In preparing for an upcoming presentation at the Parcel Forum, we researched some future challenges and trends in Logistics and Distribution(L&D) and were somewhat surprised by what we found. Here is the list (in random order):
- Risk Management/Contingency Planning
- Talent Development
- “Big” Data/Advanced Analytics – competence to act upon what data tells you, not just mine it
- E-Commerce – impact that e-commerce is having(especially in B2C)
- Menu based service levels – different service levels for different customers, for different products within same customer etc.
- Positioning L&D as a competitive differentiator – advantage over competition based solely on your service – not your product.
How would you rank them? Take a couple of minutes and we will publish the results next time and may even use them at the conference.
There are a few items that have been on the list for a few years either because they have not gotten the attention they deserve or we continue to struggle with them. You would think that Risk Management would be resolved by now as an ingrained competency in most organizations. For that matter, Talent Development has been talked about for years and we continue to talk about people being our most critical asset and yet it continues to show up on the list. Is it that most organizations pay a lot of lip service to these issues but they never get the attention or funding that they need? Or is it that these are systemic issues that take longer to resolve than the average tenure of senior managers and leaders?
Collaboration is also interesting for two reasons. First, it is a challenge to find true case studies of collaboration, especially over time. We find that the competency needed to collaborate is far different and extremely scarce in most organizations. Second, most organizations think of collaborating “forward”(customers) and hardly ever think of doing the same with their suppliers(and especially L&D suppliers). Information sharing is great when done with the customers but not with our supply base? Really?
E-commerce(especially in B2C) is fundamentally altering the landscape for L&D. Online sales will rise to $434 billion in 2017 from $225 billion in 2012 – doubling in 5 years!! Fedex just posted increases in revenue and earnings, all fueled by this surge. Consumers will accelerate this trend and the L&D function will have to satisfy a multiple channel strategy supported by a multi modal approach.
What’s even more interesting in the FEDEX numbers is the rise in FEDEX ground and decline in air shipments. This is tied to the menu based service levels. Consumers are willing to wait a day or two and save some money (think of the shipping options when you order online). Everyone is not looking for the shortest lead time and customers want the choice of how items are shipped to them. This approach also has significant bearing in the B2B world – all customers are not alike and don’t need/want the same service levels or lead times. In some case, they may have different requirements for different products or different markets. Their suppliers need to offer a menu driven approach and price it accordingly. At minimum, the different costs to provide these different options should be reflected in customer profitability analyses to ensure better sales decisions.
Developing your L&D capability to be a competitive differentiator is the holy grail and means that your organization has made the transformation from being a cost center to a value center. It means that your L&D capability is central to your value proposition and your sales pitch. It means that it acts as a defensive barrier to new competition because they cannot match it. It means that you can actually command a price premium because of it.
While each of these deserve a lot more discussion, it is clear the L&D function has significant challenges ahead of it – that’s the bad news I suppose. The good news is that companies are starting to realize the impact that L&D has on market share, customer loyalty and the bottom line and are finally committing resources to it. We would encourage you to attend the session at the Parcel Forum. If you would like a copy of the presentation, let us know. If you would like to participate in the Next Practices benchmarking survey and receive the final report, here is the link.