Long the steady workhorse of supply chain, logistics has stepped to centre stage, carrying the responsibility as never before of delighting or disappointing the customer.
Driven largely by the impact of e-commerce, combined with advances in operational technologies, logistics has become the new playing field for competitive differentiation.
Logistics can’t operate in a vacuum. It plays an increasingly vital role in orchestrating supply chain performance in a way that adds maximum value both to customers and the business. Achieving this requires opening up the flow of information between all parties in the supply chain.
As a function that relies heavily on third parties and outsourced services, an open approach brings both risk and reward. Choosing the right partners, with the right infrastructure and technologies to support changing business models, is vital.
The opportunity to deliver value by optimising the logistics process through digitally enabled collaboration stands against a backdrop of increasing complexity on a scale not seen before.
In recent years, logistics has come under tremendous pressure from all corners. This includes increasingly demanding customer expectations, fluctuations in demand, rising transportation costs, freight capacity issues, labour shortages and disruptions. It also comes from uncertainties around global economies and international trade routes and agreements. Last-mile logistics is in turmoil as dozens of new entrants compete for business.
Necessity is the mother of invention
In response, the logistics industry is in the midst of an innovation-driven shakedown, as it resolves ocean and air freight capacity issues, shifting increasing volumes to rail and tackles labour issues head on. In parallel, consumers, retailers and small start-ups leverage mobile, GPS and even drones to push the boundaries of what’s possible.
Logistics has the opportunity to move beyond being a mere commodity service function to being a strategic partner to the business, providing competitive differentiation through performance excellence and innovation.
Advances in digital technologies are making logistics more agile than ever before, turning it into a hotbed of innovation. Automation in warehouses and distribution centres is driving process and cost efficiencies, helping to decrease delivery cycle times and optimise shipping options for customers in the most profitable way.
New sharing economy-based applications and services are exposing new opportunities for businesses to flex their logistics capacity by connecting them with idle assets and resources for storage and transport.
Control tower-type platforms connected via the cloud are helping provide greater visibility into logistics performance across the connected supply chain. This enables companies to be alerted to disruptions and quickly find solutions to mitigate operational risk, optimise processes and strengthen customer relationships.
These technologies promise visibility on a grand scale, offering a panacea to not only fix issues faster retrospectively, but to provide new levels of insight to drive increased optimisation and value.
This combination of pressures and opportunities puts logistics firmly in the driving seat to rethink and elevate its role within the business, its value to customers and its relationship with partners and suppliers.
Take control of chaos
As you consider the full range of possibilities made possible by new technologies and services, the key question is whether it makes most sense to run logistics fully in-house, in partnership with one or more third-party logistics service providers, or via a hybrid combination?
To help make this decision, start by determining the strategic value of logistics to your business. In the context of your three- to five-year strategic roadmap, review the current role of your logistics function as a source of competitive differentiation for your business.
If not already a strategic partner to the business, it’s possible that you’ll need to establish a new vision for your logistics function. This will require full representation at the highest levels of strategic supply chain and business planning.
Engage with your current logistics partners to understand their future roadmaps. Sit down with your key partners and have a serious conversation about their strategic development intentions over the next three to five years. If they don’t have the services you need and aren’t planning to develop them in a timeframe or direction that meets your future requirements, challenge them to consider developing them with you.
“Prepare a plan now to develop your existing teams and prepare the organisation for a shift towards more automation.”
Otherwise, prepare to review your strategic relationships and establish new relationships elsewhere. But be warned: global logistics service providers are becoming increasingly discerning about the number and type of new relationships they take on. Be sure you have the leverage potential before thinking about jumping ship.
Take a creative approach to partnerships. Consider synergies in logistics beyond the usual suspects. Look at other parties in your ecosystem who may offer opportunities to develop symbiotic relationships — some may even be competitors. In this brave new world, don’t dismiss the possibility to explore shared value through logistical execution that doesn’t compromise commercial competitiveness and differentiation.
Prepare for the future
- Be prepared to invest. Although the focus in logistics has traditionally been on reducing costs, be prepared that elevating the role of logistics to a more strategic level will require investment. Consider options for how logistics can generate additional revenue, as well as ways to incentivise logistics to keep any future cost savings for re-investment.
- Experiment with new services. Identify and seek out niche partners and evaluate them as solutions to capabilities not yet supported in-house or by traditional logistics partners. Set up quick ‘test and learn’ pilots with a trusted partner and/or customer to assess the value to the business and build out the model. Then refine and scale to ascertain true costs and returns, pilot more widely, customising the service where necessary to meet the needs of individual customers or markets.
- Review your talent requirements. The skill profiles of tomorrow’s logistics teams will likely be very different from today. Logistics leaders are already telling us that they’re looking for people with strong analytical skills who can navigate in an increasingly business-focused environment. Equally, a shift towards a more customer-centric outlook may be required.
Prepare for the future now by identifying the types of skills you’ll need over the next few years, and work with your HR partners to develop a pipeline of fresh talent. Also, prepare a plan now to develop your existing teams and prepare the organisation for a shift towards more automation within your warehousing and distribution facilities.
Beth Morgan is a research vice president at Gartner. She is focused on supply chain sustainability and talent management. For more information visit www.gartner.com/supplychain.