

With reduced costs and improved customer service being key in the high-contested logistics marketplace, both businesses and 3PLs require a synergy that can be secure, reliable, and potentially long term. There must be clear and concise dialogue prior to and during all negotiations in order to determine the most apt working relationship once a final agreement has been determined as any hurdles or obstacles cannot be easily overcome “on the field”.

It is evident that today’s customers are fickle, brand agnostic, and ruthless, especially with a mobile in hand and social media apps awaiting comments, tweets or posts. Businesses and 3PLs must work together to create a harmonious working environment for each other as well as for their collective customers.

Risks of a Global Supply Chain

Risks of a Global Supply Chain

The advent of globalisation has brought many issues to the fore. In economic terms, globalisation refers primarily to the ways in which “economic and industrial institutions interact in various locations throughout the world, with primacy given to no specific geographic location.”

For businesses, border restrictions are no longer a hindrance as they can sell products and provide services anywhere in the world. Globalisation also allows for purchases across nations where materials are required from one country to another.

The ease with which this has been able to take place is due to the development of information and communication technologies (ICTs). In what is known as ‘informational’, the process by which “information technologies, such as the Internet, world-wide web (WWW), and other communication technologies have transformed economic and social relations to such an extent that economic (and socio-cultural) barriers are minimised.”

Coupled with the growth of ICTs is the development of more efficient and speedier transportation systems as well as reduced costs of travel and transportation. Thus, it is, in essence these factors as a whole that have led businesses to adopt global supply chains.

However, for local and global supply chains there are both advantages and disadvantages.

Local Supply Chains

Local supply chains benefit from knowing the realities of the country they operate in and so are better able to negotiate the dynamics of the politics, economics, and markets and mitigate risks. By knowing the language and the language of the business they have access to local experts and face fewer communication problems. This is underlined by intercultural communication within businesses as there is already a strong relationship in place due to the sharing of a common language.

Economically, local supply chains do not have to face trade barriers as impediments as well as changes within business laws in another country. Also, transfer prices are all in the same local currency and there are no differences in taxes or duties. Given the use of a single currency there is no scope of facing the challenges of fluctuating exchange rates and related transfer prices.

However, the disadvantages are that they may not always be able to provide the cheapest resources or materials and face barriers of distance and geography. Thus, by having access to a global pool makes it easier to source better, affordable, or quality products and services from a larger market.

 

Global Supply Chains

Likewise, global supply chains face specific advantages and disadvantages as well as some critical risks.

First, they can source raw materials and components from wherever is cheapest or most conducive globally, and thus, become more competitive in the worldwide market place. In this regard, it is evident that the manufacturing sector was a first mover in taking advantage of this phenomenon.

However, global supply chains are vulnerable to disruptions and risks. Disruptions can have significant impact on the performance, profitability and fortunes of a business.

For example, in 2000, the large network and telecommunications company, Ericsson, lost more than 400 million euros when a fire broke out at a factory where Philips produced semi-conductors that were also used for Ericsson phones. Similarly, Apple lost many customer orders after an earthquake hit Taiwan in 1999.

In terms of risks there are two types: environmental and organisational.

Environmental Risks

These include natural disasters, hurricanes, earthquakes, tsunamis, etc. For example, the Kobe earthquake in Japan in 1994 impacted, amongst others, a California-based sound-card maker Kelly Micro Systems, causing a shortage of components, which resulted in disruptions in production and loss of revenue.

The Florida hurricane in 2004 caused huge shipping failures in the state impacting companies in Asia and triggered large losses.

In 2016, climate change resulted in the damage of coffee crops that Starbucks was heavily dependent on causing much disruption in both production and sale.

Given these issues, the transport and logistics parts of the supply chain are most vulnerable to natural disasters as ships, planes, and road links can easily be disrupted.

More recently, environmental risk also includes terrorism. Thus, deteriorating political relations between countries or political instability, change of regimes, etc., can also interfere with the free flow of goods and trade between countries and cause supply chain disruptions.

For example, Deutsche Post stopped delivering to Ukraine in 2016 due to political instability in the region. This impacted 620 German companies in the Ukraine.

 

In Turkey, the attempted coup in 2016 exemplified how vulnerable global supply chains can be to political upheaval. Without a stable government, supply chains will always experience problems at borders and check-posts.

Environmental risk also includes market risks. Shortage of skilled manpower in labour markets such as a lack of truck drivers or transport staff striking over wages can heavily impact the supply chain.

As supply chains become more globalised the number of link parties involved not only increases but the geographical distances between the primary company and the links makes it difficult to control and coordinate. Also, it becomes difficult to ensure compliance to norms, standards, and practices across geographical distances as well as across organisational boundaries.

Finally, there is a greater chance of theft, fraud, pilferage and other such risks within global supply chains given the larger number of players involved and the relative opacity of each step by the other.

Organisational Risks

These include risks within the boundaries of the organisation or supply chain such as the uncertainties of labor, of technology dependence, infrastructure dependence, and the integrity of the link parties in the supply chain. For example, the grid blackout on August 14, 2003, in the northeast region of the United States that significantly affected performance, is a prime example of this.

Further, if any link party or vendor becomes bankrupt or closes down, this would adversely affect the entire supply chain. There are also interactions and relationships between the organisation and the supply chain. Dissatisfaction over relations and interactions could result in less than optimal performance, lack of cooperation, or even conflict that could adversely impact supply chain performance.

Between local and global supply chains the risks are fairly similar. However, global supply chains tend to experience a higher degree of risk due to the numerous links between the wide network of parties and firms involved.

3PL Outsourcing

3PL Outsourcing – Strategic Considerations

Third-party logistics or 3PL Outsourcing, is an option exercised by a business, wherein parts of its distribution and fulfilment services are outsourced to a third party. This can occur for a number of reasons including outdated facilities and warehousing systems, as the business does not have the internal capabilities internally and could be experiencing a reduction in efficiency, an increase in time and costs, as well as a decline in customer satisfaction.

Such ramifications could lead to the competitive advantage of the business, its market share, brand reputation, or profitability being diminished. Thus, to stem the tide, businesses have had to look for external solutions.

In other cases, businesses may have set-up in foreign markets and need to globalise their supply chains to better serve their customers. However, in such instances, being able to completely owning their own supply chain could be prohibitive and an entry barrier into certain global markets. Here, businesses require 3PL support to bridge the gap.

However, businesses do not always have to outsource parts of their elements to third parties. Another method could be that of vertical integration, wherein a business invests in developing and owning some of the sections of the supply chain. This can be exemplified by the Ford Motor Company, which owns forests and steel mills. Another option businesses could use is to franchise the supply chain, which provides relatively tight control and integration over the system rather than outsourcing it entirely.

3PL vendors typically provide services such as contract warehousing, packing and distribution services, transportation management, and freight and inventory management. Here, it is up to the business to analyse the areas where vendors are required and plug the holes as they best see fit.

There is also the relationship between businesses and vendors as many businesses are keen to look to vendors who can align with their goals and objectives, processes, standards and performance, and quality parameters. Such parameters can even be in the form of an economic contract or agreement between the two businesses though it has the risk of allowing vendors to exit the contract as they deem fit.

Thus, depending on the business, its health, performance, market positioning, services, and many other factors, the decision to outsource to third party vendors almost always remains a strategic one. In this regard, there are a number of considerations that businesses must address before entering into such a strategic decision.

Transaction costs are always at the heart of the decision to ‘buy’ or to ‘make’. Here, costs can boost overall, long-term growth or help entry into a new market.

Performance and predictability of performance is another criteria. Businesses are likely to choose those 3PL vendors who offer efficiency in planning, adapting, and monitoring, i.e. where performance is predictable and risk is minimised.

Value addition is another consideration. Businesses are keen to partner with those vendors who add value through embedded knowledge such as competitor behaviour, deep-domain expertise, and market understanding as well as certain unique capabilities. However, such capabilities or value additions are only ‘order getters’ and not ‘qualifiers’. The day-to-day ‘qualifiers’ for 3PL vendors still remain delivery reliability, speed, and price.

However, price may not always be an incentive for businesses. A sudden price drop could arouse doubts and reveal larger problems within a vendor’s functional area or core capabilities.

Further, a 3PL vendor’s IT capability is another significant area that businesses may examine within their own decision-making process. As IT is seen as an enabler to reducing costs, supporting innovation and service quality, it is a core area of scrutiny.

Another area for businesses is the ease of interaction or customer relationship. It is evident that positive and trustworthy customer interaction goes a long way and businesses tend to stay away from vendors who have been known to be ‘difficult to deal with’. Positive dealings could include taking responsibility for notifications about likely delays or identifying parcels that were late, or informing customers in advance along with the reasons for the delay. In today’s highly competitive market, customer satisfaction is paramount and businesses require a vendor who will ensure that delays are minimal, are clearly stated, and can even go the extra mile when systems break-down.

Of course, vendor size is also important. Here the capacity, scale, and reputation come into play. Depending on the nature of the business, companies may opt to choose larger or smaller players within certain markets. This, once again, depends on the business’ own situation within its growth and development cycle.

Finally, there is also the capability for innovation as another option for the selection of vendors by businesses. Innovation is seen as a significant value add and a great customer satisfaction elevator. Here, vendors known to be flexible, unique, or standing out within markets may well be viewed positively, especially where there is less freely open information.

However, despite these factors there are still challenges in the strategic decision-making process for businesses looking to partner with third parties. Some of these include unreasonable and unrealistic expectations from a buyer. For instance, customers may have unrealistic (and unreasonable) expectations that 3PL providers may have the effect of reducing their annual transportation expenditures by 50 percent. Though this is factually incorrect this perception must be addressed before a deal is struck. Not doing so could lead to severe consequences going forward.

In the end business must internally decide whether to opt to use 3PLs. This depends on their own growth strategy, vision, functionality, costs and market forces. Once a decision has been made however, there may space to nurture the partnership given that the right-fit provider has been sourced. To do this there must be clear and transparent communication between both parties, an assessment of ground market realities, and a clear understanding of each other’s capabilities. Of course, the relationship is key and businesses function best with both sides working together and collaborating closely – and in the area of logistics, distribution, and fulfilment, this requires even closer examination.

logistics

Drones and the future of logistics

It’s a bird, it’s a plane…no, it’s an unmanned aerial vehicle (UAV) commonly known as a drone!

Though drones were initially conceived and have been used as a part of modern warfare in the past, they are now increasingly being looked at by businesses to reduce costs, save time and improve customer service.In fact, one of the world’s largest companies, Amazon, is their most famous use-case through its recent public testing of drones with Amazon Air. And given its global influence, it’s no wonder Amazon forced other companies to stand up and take note of the potential uses of drones within businesses.

Regardless, many companies have already been looking into the technology and are already testing drones and using them, albeit in a limited manner. More recently, the buzz around drones has been (due to Amazon) around delivery, wherein customers are delivered products and goods via drones. However, though they can be used in delivering food, small items and products, drones can also be used within development, recovery, and search and rescue missions. Given that there is potential for drones within development, reconstruction, and retail, it is also true that drones can have a huge and untapped potential within the logistics sector.

In fact, as per a new market research report Drone Logistics and Transportation Market by Solution (Warehousing, Shipping, Infrastructure, Software), Sector (Commercial, Military), Drone (Freight Drones, Passenger Drones, Ambulance Drones), and Region – Global Forecast to 2027, “the market is estimated to reach USD 11.20 Billion in 2022 and is projected to reach USD 29.06 Billion by 2027, at a CAGR of 21.01% from 2022 to 2027.” Thus, with such impressive growth figures predicted it is no wonder more players within the logistics sector are closely examining the future potential of drones.

So what exactly is a drone and why is it so important? In technical terms, a drone “is an unmanned aircraft” or “a flying robot.” It may be “remotely controlled or fly autonomously through software-controlled flight plans in their embedded systems working in conjunction with on-board sensors and GPS.”

As earlier mentioned, drones were first associated with the military for intelligence, anti-aircraft, and target practice. However, they now are more commonly used by civilians recreationally, by cinematographers in film, for weather monitoring, agriculture, surveillance, and even traffic assessment.

Within logistics and distribution there are two main types of drone delivery being explored – home drone delivery and supply chain delivery. Home drone delivery in more popular though supply chain delivery can be very important in saving time, costs and streamlining processes.

For warehouses, drones can be used to “randomize picking routes.” In order to improve utilization within warehouses, and where there aren’t fixed palletizers, by changing the “programming of aerial drones, pallets can be set-up as and when required.” Drones can also help replace conveyor systems in places where there are configuration problems.

Given the vast amounts of stock and inventory within the logistics sector, there is potential for drones to work as possible alternatives to trucks or other surface transport options. Here, they could be deployed between warehouses to ensure demand within a local or regional area is met and to balance and manage inventory levels.

One of the biggest issues facing businesses is claims/returns. Here, drones could be used to pick-up faulty products from customers and drop them to be replaced/fixed. Large retailers could benefit from having their logistics save time given the benefits of no road traffic or congestion as well as reduce efforts of human labor and save on fuel prices.

Going further, there is also scope for end customers within a limited and finite range to be served by drones. However, given the current restrictions on weight and package type only certain goods can be transported. Nevertheless there is still an untapped potential for companies looking at the last mile (when a package reaches a customer’s door) delivery and can help remove the need for humans, reduce cost of transport, labor, and save time.

Also, within a warehouses drones can help with safety issues such as being able to reach places where employees may face danger or accidents. In the event an accident has taken place drones can be sent to take pictures of accident-prone sites or, where there is a problem, can be deployed to help review/solve problems.

Further, as has been mentioned, there is even greater scope for drones to “offer the potential to increase flexibility and combine the speed of automated handling equipment with the scalability of a manual warehouse workforce.” Thus, a combination of a human-drone workforce can greatly improve efficiencies with warehouses. This can also be complemented by RFID-reading drones, which can “pinpoint and count tagged inventory stowed inside stand-trailers, making them invaluable for large distribution centers with outdoor goods-yards,” saving precious time and costs.

In terms of the future, there is a great deal of potential for drones to be used within the logistics sector. However, one of the biggest hurdles is their limited weight. At present, packages weighing more than 5 kg are hard to hold and there is a risk attached to them. For now, larger drones are more expensive and need more testing. Given this their range is also limited as is their speed and they can only embark on short trips.

There is also the issue of government regulation and the need for several licenses and procedures to be followed for commercial usage of drones. Here there are several grey areas and issues of security, surveillance, safety and risk need to be addressed. Thus, at present, only large players such as Amazon, Walmart, DHL, and UPS (among others) are actively using drones.

However, given the rapid pace of technology, innovation by businesses, and competition for increased customer loyalty, the future looks bright and it seems only a matter of time before drones, as part of the technology revolution, which includes AI, robotics, IoT, etc., will enter the mainstream and will inevitably become commonplace within the logistics sector.

RFID in warehousing

RFID in warehousing

As an efficient and effective method of tracking items and transferring data, it is not surprising that RFID (radio frequency identification) has gained prominence across several industries, though more notably within warehousing.

As demand for warehousing has increased, many businesses, globally, but specifically in the US and Canada, require services ranging from brief import housing to long-term storage of their products.

Over time and through technological advancements, businesses have required additional tools to deal with increased customer demands. Previously, barcodes were used within warehouses. These helped to tag, dock, and store stock and barcode readers were used to identify stock that came in and went out in a structured and organized manner. This worked well when single sources came in as barcode items were individually scanned one at a time. However, this was still a labor-intensive and time consuming task and required a significant amount of paperwork, tracking, and could easily lead to mistakes.

As warehouses grew in size, reaching up to many thousands of square feet of stock and storage space, the use of barcoding became less feasible. Coupled with this was also the increased competition within the sector as well as the rise of more discerning customers who demanded immediate benefits with less thought about loyalty. Businesses had to adopt to address speed, delivery/time, and cost, especially within their just-in-time inventory. Additionally, the cost of labor was also rising and was error-prone. Thus, a new and improved technology was the need of the hour.

Given this, RFID brought in a paradigm to the sector. One of its main benefits was being able to store up to “100 times the data of barcodes” and can keep track of all inventory data such as “lot and serial number, size, manufacturer, vendor, expiration date, user, location on production line, etc.”

RFID in warehousing

This is very beneficial when dealing with multiple functions such as order-picking and receiving, pick-and-pack sorting, distribution, trans-loading, promotional packing, and cross-docking.

So what is RFID? Many observers have named it the smart barcode because it is layered on top of a traditional barcode and can complete more complex functions. In essence, RFID (a form of Auto ID technology) is “a system that transmits identity in the form of a unique serial number of a product wirelessly.” Just like many other smart products such as TVs, other electronic appliances or household products, RFID tags consist of “a microchip attached to a radio antenna mounted on a substrate.” The use of this technology “connects products to the Internet for tracking purposes so that information can be shared [with businesses] across the supply chain.”

Of course, such technology can enable many varied uses and also helps to reduce time, improve real-time data accuracy, and lessen the burden on human labor involved.

Within the warehousing industry there are two types of RFID systems that are commonly used – active and passive. Passive RFID tags “do not have transmitters and simply reflect back radio waves that originate at the reader antenna,” whereas Active RFID transponders (a microchip with an antenna) “are placed on products [through which] information is accessed using a reader to pass the information to a computer.”

In terms of direct use, active RFID tags are typically used for “large assets, including cargo containers, rail cars and containers that are transported over long distances.” Passive RFID tags, are less expensive and require less maintenance though lack power sources and transmitters, ensuring their use is more limited.

The benefits of RFID within warehouses are significant. With their use, stocks can now be tagged through RFID portal readers all at once rather than individually. This is a huge bonus as it can greatly reduce time and effort and improve efficiency and accuracy, owning to the exclusion of manual processes. Further, stock can now be tracked and monitored not only within the warehouse but anywhere across the supply chain, in any location. Further, along with web tools and information about stocks, inventory can be made available in real-time and 24×7.

Another significant advantage is that RFID can be integrated with any warehouse management system that has already been deployed or is currently in use. This means there is less time and effort spent in updating or upgrading to a newer technology and limited lag-time in terms of business processes.

As mentioned earlier, RFID use also provides a much higher level of accuracy as well as an immediacy of information of inventory levels. This means that decision-making concerning replenishment of stocks can be taken with less planning and ‘on the fly’. Also, other decisions can be taken to improve the storage capacity utilization of a warehouse so as to ensure better efficiency and to improve profitability.

Due to the tracking and ‘smart’ advantage, RFIDs can help customers track and follow their goods’ journeys in real-time. Such web-based RFID systems can provide this information and help improve customer satisfaction levels. This is especially critical when precious, high-value goods are stored and being transported and can greatly help to reduce and alleviate the associated risks. Given that the monitoring process is so clear the possibility of theft can be diminished and a safer passageway of transportation could be cleared.

Finally, for both labor and cost there are clear gains given the fact that inventories can be leaner, thus, improving savings. The introduction of RFID tags can also help reduce labor costs, given that the manual work of barcode entry has been removed and humans can focus more on specialized tasks within the warehouse rather than solely on the scanning of each and every item.

As demonstrated, it is evident that RFID tags have revolutionized the warehousing sector and have pushed the associated technology further into the mainstream. Given the impetus they have provided many businesses are now looking at newer ways of using employees for more specialized tasks within warehouses, which cannot be replicated by technology. Thus, the introduction of technology within the warehousing sector is also playing a role in creating a human revolution within the workplace.

The implications of paperboard packaging replacing plastics

With an increased emphasis on being environmentally-friendly, many governments have reviewed their approach and have moved further in this direction. In the US, cities like Washington D.C (tax on plastic bags), San Francisco (complete ban on plastic bags), and Boston (tax and ban on single-use bags), have implemented their own laws. Around the world, Kenya, Chile, UK, Australia, and China have also enforced their own rules. Additionally, India enforced a ban on single-use plastics in July, 2018.

Most plastic bans include: PE bags, disposable plastic cutlery, disposable thermocol items, plastic wrap used for packaging and storage, non-woven polypropylene bags, plastic pouches for storing liquid, plastic packaging for food items, and plastic and thermocol decorations.

It has been determined that these plastics are the most harmful for the environment as they clog water bodies due to improper disposal, lead to ground water pollution, and disturb soil microbes.

With more and more countries adopting alternatives to plastic, the use of paperboard packaging has been gaining further acceptance. This has also been driven by a retail boom and the introduction and increased use of e-commerce. It is also important to note that paperboard packaging is consumer-friendly, provides excellent product protection, is lightweight, easy to transport and stack, and significantly easy to dispose of. However, the underlying and important aspect is that paperboard packaging is bio-degradable.

Given this it is no wonder that the paper packaging market is growing at a rate of 7.5%. In fact, industry estimates suggest that Amazon and Flipkart — top two players in the $17-billion ecommerce sector — consume between 1,200-1,400 tonnes of paper that goes into making boxes and printing bills.

For other large organizations such as Swedish furniture company IKEA, the switch-over to paperboard has been undertaken very quickly. And, as it is clear, the effects of paperboard packaging replacing plastics can greatly reduce climate impact, businesses are climbing on the sustainable bandwagon to underline their positive appeal for the environment.

 

 

Across the ocean, in the US, tech giant Apple has already outlined its longer-term vision in this matter. Through its October 2017 Paper and Packaging Strategy, it details how it “succeeded in reducing the plastic content of the iPhone 7 packaging by 84 per cent compared with that of the iPhone 6s.” Going forward, it is evident that this strategy is being used extensively with regard to its Apple’s smart speaker, Homepod. Here, “an incredibly complex paperboard construction with closures holds the speaker cord in place and there is also a setup to secure the plug.” And as has been mentioned, “there would be have been no doubt that plastic would have been the material of choice for this even up to 10 years ago.”

However, despite all of this, when it comes to replacing plastics there are still challenges that need to be overcome. Some of these include: the high cost of production caused by inadequate availability, the high cost of raw materials, a limited availability of good fibre, as well as technological obsolescence.

Further, major industries such as fresh and frozen foods, dairy, pharmaceuticals, beverages, snacks, and confectionery, have been severely impacted given their current extensive use of plastic packaging.

It is also evident that both the organized and unorganized sector are engaged in the packaging industry. Within the organized sector, SMEs that have been producing plastic packaging cannot quickly switch to paperboard and require time to do so. Thus, the plastic ban has adversely impacted sales and jobs in this sector. Many enterprises have also had to take up loans even though don’t have easy access to financing and funds. So despite the paper and paperboard markets growing rapidly there are still obstacles issues surrounding expansion of capacity.

Regarding the paper industry, it too has its challenges given the overall fragmentation of the market, which is served by around 500 various-sized mills. Further, the capacity for paper production has slowed down primarily due to a shortage of its key raw material – pulp wood. This is coupled with the rising prices of local waste paper. However, though this has been partially mitigated by renewed agroforestry initiatives, the industry has regularly requested for a policy to be implemented that allows access to degraded forest land for paper mills to raise pulp wood plantations for sustainable development. This, unfortunately, has yet to be undertaken.

In 2017, paper companies did not undertake price hikes due to factors such as competition from imports, stabilization in wood prices lower power, and fuel costs but by FY18, domestic paper prices had risen marginally.

In terms of supply there is a shortage of paperboard packaging and a study suggests that the paperboard segment will face a shortfall of 12.5 lac MT.

However, this supply deficit will mostly help players who are self-sufficient with raw materials and have cost optimization plans. It will also benefit major players in the industry who are using cash whilst adversely affecting the unorganized and SME sectors.

The shortfall in supply will also cause delays and disruptions in distribution and the delivery of goods produced as there is a lag for sufficient quantities of paperboard packaging material to enter the market. However, on the plus side, this may result in opportunistic price rises within paperboard packaging materials, that in turn, will raise the costs of goods overall.

It is clear that as technologies develop and more companies understand the reasons behind omitting plastics and looking towards alternatives, paperboard usage will increase. Though nations have adopted other materials at different rates and speeds, there has been a concerted effort on the part of governments, businesses, and environmental groups to push for steps to move away from plastic usage. It still remains to be seen whether current global conditions have already been too adversely effected to reverse the process but the increased move towards paperboard can only be seen as a positive sign.

Why should you use a Freight Forwarder?

Most business today have customers spread across vast geographical area even within the country, if not internationally. Hence for success of any business, it is important that the product reaches its customers unharmed, in timely manner and at a reasonable cost. If this does not happen, the business will fail, even if it has a great product.

Now imagine that a company has to ship a large package across the Atlantic Ocean (Say from the USA to some land lock country in Europe). For it, the business has to first send it to the port via truck then choose between air or sea route to cross the Atlantic. Further, it must get the product onto the ship or aircraft, (after clearing all the customs and regulatory requirements), get the delivery at the landing port across the Atlantic, clear the customs of the landing country and then again move the package by road (or another means) to the customer. For a small business, this is very daunting. This is where freight forwarders come in.

 

What is a freight forwarding business.

 

A freight forwarder is simply a business that arranges the movement of the goods for a customer from the manufacturer to the end distribution point, or to the end customer. They are the intermediary between the business and the point of delivery (end customer or distribution point). They do not move the cargo themselves; they arrange for the shipment to be picked up, transported through various modes and by different transportation providers, customs and clearing houses till it reaches the endpoint. They specialize in coordinating between various such agencies for minimum cost and speediest movement of cargo. In a way, they orchestrate between multiple service providers. They have established relationships with transporters, ocean liners and the likes, which they use to negotiate the best possible price for their clients. They use their relationship network to identify the shipping options, find the standard shipping routes and cost associated with each and select the best possible combination of available options for the shipment. All these tasks may look as formidable or complex for a simple business who just wants to get his product across, to the customer.

 

 

Services Offered by freight Forwarders

The freight forwarders generally offer a few more associated services required for the freight, which require specialized skill which may not be available with the business.

Packaging. If the cargo is going to be loaded and unloaded at several points, it needs robust packaging that can take rough handling. If the cargo is taking sea route, then the packaging must protect the cargo from sea corrosion. When shipping through air, the low air pressure and low temperatures may be a cause of concern for some of the products, and they will need sealed packaging for same. Many such specialized packaging requirements come with the transportation and other logistical options. Since freight forwarder understands the requirements and risks associated with the chosen mode of transport, they also provide (usually), the packaging that is most suitable for that mode of transport. The shipper does not have to manage additional packaging needs. This is most helpful, when there are several types of products destined for several locations with multiple modes of transportation.

 

Labeling. Cargo passing through various checkpoints usually has strict regulatory labeling requirement. Typically a cargo label would indicate following:

  •  Type and quantity of product.
  •   Handling instructions
  •   Hazardous material information
  •   Country of origin
  •   Destination
  •   Hazard and handling instructions in local language (at source and destination)

 

The freight forwarder would generally know the labeling requirements and can fulfill them more easily and precisely.

 

Documentation. Domestic and international cargo requires lot of documentation that may be daunting for a regular business. Freight forwarders have developed their expertise in knowing exactly what kind of documentation is needed for which kind of product and destination and from where and how to procure it. Some of the typical documents required for international shipping are:

  •   Bill of Landing. The contract between the shipper and the owner of the goods.
  •   Invoice. The regular commercial invoice for the product
  •   Inspection certificate. (clearance from required agency to ensure that product meets the quality as required)
  •   Insurance.
  •   Export License.
  •   Customs documents. To ensure that product can be legally sent out from the origin country and received at the destination country and is not prohibited by either of the countries.
  •   Tax papers. To ensure all the required taxes have been paid

Freight forwarders typically don’t have any capital equipment of their own. But the service they bring in can be quite valuable even for established players. They run the supply chain show, holding all the thread of various sections of the chain. The business can leave all the transportation and its related handling, packaging, documentation and other requirements to be handled by the freight forwarder and focus on what they do the best, That is making a quality product.