Shippers have grown accustomed to the changing demands of the industry. Today’s consumers expect faster, free shipping, and they are unwilling to listen to any reason why a shipment was delayed. Combined with the uncertainty in the market and tight capacity, as reported by John Schulz of Logistics Management, shippers are struggling to keep pace. As the industry moves closer to the 2019 peak season, the differences between thought leaders and those that lag will become evident. Shippers need to understand the top trends driving strategic freight management investment decisions and how to be prepared now to ensure a successful start to 2020.
Consumers Have New Expectations for What Constitutes ”Fast” Delivery
Customers have always wanted faster shipping. That much is true in today’s freight market. What is new is how customers define fast shipping. In general, fast shipping describes any shipment that arrives within three days of the order time, notes Morgan Forde of Supply Chain Dive.
Moreover, up to 50% of customers will abandon their carts at the time of checkout due to exuberant delivery fees. It is simple. If shipments are not fast and free, shippers need to up the incentive to complete a purchase. Now, here is where the tactical and strategic part of the supply chain strategy comes into play. Generation Z customers and millennials are willing to pay a premium for faster shipping. This opens the door to recapture lost opportunities and costs associated with shipments that turn a smaller profit. In other words, shippers could use the fees charged for faster shipping, assuming processes are in place to secure competitive, affordable spot rates, to effectively subsidize other parts of the supply chain. Subsidization is particularly attractive for customers that order more extensive, more expensive to ship items.
The State of Freight Management
Amazon Continues to Push the Boundaries of Free Service
The Amazon Effect plays another role in the way in which consumers and shippers interact in the modern world. Today’s customers have become accustomed to a seamless digital shopping experience, and this demand for an omnichannel capability and experience transitions across channels and retailers, well beyond the reaches of Amazon. Now, Amazon recently sought to change the nature of the game by offering next-day, free delivery on millions of items for Amazon Prime members, but a caveat remains. When viewing all generations as a whole, consumers still expect a free shipping option. The take away is simple; shippers that do not have a free shipping option, even if it takes a few days to complete, will alienate their customers. As a result, shippers need to carefully assess all available freight rates and modes to find the lowest cost option. This is the only way to adequately subsidize shipping costs incurred to offer free shipping through other shipping charges or fees.
Final Mile Services Are Becoming a Key Component of Strategic Freight Management
Speaking of Amazon, let’s keep the e-commerce behemoth in the spotlight for a moment. Amazon customers can now take advantage of additional services that go beyond purchasing a product, including installation, removal of old products, and even manual labor needed to make full use of a product.
For example, customers purchasing new windows can hire and pay for a contractor to install the window upon delivery within the same platform. This capability demands integration and the ability to offer more than just a product. These are the invaluable final mile logistics services that are starting to reshape the entire way shippers approach freight management. Value-added services within the final mile can make or break a successful interaction. It may not be possible to offer all available final mile and white glove services at once, but shippers need to implement the systems that can integrate well with third-party platforms to make this a reality in 2020.
Automation Within the Industry Approaches a Breaking Point with Legacy Systems
Supply chain automation is another trend in the industry that will push the boundaries of existing systems. As automation continues to advance, it relies on newer, more updated systems. It is not enough to integrate with a traditional platform through older coding mechanisms. While EDI’s were great, they fall short of the extensive capabilities of modern APIs.
Meanwhile, new ways to automate systems, including automating the automated through the use of artificial intelligence and machine learning, open the door to new possibilities and managing day-to-day operations and supply chain and preparing for long-term demand forecasts. It is impossible to determine precisely how the market will respond, but the supply chain abhors a vacuum. As technology grows, consumer demands will only continue to increase, and more technology will be needed to meet such requirements.
New Shipping Strategies in Order Fulfillment Models Must Evolve to Move More Product
Shippers are also faced with prospects of SKU proliferation as more vendors arise, and new products come onto the market. SKU proliferation is a crucial problem for the modern shipper, especially retailers. Instead of trying to handle everything in-house, more shippers are turning to new fulfillment strategies, including cross-docking and drop shipping, to eliminate the need to ever have the product physically within their warehouses. This will effectively reduce the stress in managing logistics. Still, it comes at the cost and the need to understand and gain end-to-end visibility throughout the entire supply chain up to the manufacturer. At the same time, shippers will need to build the business case for partnerships, highlighting how partnerships can add value and increase capacity.
Know the Trends Affecting Strategic Freight Management to Stay Viable
The market is uncertain, but growth is a certainty. Shippers need to start thinking about how to reshape current operations to save every minute and reduce the costs associated with transportation management. Shippers need to invest in a dedicated TMS and well-rounded supply chain systems management partner now to stay successful.