Logistics Management Executive Brief for Ryder – November 2018
In this Executive Brief for Ryder, we learn about managing E-fulfillment operations in the age of e-commerce means coping with all aspects of “more” for the customer. More as in more single-line orders, more special packaging, and especially more when it comes to quicker, faster delivery options. Online customers increasingly expect to be able to choose next-day or even same-day delivery options. Many expect a free delivery option with the assumption that their goods will show up reliably in a matter of days. These heightened needs add complexity to fulfillment and logistics operations.
While e-commerce requires extensive piece picking to fill orders, the complexities involved reach far beyond the forward pick areas of distribution centers (DCs). To begin with, there is increased complexity in managing inventories across a DC network to be able to meet demand without running up costs. DCs need to be able do things like cross-dock goods, keep forward pick areas replenished, and perform pick, pack and ship tasks quickly and accurately while holding down costs. Customer expectations around delivery windows also add complexity. Companies need to find the right mix of transportation modes and parcel delivery services to meet order commitments at lowest possible cost.
In a sense, the toughest “more” in e-fulfillment is more complexity in its various forms. Organizations need to have systems and resources in place to be able thrive in the face of complexity. Whether it’s directly within their own network, by leveraging a third-party logistics (3PL) partner, or a mix of both internal and external capabilities companies can succeed. Nearly every company talks about being customer-driven, but without the right mix of logistics capabilities to support e-commerce, customer satisfaction will suffer.
Omnichannel is the new black. Omnichannel shoppers buy and spend more. They are more loyal and they are here to stay. Companies of all kinds are jumping on the omnichannel bandwagon. Therefore, they strive to sell their products wherever and whenever their customers are shopping.
In doing so, they find themselves faced with heightened customer expectations. Product and availability information, delivery and return options, and seamless service are some of the expectations. Likewise accommodating these expectations is no simple feat, but it is an increasingly critical competitive differentiator.
To better understand how companies handle fulfillment and distribution today and plan for the future, Saddle Creek engaged Peerless Research Group to conduct an online survey of Logistics Management readers, including manufacturers, retailers, ecommerce companies, wholesalers and distributors, in November 2017.
Saddle Creek engaged Peerless Research Group to conduct an online survey. The resulting study is based on survey responses from those industry professionals who are personally involved in the evaluation, operation, recommendation or purchase of omnichannel order fulfillment and/or distribution solutions for their organizations.
Of course, establishing a more sophisticated supply chain isn’t easy. As a result omnichannel poses a host of potential challenges related to order management, fulfillment and distribution, and respondents say they are experiencing many of them.
Inventory management across multiple facilities
Order processing issues
Scalability to accommodate growth/fluctuations
Where omnichannel is headed
Omnichannel continues to evolve. For that reason the survey identifies a number of trends that are helping to shape the practice.
Ecommerce is exploding for companies, and survey data supports this. Thirty-seven percent of respondents say they will be adding ecommerce sales channels for their customers in the next two years while 26.1 percent plan to leverage their customers’ ecommerce channel. Another 20.2 percent plan to utilize third-party marketplaces like Amazon or eBay.
Mobile solutions can be utilized in warehousing, logistics, distribution and manufacturing facilities to improve supply chain efficiencies. 185 managers involved in the purchase and usage of mobile and wireless solutions were surveyed about the challenges they face in managing supply chain activities, and how mobile devices and applications can improve processes.
This report shares the results of the survey to help supply chain managers better understand the types of mobile solutions being adopted and where they are being deployed. Supply chain managers can then identify those areas that are in greatest need of upgrades, and outline the plans for acquiring and revitalizing critical mobile applications.
The survey further supports the need for mobile systems as a means of sharpening inventory management procedures and fulfilling more orders rapidly and correctly.
Materials handling and operations managers are challenged by the need to improve operational efficiencies.
It’s no surprise to hear that managers face a litany of obstacles in running their day-to-day operations. Improving competencies in warehousing, logistics, distribution, manufacturing or field operations ranks as the top issue for most.
Servicing customers is also a primary concern of materials handling and supply chain executives, which is not surprising given the ever-increasing service level expectations of customers. The challenge of equipping workers with devices suitable for tackling the necessary tasks as well as fulfilling orders quickly and efficiently is also closely linked. (figure 1)
Supply Chain Efficiencies
To further understand the challenges faced by materials handling and supply chain managers, the key operational areas were examined. The findings revealed the areas in greatest need of improvement involve warehouse and DC procedures, shipping and receiving practices, and activities involving fulfillment centers.
Mobile technology is already regarded by managers as a conduit to improving processes across the end-to-end supply chain.
The digital economy is strong with e-commerce accelerating at a better than 10 percent annual clip. That shift in buyer behavior draws attention to consumer technologies like smart phones and mobile commerce. However, when it comes to fulfilling orders for goods that connected consumers are snapping up, distribution centers are where the demands of the digital world run up against the realities of the physical one.
In short, companies need to stay abreast of the latest technologies to flourish in the digital economy.
Doing more with less continues to be a main challenge for distribution center managers
Managers reaffirm that cutting costs, increasing productivity, improving inventory management and refining process efficiencies top their list of operational goals.
Adoption of data capture technologies can lead to improved productivity and process efficiencies
Industrial and warehousing facilities use wireless technology as their primary Internet protocol. In fact, roughly three-fourths of those surveyed manage or plan to run Wi-Fi-based applications. They also use Ethernet-based networks for transferring large amounts of data and sending information requiring a higher security transmission.
Organizations are predominantly using barcoding solutions and handheld systems for their data capture applications. In addition, roughly one out of four also now use sensors, forklift computers or RFID technologies. Yet, distribution center managers feel that using barcode scanners and imaging technology, RFID systems and handhelds would increase accuracy in inventory and fulfillment data. Those surveyed see value in continuing to invest in traditional data collection solutions alongside growing interest in newer technologies such as RFID, sensors and voice picking.
However, costs for implementing, operating and maintaining warehouse technologies loom as the largest hurdle.
While usage of sensors is not yet mainstream, distribution center managers are thinking about them
Slightly more than one out of three of those surveyed currently use sensors in their DCs. In addition, one-fourth say that while they’re not presently using sensors they expect to implement sensor based applications during the next two years. Interestingly, over one-third claim that they have no plans to adopt sensors at the present time.
Outsourcing manufacturing is becoming a well-established approach for companies that want to strategically manage materials in today’s fast-paced business environment.
As a result, manufacturers see various benefits from outsourcing to reliable manufacturing and logistics partners. These include cost and asset reductions, access to skilled labor, third-party design, and manufacturing expertise. Along with the ability to quickly scale production up or down. Also an outsourcing strategy allows brand owners to focus on their core competencies. These include design, brand management, and sales, while relying on partners to manage manufacturing and distribution.
But has the promise of outsourcing truly been fulfilled over the past two decades?
Because of this, Peerless Research Group (PRG), on behalf of Supply Chain Management Review and E2open, conducted a survey of 94 top supply chain executives in companies with US $250 million or more in annual revenues. The survey was commissioned to assess the current state and future plans for outsourcing manufacturing.
Researchers sought to better understand:
how companies outsource their tasks;
what the outsourcing forecasts look like for the next couple of years;
what level of visibility there is over the end-to-end process; and
how technology is being used to manage the process.
Finally, while feedback from respondents was varied, it’s clear that outsourcing is here to stay. Even with the current trends of reshoring, outsourcing remains a key strategy for most firms. While they may tactically “reshuffle” or re-balance in-house vs. outsourced manufacturing, there does not appear to be a wholesale move away from reliance on outsourcing. Read other executive briefs.