Opportunities to Deliver a Seamless Omni-Channel Experience Danny Halim, Vice President, Industry Strategy, JDA
The advent of online retailing has created a new wave of opportunities and competition for third-party logistics companies (3PLs). According to PWC, three-quarters of retail sales growth has occurred through online channels since the year 2000. The retail landscape now sees goods constantly move between retail stores, fulfilment centres, and consumers.
To remain captivating to the consumers, the entire retail supply chain has to work together and focus on providing a seamless omni-channel experience. This is especially true for 3PLs, which need to increasingly focus on not only meeting their service level metrics but also satisfying the increasingly demanding consumers.
Indeed, as the market continues to shift, consumers have become increasingly intolerant to poor experiences when shopping online, especially when it comes to home delivery. In a recent survey by JDA and Centiro, 80% of UK consumers said they were likely to switch retailers when they next shop for products online as a direct result of a poor home delivery experience. Despite these issues taking place in the last mile of the customer journey, 60% of consumers believed the retailer should be responsible for resolving their poor experience instead of the delivery service provider.
As such, retail giant Amazon is taking steps to build its own logistics business to supplement existing relationships with 3PLs that are currently unable to keep up with demand, especially during the peak season. By taking this approach, Amazon can limit the amount of failed deliveries and have full confidence in the service it is providing for the consumer.
Leading 3PLs strategically position themselves to align their business models and supply chain capabilities with the retailers, and take on more responsibility for the quality of service delivered to the consumers. The next challenge for 3PLs will be to help the retailers restore their omni-channel reputation by overcoming service challenges while responding to increasingly disruptive, complex supply chain.
Leading 3PLs respond to this challenge by proactively engaging beyond the traditional warehouse and transportation services, and bring new ideas and solutions that help the retailers grow their business. These solutions may include innovative distribution models, warehouse configurations, adoption of automation technologies to speed the fulfilment processes, and value-added services such as blending, kitting and returns facilitation.
Worryingly, the next five years is set to see the labour crisis currently affecting the logistics industry worsen as the ‘baby boom’ generation plans to retire, and vital skills leave the industry. Typically, HR departments would plug this gap by hiring new staff as soon as vacancies become available, but 3PL companies continue to face a shortfall in vacancy applicants. For 3PLs in the UK, this is a particular issue as tough regulation continues to scrutinise driver operations and is causing a significant fall in large good vehicle licensing. Indeed, other job opportunities across the supply chain are also often regarded as being more attractive than those in 3PL companies, adding further complications to the industry’s recruitment strategy.
Many professionals have attributed these problems to the fact that the industry has been slow to adapt to the changing needs and expectations of a younger work force. The fact is, to combat the labour shortage, 3PLs must look to technology to attract and retain talent. Now is the time for 3PLs to understand that their workforce is changing and grasp the importance of having the right people in the right roles. But how can 3PLs engage this new workforce and get them brought into the industry?
The deployment of technology can help the 3PL industry maximise productivity even when working with a shortage of staff and attract new talent at the same time. Many 3PLs still do not have the proper tool to gain visibility into the individual workforce’s task and productivity making it difficult to provide coaching and process improvement that will fundamentally improve productivity and the accuracy of their tasks. This is extremely important to eventually deliver the right goods that consumers ordered, on-time. This level of visibility usually can quickly help 3PLs increase productivity between 3 to 5 percent. This matters a lot especially when they currently supplement their inefficiency today by hiring a temp workforce or paying for overtime to make sure holiday orders arrive on time.
Indeed, as mobile devices become increasingly important in our lives outside the workplace, it makes absolute sense for mobile solutions to form an integral part of the working routine as well. Mobile solutions provide both accessibility and familiarity, whilst delivering around-the-clock performance in a way that legacy infrastructure simply can’t match. Mobility solutions deliver visibility and transparency that help problems be identified and resolved quickly. The deployment of mobile technology will also help to attract, engage and retain staff, leading to a lower staff turnover and improved morale across the workplace. The full adoption of a mobile solution will also allow 3PL companies to attract a younger workforce who have come to expect digitalisation across the workplace, helping to reduce the staff deficit currently affecting the industry.
It’s an exciting time for the 3PL industry, as the potential for manufacturers and retailers to increase their reliance on outsourced logistics grows. The key to lasting success for 3PLs will be to look beyond the tactical logistics services, align their business models, invest to build a culture of innovation, and improve their workforce agility and productivity.