The need for a robust logistics capability has grown over the past two decades, but this last year, with the pandemic raging, has really put into focus the essential need for this technology. For many, 3PLs are the answer.
Back in 2019, I posted a blog discussing how e-commerce was changing the world for buyers and sellers and how logistics played a vital role in that change. That blog focused on the challenge of “last-mile” delivery, but as this past year has shown, issues far more challenging can suddenly appear. Logistics in a key factor for companies that need to ensure their product arrive at its destination on time and, when it comes to items like food and medicine, in good condition.
A year of incredible challenges
We’ve experienced, in this past year, a pandemic that has upended business as we know it; sever weather that has impacted the driving conditions for truckers and non-commercial drivers alike; unforeseen situations like the recent Suez Canal incident that slowed down shipping (we can only imagine how that will impact the trucking industry as the goods we need to deliver arrive at their ports so much later than anticipated).
The scope of these challenges is noted in a McKinsey study from last year as the pandemic started to hit, which found that pandemic panic buying caused a spike of nearly 30 percent in trucking volume. Although the panic has subsided, what has not subsided is the growth in e-commerce. Ordering online had already been growing exponentially over the last decade, but the jump after Covid was incredible. According to the Commerce Department, e-commerce sales jumped over 32 percent from 2019 to 2020, from approximately $598 billion to nearly $792 billion…in just over one year.
It is probably that some of this increase will dissipate once retailers are fully open and customers feel safe; however, many brick-and-mortar stores have sadly gone out of business and a large pool of customers have gotten used to ordering online. It’s clear there will be a new normal and companies will have to meet customer expectations when it comes to on-time delivery.
B2C or B2B, timely delivery must occur.
In times like these, where companies need to cut costs and optimize performance, it is essential to focus on the core business. If transportation is not your core business but rather a necessary way to deliver that core product, shipping can be complicated, time-intensive, and costly. This is especially true when dealing with urban deliveries with the double issues of traffic congestion and a lack of parking spaces.
Planning and delivery technology and the digital transformation of transportation logistics has helped; however, it can be costly to implement and adapt this technology. That is why companies are looking to 3PLs (third-party logistics providers) for faster delivery and reduced shipping costs. A quote I used in my 2019 blog is just as meaningful today as it was then, if not more so. Rich McArdle, president of UPS freight noted that “If all of our vehicles are delayed just five minutes a day, every day, it costs our company $114 million a year.”
Companies need to be agile and flexible when it comes to every aspect of their supply chain, but if you speed up manufacturing and warehouse fulfillment but still fall behind when it comes to delivery, that can have a very negative impact on the customer experience and, therefore, on your bottom line. Whether to use a 3PL or decide to handle logistics in-house will force a company to assess where to invest working capital.
- Not only will technology need to be constantly upgraded to be optimized, but time will need to be spent training staff.
- Does the company have enough internal resources to react quickly as business scales up or down?
- Is the company fleet equipped with the right vehicles for the right jobs?
- Does the business have analytics capability that can interpret data to maximize equipment usage and delivery tactics?
When it comes to your business and your supply chain, the focus should be on improving product, developing new markets and offerings, and ultimately, growing revenue without overgrowing headcount. But you may want to consider a partner when it comes to a focus on freight.