New Equipment Digest - December 2020

tics services providers (3PLs) have been adapting to new distribution models, new warehouse locations, expansion of transportationmodes, and an increase in visibility demand for shippers.

The COVID- 19 pandemic simply accelerated this growth, withsafety and fear being prominent driving factors for traditionalshoppers wanting to avoid public places and the airborne virus.We have new customers entering the space as older generations,that would traditionally avoid online purchases, are now adaptingto online shopping with COVID- 19 store closures. Many new industries are forced into developing an e-commerce strategy anddigital experience model to survive the current pandemic statewhile preparing for the post-COVID consumer era.

DISTRIBUTION

Retailers are moving to new distribution models from the traditional distribution model, expanding last-mile and e-commerceshipments as online orders and demand for short delivery timesincrease. Big Box retailers with already established strategies arenow looking outside of traditional distribution warehouse spacesand allocating space in brick-and-mortar stores as well as severalother methods.

Distribution center models are seen as inefficient and manybusinesses are moving forward with fulfillment center models inorder to meet demand with smoother, more localized operations.This model targets low-cost areas outside of cities and are usedas touchpoints for divert to relay and transfer shipments. Movingforward, air freight will become increasingly important for e-commerce logistics as rail transport is slower and predominately usedfor raw materials.

CHALLENGES

There are many retailer challenges that come with these typesof demand for e-commerce and unfortunately, retailers who do not evolve risk the futureof their business. Adding another leg of thesupply chain—a crucial and complex oneat that—requires strategic hiring across thecompany. These retailers face many challenges in their direct network with vendors,being forced to partner with those that canmeet their evolving needs in the short termand long term.

Reverse logistics, or returns, have alwayscaused a lot of headaches for retailers. Thee-commerce boom has only heightened thisstress on the supply chain, increasing storagecosts and lost profits while being an uncontrollable aspect of your overall strategy to account for. Those shippers that have solutionsand strategies surrounding reverse logisticscan use it as a major competitive advantagemoving forward.

VISIBILITY

Technology has advanced the supply chain
space significantly with the rise of e-com-
merce. Shippers across modes require stan-
dards for 3PL visibility in order to optimize
their supply chains and better service the cus-
tomer. With the rise of e-commerce, the con-
sumer now demands a high level of visibility on their shipment,
which becomes a big challenge for many retailers when partnering
with a transportation provider.

In the case of last-mile delivery, scanners are a leading way toincrease visibility and efficiency. With scanners, more packagescan be delivered in a day because they are helping to eliminatemanual work upon delivery. If managing a large fleet, having theability to manage this volume of drivers effectively and efficientlythrough technology is crucial for success.

FINANCIAL ASPECT

Despite its short supply chain journey, last-mile takes up a largeportion of shippers’ transportation costs. According to the Bureauof Economic Analysis and Freight Waves, last-mile costs are asmuch as 28% of entire supply chain expenses. The traditional wayof manufacturing, inventory, etc., have significantly changed inthe last 2-3 years—pushed by transformative technology and themodern generation entering the workforce.

The pressure to have a firm grasp and find a balance betweenhuman vs AI and human vs robot in modern business models isa significant challenge across industries. For example, what happens if 3. 5 million drivers do not have to drive because of autonomous trucks? How will the industry adapt moving forward? Thisis something that forward-thinking organizations strategize on andnever leave out of discussions surrounding innovation and relevancy.

New cost structures along with adapting to a new budget model
can be challenging for retailers. With adding transportation cost
there is and will continue to be a need to figure out how it impacts
the bottom line and whether product prices need to increase to
help offset costs and stay profitable. There will also be operational
challenges to face with last-mile delivery—does it make sense to
hire within or contract/outsource? That is a question on everyone’s
plate when targeting last-mile services.

BEST PRACTICES

In order to move forward, businesses require technology andstrong partnerships. With the complexity of last-mile delivery ande-commerce supply chains, technology enables you to optimizeyour operation and ensure you are scalable as the industry evolves.Technology integration is imperative given the volume of deliveries per stop and the need for real-time location demands andautomated delivery updates. It is essential that this data is sharedregardless of the timeline between the retailer and the consumer.

Consumers now prefer and lean towards retailers that offer doordelivery, but many retailers are asking if they are able to stay profitable with this last-mile strategy. Not every model will work for acompany, but you have to find the best model for your operationsthat will position you for success in the next phase of e-commercegrowth.

Last-mile is not the same as shipping between distribution centers and some 3PLs have the resources and the network to deliver the level of white glove service required in last-mile shipping.3PLs utilize their carrier network and industry expert employees,which can relieve you of the headache that hiring company employees can bring. Outsourcing last-mile to a 3PL can also lead todecreased overhead, offsetting additional transportation costs thatmay arise. Each second counts in e-commerce and using a reliableand relationship-based partner can help you scale faster and moreefficiently in the e-commerce, last-mile space. MH&L

Andrew Herpich is executive vice president of enterprise strategy with Nolan Transportation Group ( www.ntgfreight.com),a third-party logistics services provider.