5 Big Questions Facing Retail and Logistics Leaders
More than ever, consumers are making purchase decisions based on how fast they can get products in their hands. To meet these growing expectations for speed and convenience, traditional retailers are overhauling their supply chains to compete with Amazon.com and other rivals. Retailers also are asking more of their suppliers to help keep inventory low and shelves stocked. In this dynamic landscape, here are five questions facing retailers and logistics leaders:
1. What advice do you have for retailers looking to become better shippers?
With load-to-truck ratios at historic highs, carriers are becoming more selective about the shippers they work with. Thanks to the implementation of electronic logging devices, carriers must take care to fully use their hours of service without exceeding the daily limit. Therefore, it’s not surprising that we're seeing carriers upcharge or avoid those shippers that routinely incur excessive or unpredictable loading and unloading time. There's no incentive for a carrier to burn valuable hours of service at pickup and delivery points, and standard detention fees don't begin to compensate the carrier for their lost time.
There are many things a shipper can do to become a “shipper of choice.” The easiest is to work to reduce wait times at their warehouse facilities. Doing so has an immediate positive impact on the shipper's relationship with carriers and can lead to reduced rates as their freight becomes more attractive to the carrier community. As an added bonus, reduced wait times could mean lower freight costs in the long run. In a recent presentation at the Food Shippers of America conference, Bob Costello, chief economist at the American Trucking Associations, estimated that as much as 30 percent more capacity could be added to the market by reducing wait times.
2. How can shippers mitigate risk in response to Walmart's recent “On-Time, In-Full” (OTIF) rollout, especially with other major retailers following suit?
Here are five things to do:
- Plan capacity needs on a daily and weekly basis. While challenging, working with your third-party logistics (3PL) provider or carriers to anticipate future capacity needs and to develop contingency plans for volume surges can help you stay one step ahead of the game.
- Increase communication with your 3PL and/or carriers. The planning mentioned above is only possible when there's a free flow of communication between shippers and their 3PL and/or carriers. Shippers should be proactive and transparent in communicating their priorities and challenges so their providers can be better positioned to help.
- Seek out expert help. At the risk of stating the obvious, one of the best approaches for shippers that are being challenged by new OTIF requirements is to work with a 3PL that has intimate knowledge of the OTIF policies, relationships with experienced and vetted carriers, and access to Walmart’s scheduling tools. In addition, 3PLs can provide access to technology that delivers critical business insights.
- Keep your eye on the clock. Ensure that drivers have adequate hours of service if they arrive early for a delivery and must wait until the appointed delivery window to open.
- Recalibrate the trade-off between cost and service. As OTIF compliance becomes more stringent, and the risk of fines increases, it doesn’t make sense to seek out rock-bottom truckload rates from sub-par providers only to cough up the savings in the form of chargebacks. Instead, work with your 3PL to increase your OTIF delivery, avoid the fines, and in the process, improve your relationship with Walmart.
3. When will freight costs come down?
Freight costs have shot up due to the combination of driver shortages and a strong economy driving demand. The situation isn’t expected to improve any time soon, according to industry analysts. Companies are juggling shipments to ensure full loads on each truck and raising pay to retain drivers. Some are raising prices on customers to cover the inflation in their costs.
4. How are retailers redesigning their supply chains?
Target, for one, is testing a new distribution strategy at one of its warehouses in New Jersey, using the same inventory to replenish stores and fulfill online orders. The goal is to cut its replenishment cycle from days to hours while reducing overall inventory at stores. The logistics effort is critical, as Target expands its fleet of small-store formats, which are mainly in urban, suburban and college markets. These stores tend to have a highly curated assortment to match the needs of the neighborhood.
5. As supply chains evolve, what does this mean for brick-and-mortar stores?
It’s the paradox of the Amazon age: While retailers are shrinking or closing thousands of stores, they're also transforming their physical spaces. Stores are becoming a full-fledged node in the supply chain. Companies use stores to fulfill online orders as well as provide instant gratification by offering in-store pickup of online orders. In-store pickup encourages customers to visit the store and continue shopping. Retailers also use stores to facilitate returns of online orders. Logistics will be the key to providing a seamless customer experience.
Rachal Snider is vice president of customer supply chain at AFN, an award-winning leader in freight brokerage, third-party logistics and transportation management services.
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