1) Supply chain management professionals face constantly changing challenges from heightened customer expectations, evolving business models, and pressure to increase productivity. New technologies can help with collaboration and efficiency but also increase complexity. 2) E-commerce is driving significant increases in shipping volume, with estimates of 20% growth by 2018. This is challenging carriers and companies to reinvent delivery approaches to meet demanding customer expectations. 3) To adapt successfully, companies must invest in their people through leadership development and skills training, fostering critical competencies like problem solving, flexibility, and creativity. Collaboration between companies can also help address complexities through data sharing and standardized processes.

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BY ELIZABETH RENNIE
Logistics
Trends and
Transformation

3. 46 March/April 2017
S
upply chain management professionals cope with constantly escalating
challenges that create both risks to be managed and opportunities to be
maximized. Heightened customer expectations, evolving business models,
and intense productivity requirements are key issues facing the industry.
Meanwhile, promising new technologies aid in collaboration and efficiency yet often lead
to even greater levels of complexity. A wait-and-see approach is unwise in such a taxing
marketplace; businesses must prepare now and respond tactically.
“For consumers facing a constant barrage of news
about what’s conceivable in both last-mile delivery and
late customization or personalization, expectations
are high,” says Dana Magliola, director of the supply
chain resource cooperative at the North Carolina
(NC) State University Poole College of Management.
“The professionals who are most prepared to adapt to
ever-increasing customer expectations will prosper, so
innovation has to be a part of the equation.”
This and related trends are calling into question
prevailing business models and reshaping the field in ways
that are only just starting to become clear. According
to the 2016 PwC report “Shifting Patterns: The future
of the logistics industry,” supply chain management
professionals are in an era of unprecedented change as
digitization takes hold and customer expectations evolve.
Authors Andrew Tipping and Peter Kauschke advise,
“The race is on to define the industry’s future.”
E-commerce and rising shipping numbers
More than 31 billion items were dispatched and transported
in 2015, according to a recent Pitney Bowes Parcel Shipping
Index. Furthermore, the guide states that shipping volume
will grow at an estimated annual rate of 5–7 percent, for a
total increase of 20 percent by 2018. E-commerce is unques-
tionably a significant driver of this escalation, with Index
estimates for growth in the 15–20 percent range each year.
“This highlights the [need for] increased focus on inno-
vation in the e-commerce space, whether in technology
or in process,” says Lila Snyder, Pitney Bowes president of
global e-commerce. “Carriers and companies around the
world are looking to reinvent how parcels get delivered to
consumers—and how they do so while adhering to con-
sumers’ increasingly demanding expectations.”
Snyder adds that these issues have spurred new
solutions relating to same-day and store delivery,
hourly windows, robotics, and shared-transport
services, which, up until a few months ago, were
somewhat rare. The current trajectory of e-commerce
also means that designing and sustaining a nimble
operation is a critical challenge for logistics,
transportation, and distribution professionals.
“Firms will look to technology solutions to bridge
the divide between what’s possible, what’s practical,
and what’s profitable,” Magliola says, adding that even
small firms have excellent resources at their disposal and
should make the most of these offerings. For example,
there are numerous open-source technologies available
that can augment visibility, tracking, data analytics,
relationship management, customer service, and more.
One promising solution for managing growing volume
is an application programming interface (API), which
enables users to integrate shipping functionality directly
into their website or enterprise system. APIs can improve
cost management; enhance address verification, mobile
applications, and cross-border classification information;
deliver a more unified customer experience; capture
important data from the transactions flowing through
systems; and help users innovate faster in order to create
more custom solutions.
“We have seen retailers use duty calculator APIs to aid
in product classification,” Snyder says, recounting the
case study of an online fashion footwear retailer. This
business wanted to ship its products across borders using
the most current data possible. By harnessing the power
of a global trade API, the company was able to move
products to where they needed to go much more quickly
and with better accuracy.
Ordered
Shipped
Delivered
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and Transformation

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The Omnichannel Effect
In addition to the trends discussed in
this article, providing a complete cus-
tomer experience requires supply chain
management professionals to navi-
gate the steep costs of omnichannel
delivery. As consumers expect increas-
ingly personal, seamless service,
Pitney Bowes’s President of Global
E-Commerce Lila Snyder says the
cost of disparate systems and limited
visibility leave companies at a cross-
roads. She breaks down the specific
challenges faced into three key areas
of focus: inventory management; team
alignment, including store associates;
and meeting consumer expectations.
Inventory management: Snyder
believes that adding the retail store to
the mix of service to online customers is
great for optimizing inventory. However,
because the retail space is not a static
environment (people are constantly
walking in and buying things), the ability
to know store inventory at any given
time is a challenge.
“It’s fine if you have a dozen of that
[stock keeping unit] in your inventory
management system, but can you
take the risk in moving them out of
store stock or committing to an online
shopper?” she asks. “What if you don’t
know what is happening in the store
from the time when an item is pur-
chased online? That kind of knowledge
and inventory view is critical.”
She adds that establishing business
rules related to when a company will
allow an item to be sold online and when
it will not is incredibly important to
designing a fully unified commerce view.
Team alignment: The second task is
rethinking the role of the store associate.
In order to move into an omnichannel
world, these people must be adept at
securing sales and fulfilling orders across
all of your channels, not just in the store.
“The traditional model is that an associ-
ate works in the store, sells in the store,
and often makes commission on what
he or she sells,” Snyder says. “If you want
to take the associates away from those
tasks in order to package up something
for an online order, that takes them away
from their traditional selling role and,
ultimately, earning their commission.”
She recommends thinking care-
fully about in-store incentives and the
in-store behaviors of those associates,
and then, at a minimum, make the ship-
from-store process incredibly simple for
store associates to implement.
Consumer expectations. Shoppers’
expectations are high year round, but
supply chain management professionals
often find that they increase signifi-
cantly during the holidays. No matter
the time of year, consumers assume
purchases will arrive in a timely manner,
even with incredible volume increases.
“Another challenge is that
e-commerce sites are sometimes not
as clear about shipping policies or
outline it in the fine print,” Snyder adds.
“It is important to provide reasonable
expectations without being overly
conservative to suppress opportunity.”
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5. 48 March/April 2017
“In a world that is both border free and location
aware, the lines between physical and digital commerce
are becoming increasingly blurred,” Snyder says.
“[APIs] make it possible to create new and exciting
applications, such as these cross-border opportunities.”
The people behind efficiency
Jonathan Valencia is the regional transportation, distri-
bution, and logistics supervisor at PepsiCo. In this role,
he manages the full-truckload shipments of two fleets to
PepsiCo facilities and warehouses. “As someone who is
in charge of over-the-road shipments, I can tell you that
efficiency is hands down one of the greatest challenges
in the world of logistics,” he says. “The primary concern
for carriers and brokers is, of course, ensuring that their
products are picked up on schedule and delivered in a
timely fashion. To do this, communication is key, and
it involves every facet of the organization. Ideally, the
process should be as seamless as possible. However, this
is more easily said than done.”
Valencia spends a lot of time following advances in
efficiency improvements, particularly fuel-reduction
solutions; automation of over-the-road or ground
transportation; methods for eliminating human
error; and better understanding of how changes in the
weather can affect carrier availability, timeliness, and
productivity. However, he believes the most important
element of an efficient supply chain is a meaningful
investment in the development of its people. “The
opportunity to excel in this industry begins with
strong leadership and a skilled workforce,” he says.
PwC’s “Shifting Patterns” also highlights the people
side of the equation, noting that change in the logistics,
transportation, and distribution fields puts company
cultures to the test. The authors maintain that the most
successful organizations will be those with agile and
flexible cultures that make it easier for people to work
together across internal and external boundaries. As
the report says, “You need to put your culture to work.”
Skills Valencia sees as integral to success include
keen attention to detail, the ability to remember
multiple variables, effective troubleshooting, and being
quick and decisive when determining the best solution
to everyday challenges. Critical thinking and problem-
solving are two more competencies worth noting.
“It’s easy to see the problem, harder to obtain the best
answer, and even harder to put that answer or solution
in place,” Valencia notes.
Snyder adds that a consumer-focused approach
is highly beneficial. In addition, professionals in
this field must be flexible, as one solution will not
fit all populations. “Every country and region is a
bit different,” she explains. “What we see with our
retailers and consumers, especially in the cross-
border space, is the need for options.”
Finally, when aiming for maximum efficacy, creativity is
“an immeasurably important characteristic,” Magliola says.
In his role at NC State, he works to ensure that students
graduate ready to experiment with new ideas; brainstorm
how the trends they see can be applicable to logistics,
transportation, and distribution; and identify the next
significant innovation. “The great thing is that supply chain
professionals are also consumers,” he says. “If we experi-
ence something that creates significant value for ourselves
as consumers, there could be elements of that experience
that can be relevant to innovation in our industry.”
Real-world complexity
Another core element of the curriculum at NC State
involves a project-based practicum research program in
which students, faculty, and executive advisors engage
with companies to solve real-world business problems.
“Ahead of each semester, we solicit and receive numer-
ous project proposals that will find their way into the
classroom,” Magliola explains. “If the prevalence of com-
panies striving to manage the dynamism of their supply
chain is a bellwether of what’s important to them, then
supply chain complexity is a very high priority.”
Indeed, Valencia faces complex systems and pro-
cesses at PepsiCo. And, just as with most companies,
a fair portion of the financial loss he works to mitigate
lies in poorly managed supply lines and transportation.
Fixing these issues requires a multifaceted approach.
“Most leading companies have specific tools in place
to help alleviate distribution complexity,” he says. “I
genuinely believe the people who manage those tools
and technologies are the greatest asset.”
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and Transformation

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As the competitive landscape becomes more
intricate, developing collaborative relationships with
carriers also is extremely important. “Communication
is bolstered by sharing or democratizing data where
possible and competitively applicable,” Magliola says.
The practices around collecting, analyzing, defining,
sharing, and securing data should be a high priority for
any organization that is determined to manage the com-
plexities of the global economy. Further, a key movement
to watch is how successful companies manage such efforts
internally and externally—from simple, productive col-
laborations to global, federated supply chain networks.
Corporate social responsibility is another critical
trend to monitor, as the global marketplace, social media
and other new communication methods, and envi-
ronmental consciousness are influencing supply chain
complexity. “A company that manages to balance the
demands of our immediate-gratification society while
maintaining a green footprint is a company to watch out
for and learn from,” Valencia says.
A part of the network
Beyond new technologies, real logistics results are
being realized via smart collaboration. There are
numerous examples of industry players operating in
this manner. As the PwC report notes, companies
including FedEx and DHL have been partnering
with national postal organizations and small local
businesses for many years now. According to
PwC, fragmentation and a lack of accountability
and consistency make collaboration challenging.
“For example, each company has its own labelling
system,” the report states, “and some companies
are wary of farming out the crucial last mile of the
journey to an operator that may not reflect its own
brand and service levels.”
The authors believe the physical internet could help
address these issues by drastically increasing cooper-
ation among businesses and across transport modes
through greater standardization. “For the physical
internet to work in practice, though, companies would
need to be willing to collaborate far more extensively
than they do today,” they write. “Most of the 535,000
distribution centers in the [United States] are standalone
operations owned by different companies; imagine the
savings if they were all connected and physical work-
flows were standardized for maximum efficiency.”
A growing number of supply chain management
professionals do see logistics, transportation, and
distribution as an opportunity to collaborate instead
of compete. Working together can make the best use
of warehousing space, prevent less-than-truckload
shipments, meaningfully cut expenses related to
underused capacity or unnecessary duplication, and
reduce related supply chain expenses.
Collaborative distribution methods that are quickly
becoming more mainstream include freight and ware-
house consolidation, fleet sharing, and joint ventures
and alliances. “Think about the supply chain as a
dynamic ecosystem,” Magliola urges. “The more we can
do that, the better we can understand the ways in which
challenges, adaptations, and innovations will affect our
businesses, our economy, our world, and our daily lives.”
Elizabeth Rennie is managing editor of APICS magazine.
She may be contacted at editorial@apics.org.
To comment on this article, send a message to feedback@apics.org.
“Firms will look to technology
solutions to bridge the divide
between what’s possible, what’s
practical, and what’s profitable.”
Ordered
Shipped
Delivered