This article originally appeared in the September/October issue of PARCEL.
Thinking five to 10 years ahead, leading North American executives are increasingly turning to multi-modal data science to address the enterprise impact of soaring parcel volumes across the global supply chain. According to leading industry reports, parcel and express delivery volume has surpassed railroads as the second-largest logistics sector behind motor freight. Spending on small-package delivery jumped double digits in the last year. E-commerce sales as a percentage of retail sales nearly tripled in the last decade. And economic analysts predict parcel spending will surge to nearly $95 billion by 2019. These collective disruptions are bigger than the transportation profit and loss. Business concerns related to parcel shipping acceleration and omni-channel complexity have reached the C-Suite. With smart devices fueling parcel growth, smarter supply chains are on the board room table.
Managing disruptive change in logistics networks requires layers of multi-modal expertise supported by risk mitigation strategies. The most successful omni-channel shippers say the real game-changer for managing business growth in light of the e-commerce explosion is access to top-flight intellectual capital across all transportation modes. Smart engineering ensures shipping programs and the end-to-end supply chain are optimized for performance and customer satisfaction.
Successfully reconfiguring transportation and supply chain networks to meet escalating delivery expectations starts with understanding the data behind parcel trends and distribution network changes. High-volume parcel shippers leverage smart solutions, such as advanced analytics, digital technologies, and innovative transformational strategies, to create better alignment to the carrier networks. By understanding how a delivery profile impacts every carrier’s network, companies can adjust their shipping profile to optimize and align for maximum efficiency and serviceability. Companies often begin the process by getting answers to fundamental logistics questions:• Are we examining our operations holistically to get better multi-modal economics? • What role can LTL play in e-commerce outbound? • What does good look like when it comes to parcel shipping program characteristics? • Is our parcel-centric supply chain engineered for optimal service, cost, and efficiency? • Is our parcel packaging optimized? Best practices for optimizing logistics operations require a “diagnose first, prescribe second” approach to designing best-in-class parcel shipping programs that maximize service levels with minimum interference. This methodology applies to all transportation modes. The goal is to reduce transit times and costs, mitigate risk, support enterprise growth, and improve customer satisfaction across the entire network.
Today, more shippers are finding success with a supply chain optimization process that originates from Lean methodologies and adds deep data analysis to the mix. By applying network design tools to leverage data from across the supply chain — from procurement to shipping — shippers can obtain a clear picture of inventory levels, cost to serve customers, SKU positions, transportation costs and performance, raw material costs, and production costs. This deep data analysis reveals opportunities to enhance performance and determine where to focus efforts toward meeting strategic goals. When complemented with rich domain experience, it ensures that the transportation network is agile and optimized for profitability, not just survival.
As part of the evolution of enterprise excellence, leaders who understand the importance of an enterprise logistics approach are taking a holistic, strategic view of the supply chain to gain competitive advantage by following these best practices.
Establish a Current Supply Chain Performance Baseline
• Review the current state of shipping operations from an operational, analytical, and cost-based perspective.
• Develop an understanding of the changing role that parcel plays in the overall network.
• Be realistic about how much e-commerce and customer expectations will change strategy.
• Identify customer service needs and how parcel shipping will change financial goals and logistics requirements.
Leverage Visual and Analytical Tools to Design the Future State• Use collected data to model and map what-if scenarios enabling enhancement of programs for current strategies and future goals. • Perform split shipment assessment, routing analysis, distribution center alignment, and site selection analysis along with any required fulfillment models.
A re-engineered parcel program should align with business objectives. By embracing best practices, a shipper can gain a thorough understanding of their entire supply chain – not just the parcel shipping network – and facilitate the design of a shipping program customized to the shipper’s needs. Drive compliance with each attribute supported by robust auditing, advanced supply chain analytics, and powerful data visualization tools. With total visibility and a multi-modal perspective, knowledgeable shippers can mitigate identified risks and transform the supply chain from a profit-squeezing part of the enterprise into a competitive advantage that enables their company to accelerate in the marketplace.
For shippers without in-house expertise, analytical tools, or dynamic modeling capabilities, the dedicated support of a credentialed partner can help manage RFPs, select appropriate carriers, optimize contracts to maintain expected customer service levels, and monitor ongoing activity. Additionally, insight and visibility to thousands of transportation networks can help shippers build tightly engineered, integrated multi-modal logistics programs that support business growth, keep customers happy, streamline operations and sustain efficiency.
Responding to rapid demand shifts in e-commerce-driven small-package shipping has prompted some shippers to react by simply transitioning their strategies from Truckload and LTL shipments into distribution centers toward utilizing a higher volume of parcel shipments direct to customers. Many are implementing these operational changes without the benefit of a full network analysis and are realizing new financial, operational, and strategic enterprise risks that lead to higher shipping and operating costs. Bolt-on parcel capabilities intended to keep pace with demand can inadvertently create visibility challenges specific to external and internal compliance, payment duplication, and fraudulent usage of account numbers. Many parcel shippers may also face risk due to enhanced enforcement of International Trade Compliance.
In an era when dramatic change is becoming ever more constant, employing smart strategies to mitigate financial risk and seize growth opportunities is key. Tech-savvy shippers are building a new breed of supply chain, taking into consideration changes in regionally oriented distribution centers, new route configurations, same-day delivery options, last-mile delivery capabilities, and increased knowledge of LTL shipping intricacies. Whether leveraging big data, predictive analytics, or artificial intelligence, smart, next-generation supply chains embrace change and network alignment to drive efficiencies and outsmart the competition.
Charles Moore is Vice President of Parcel Solutions for Transportation Insight, a multi-modal global Enterprise Logistics Provider. He is a 2017 Pro to Know, with more than 25 years of experience in the supply chain marketplace, and is a pioneer in Enterprise Logistics solutions across all modes of transportation. He graduated from the Louisiana State University in Shreveport with a Bachelor of Science degree in Marketing and Management.