Interesting Observations About the Future of 3PLs and the Retail Industry
By on May 22, 2014
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In his latest column Chris Saynor reviews the conversations he had with attendees of the 19th Annual 3PL Study, and explores how management of the supply chain may have an influence on retailers
I had some interesting discussions yesterday in London, both at a workshop looking at the 19th Annual 3PL Study (please complete the study survey at https://www.surveymonkey.com/s/3PLStudy-E4T) which is put together by John Langley from Penn State, Capgemini, Korn Ferry, Penske Logistics and eft. Plus I met with Razat Gaurav who is the Senior Vice President of Europe Middle East and Africa at JDA Software.
I have known Razat for around 10 years and it was very interesting to hear of their plans for the 3PL market. We spoke at length about commoditization in the 3PL Industry and I was very interested to hear Razat mention that some forward thinking 3PLs are now managing activities such as demand planning for customers (using JDA software of course ;0)), these areas have mostly been off-limits for 3PLs, but it is interesting to think about what services 3PLs can offer in the future which cannot be commoditized (not easily anyway).
One of the participants at the 3PL workshop I attended was Janet Godsell who is the Professor of Operations and Supply Chain Strategy at the University of Warwick. She had a couple of really good observations that I wanted to share. One was about retailing, and how in her mind, smart retailers are those that ensure that demand for all their different goods does not fluctuate. The discount supermarkets in Europe were her example (such as Aldi and Lidl), through dynamic pricing strategies they ensure consistent demand, which as you can imagine has huge benefits in terms of forecasting and on-shelf availability. It made me think about another industry which really builds their entire business model on this concept and that is the airline industry. Every Tuesday, Delta has 200 seats available for example from Atlanta to Palm Beach, and to ensure consistent demand it will change the pricing dramatically. Retailers mostly do the opposite, the pricing stays mostly constant (with the exceptions of a few promotions or sales), but demand often fluctuates hugely….maybe time for a change?
Janet also talked about the Internet of Things and big data and how this is a potential danger for retailers in the future. Her thinking was that eventually sensors will measure how much washing powder you use for example and could send that data to Procter and Gamble who would replenish your stock directly with deliveries so you never run out, completely bypassing the retailer in the process. I think that this exact scenario may be a little way from being mainstream, but what certainly is going to happen is that more CPG manufacturers will be delivering direct to customers. What will this do to the retail landscape and what does it mean for supply chains and for the logistics providers who service them? More questions than answers at the moment…when I discover the answers I will be sure to share them with you…once I have used the idea to make my fortune.
I will be speaking in Chicago on June 11-13 for the 12th 3PL Summit and CSCO Forum. I would urge you or your colleagues to ensure your company has some representation at the event, as there is a lot to learn and a great number of top executives to meet with. Full details at www.3plsummit.com and www.cscoforum.com