Peak Season 2018 - Part 3
Now is the Time to Prepare for Peak Season...2018
Looking forward and evaluating trends in Parcel Shipping, Part 3 of a 3-part series.
In Part 1 (Table Stakes) we offered predictions to help you manage the opportunities you face every day as you prepare for 2018 peak season volumes, carrier trends, advance rate shopping, and dealing with extreme weather conditions.
In Part 2 (Big Data), we dove into taking action from the insights that bubble up through parcel shipping data.
In our last installment, we explore "what will be" in three key areas - faster delivery, globalization, and blockchain - and offer some high-level guidance to help you prepare.
Upon Prime's 2005 launch, we asked, "Do we really need two-day delivery?" Now, while two days still feels quick, we are entering a future where customers will soon adjust to an even higher bar. For example, Prime Now (free two-hour delivery for Prime members with an upcharge for one-hour delivery) delivers 7 days a week and has spread to 30 cities. (Amazon's fastest recorded Prime Now delivery is 8 minutes according to a recent press release!)
Amazon continues to challenge even one-hour delivery. It's Prime Air development centers in the US, UK, Austria, France, and Israel are experimenting with drones to reduce delivery to 30 minutes or less. Such moves could raise expectations across the board thanks to Amazon's willingness to win long-term market share at the expense of short-term profits.
By 2021, Amazon could overtake DHL to become the world's largest logistics company. -Gartner
Faster delivery conversations always lead to last mile innovation, given the last mile's hefty share of total parcel delivery cost (often reaching or even exceeding 50 percent of the total). But, retailers often have an inherent last-mile advantage given their presence in local geographies. USPS for example, continues to collaborate on same-day retail ship-from-store programs, where products are picked and delivered from the location that is closest in proximity to the end customer (no drone required).
Obviously, USPS is the most cost-effective last-mile provider given it's already equipped to pick up and deliver to 156 million U.S. addresses. To be even more competitive, USPS is implementing next generation delivery vehicles (with broader midsections to accommodate more capacity) to replace its traditional trucks by 2020. And, its Sunday delivery pilot, initiated in 2013 with Amazon, remains in effect to the benefit of other retailers. USPS' offering where shippers can deliver a pallet of parcels to one of its 350 DSCF locations (Destination Sectional Center Facility) for next-day delivery is certain to expand in 2018.
As highlighted in prior posts, Alternate Delivery Locations (ADLs) offer another approach to managing last-mile delivery costs while improving customer satisfaction in the delivery process.
For those without the advantages of a broad network of retail stores or leveraging an existing vast delivery workforce like USPS, there are technology-enabled techniques that address customer demand for ever faster delivery, for example, drones and autonomous ground vehicles (AGVs). The trend is especially relevant to those that operate in high-labor-cost countries or provide service to remote rural areas that have been largely left out of one or two-day delivery offers. Stayed tuned during 2018, as we explore how emerging technologies will help conquer last-mile delivery challenges.
78% of the B2C ecommerce market opportunity lies outside the US, making global markets one of your biggest growth potentials. While supply chain and fulfillment professionals aren't usually asked to construct the business case associated with entering a new market, we are often asked how to execute such decisions. Given market trends and pressures to grow, you may soon become a global player, hence our advice for getting started.
Craft a global execution strategy: It's not uncommon for a CEO to promise global growth to Wall Street without consulting you or other business leaders in the organization. Yet, it's still your responsibility to provide strategic input and construct a deployment plan. If you're serious about entering global markets, start by prioritizing the countries you should ship to with a list informed by product availability, import taxes, duties, and the programmatic complexities you'll face (language, address formatting, carrier integration, Unicode requirements, and currency).
Be honest about what you think the business can and cannot accommodate. Also, if you decide to sell into new markets, it doesn't mean you have to fulfill the order internally or domestically. For example, research third parties capable of direct/drop shipping the customer's order. Also consider leveraging existing 3PLs in the market that you are evaluating.
Conduct due diligence: When entering any new market, you will inevitably discover carriers you've never heard of, so get to know them well (as they aren't created equal). Look to other DTC shippers serving the market - and benchmark their pricing and delivery model (keeping in mind, not all consumers reflect US demand for one-day, free delivery service).
Have a returns plan: Getting product to an international customer is just one part of the equation. Be prepared for the inevitable returns. Given it's not cost effective for most companies to manage domestic returns, you may want to source a company for return processing. Decide whether you want your item returned to you or if you'd rather destroy it/resell it in a secondary market.
Acknowledge the devil in the details: Research the USPS Shipping Restrictions for prohibited items for each country. Be prepared to deal with Customs and any associated fees when shipping across a border. Master the art of the most common customs forms. If your system doesn't programmatically complete these forms, you will need to fill them out once, check them twice, and then engage a pro for proofreading. Finally, don't leave your buyer out in the cold; double check all shipping vernacular and choose the correct option to avoid delays or unexpected costs.
Executing the plan: Once you have entered the market you still need to do what's best for your business, which may or may not be the fastest, most expensive option. Most international buyers are willing to wait a few extra days for their order, but nevertheless, manage expectations before 'purchase' is clicked. Provide a wide range of international shipping choices. For example, if a buyer wants your product even faster than your standard terms, offer it at a premium.
Global markets ebb and flow, so be prepared to evaluate your performance each quarter. As you continue to grow, brainstorm creative solutions with your carriers to create shipping incentive programs. (Finally, consider getting a massage periodically to lessen the stress of international shipping!)
While there may not be significant movement in blockchain deployments for DTC parcel delivery anytime soon, recognize that blockchain will be a relevant technology at some point in your career.
Don't get distracted by today's blockchain buzz on bitcoin, rather focus on the technology itself. While the industry press generally agrees blockchain will become viable (even mainstream), the pundits vary on their forecast of the role of blockchain in DTC parcel delivery varies dramatically. We've reduced the noise to three priority use cases (see Table 1).
Table 1: After digesting all the blockchain news, we've highlighted three priority use cases:
|Product lifecycle tracking:||Whether you ship pharmaceuticals or produce, products must be tracked through every supply chain step. With blockchain:
|Carrier to Shipper integration:||EDI, FTP, and other technologies that enable shipper communication with carriers innovated legacy manual, triplicate paper-based systems.
|Multi-modal Transportation and Multicarrier Shipping:||Even if you don't use multiple transportation modes to ship products, you likely use multiple carriers (if not, you should).
While the above use cases don't represent blockchain's full DTC parcel shipping potential, use them as inspiration for crafting your own plan for how blockchain can improve the integrity of your business.
Better yet, conduct a pilot. For example, define the blockchain-based interactions that make sense for your operation. Then, map what your blockchain process might resemble. Finally, consider joining (and influencing) a blockchain standards organization. Without standards, we will all create our own way of working, missing the opportunity to get this right. We are, for example, keeping an eye on the Blockchain in Trucking Alliance (BITA).
All shippers and carriers are being forced to adapt to consumer and business demands for more convenience and speed in a world that is increasingly global, complex, and volatile. Managers need to know where to innovate as they invest in new processes and technologies to remain competitive.
Every organization should designate a leadership team to recommend how to meet rising demands while protecting margins. This doesn't need to be a fulltime dedicated team of executives, it can be a cross-discipline team of employees at all levels in your organization. The teams charter would be to gather, track, and report (even recommend) on innovative developments each quarter (or whatever time period you deem appropriate). Without individuals assigned to the task, you run the risk of not catching and preparing your organization for a trend as it becomes feasible. While the organization has individuals that see the trends, without a group assigned to documenting, communicating, and suggesting a path forward, it is often difficult to have the agility needed to react.
We hope you have found value in this three-part series as you plan for Peak Season 2018. Please feel free to reach out to us anytime if you have any questions on trends or even if you would like to deliberate or dispute some of our insights/recommendations. You are an expert and we'd love to speak with you.