Supply Chain Management in an On-Demand World?

A lot has been written, argued, and speculated on the future of supply chain management. Technology has disrupted the industry by companies like Amazon and Uber Freight. Investors and thinkers are scrambling to predict the future. In a recent article, the Harvard Business Review even sounded the death knell of Supply Chain Management. One of the driving forces behind these changes is the cultivation of an on-demand mindset in consumers. Netflix and Hulu have irrevocably changed the entertainment industry. HelloFresh and Blue Apron have replaced nights of grocery shopping and eating out. Amazon has created a model where consumers not only want but expect, next-day delivery of their products. The instant gratification of the entertainment world has seeped into the realm of material goods.

But is this requirement for instant fulfillment sustainable? After all, traditional modes of transportation are limited by the laws of physics. Trucks can only travel so fast. Trains can only pull so many cars. Delivery drivers can only offload so many packages per day. This new expectation of superhuman speed requires a level of planning and network building the industry has never seen before. Let’s explore what an on-demand culture means for the supply chain management industry.

How’d we get here?

The growth of Amazon in the last few years has been an all-out sprint. With over 100 million subscribers to Amazon Prime, the segment of consumers that expects the shortest possible delivery times is growing. Customers are no longer willing to wait for products to traverse the traditional supply chain. They want it now. Suppliers need to exceed their expectations.

On the other hand, a recent study revealed customers actually prefer free shipping to shorter wait times. Great news, right? Companies can offer free shipping and keep the same steady supply chain they’ve been using for years. There’s only one problem: these supply chains were designed around delivery fees. If you remove the revenue generated by delivery fees it lowers margins and diminishes bottom lines.

Moving to a meaner, leaner, supply chain is the only way to find the balance needed to succeed with modern consumers. By removing bloat and unnecessary handling fees, you can lower your transportation costs. Work with your logistics partner to design a better supply chain.

A Look at Future Threats

Shifts in the mindsets of buyers aren’t the only threat to companies selling their goods today. The transportation industry is also going through some growing pains. On December 18, 2017, the Federal Motor Carrier Safety Administration (FMCSA) enacted a mandate for Electronic Logging Devices (ELD). Designed to keep truck drivers safe, the devices track hours spent driving. Drivers are now required to show proof that they are practicing safe standards. By reducing fatigue – the number one cause of traffic accidents – truck drivers and the public should be safer.

Although it’s too soon to tell if the mandate has generated the expected benefits, it has resulted in a capacity shortage. Fewer miles are traveled each day. Thus, fewer goods can be transported across the country. Couple this with a shortage of qualified drivers and shippers are finding it difficult to move their goods quickly. The result is premium prices on historically affordable lanes.

Rising bunker fuel and diesel prices have impacted most modes of transportation. The Ocean Freight industry has experienced several increases. Over-the-road carriers have seen a steady rise across the country. Higher costs of operation for drivers means increased transportation costs for shippers.

What You Can Do Now, to Position for Future

Reexamine your supply chain. Analyze your data and identify where you can increase efficiency. For instance, if you are selling a lot of goods in Los Angeles, but your main storage space is in Atlanta, you may want to search for a warehouse in California. You’ll be able to control your inventory. You can create a more strategic staging location for order fulfillment. This cuts down on cross-country transportation. You will reduce the time it takes your goods to reach customers.

Through your marketing and sales efforts, start building a discussion of value. No matter what your product is, make sure you communicate clearly why your prospects need to buy. After all, modern consumers are savvier than ever. They will shop around for the best deal and lower prices aren’t enough. Explain how your product will improve their lives and differentiate from competitors on an emotional level. Lofty goal…we know. But this will go a long way toward encouraging patience from your customers.

Find a partner who understands the changing landscape. Do not settle for the status quo. The landscape of the supply chain industry is changing rapidly, and you’ll need a solid partner to help you grow in the future.

Even with these intense changes and threats it is still an exciting time for the Supply Chain Management Industry. Something big is happening. What that something is will be debated for years to come. In the meantime, logistics professionals should be thinking about what that is. It is up to us to create the future.