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Can the logistics transportation industry thrive by connecting the physical and digital worlds?

Earlier this year, Trimble completed its acquisition of Transporeon, combining the two companies’ North American and European expertise, and enabling the creation of a unified, global transportation management platform that transforms the way the world works. Christopher Keating, Senior Vice President of Trimble Transportation Europe explores this connection in the following byline, as he looks at how the industry can become a digital leader…

Transporting goods from A to B requires close collaboration between shippers, carriers, logistics service providers and recipients. In many ways, how these stakeholders interact with each other and conduct day-to-day operations has remained largely unchanged for the past decade (or more). After all, the industry often still relies on phone conversations, lengthy email chains, paper documentation and manual reporting to coordinate the smooth movement of freight.

But with a raft of digital technologies now available, this is no longer the best approach. Companies could be much more efficient if they embraced ‘phygital’ – the seamless integration of physical and digital systems to enhance their operations. So, what’s holding the industry back from integrating the physical and digital worlds? And where could companies see meaningful gains from adopting a phygital approach?

Old habits die hard

Technologically speaking, much of the logistics transportation industry is stuck in the past, operating a patchwork of disparate tech solutions combined with legacy paper-based processes.

Why? Well, put simply, old habits die hard. Archaic import and export rules (e.g. countries stipulating the use of physical stamps to authenticate and authorise documents) have, until recently, forced companies to continue using paper. Meanwhile, a lack of ‘universal standards’ for digital solutions means that companies have taken vastly different digitalisation trajectories over the past decade. This results in siloed tech stacks that can’t ‘communicate’ with each other, making it hard for companies to accurately understand their order and capacity situation and see whether processes are flowing seamlessly – among other challenges.

The solution? A standardised approach to digitalisation based on a collaborative network, rather than companies working in isolation. Also known as a ‘platform approach’, standardisation provides the foundation for a phygital future, enabling the creation of a transportation network spanning the entire industry. By connecting shippers, carriers, logistics service providers and other stakeholders, companies can simplify communication and slash manual administrative work.

A collaborative approach also enables data-driven decision-making, with companies benefiting from a vast pool of insights that helps all parties get ahead. In the short term, companies can use this data (combined with a high level of automation) to minimise dwell times, optimise yard operations and more. On a long-term basis, it can be used to train AI models to create tools for autonomous procurement or quotation, real-time ETA and everything in between.

New challenges require novel solutions

Embracing a phygital approach won’t just help shippers and carriers enhance overall efficiency, it’s also crucial to helping the industry tackle emerging challenges.

Decarbonisation is arguably the greatest of these, as companies face pressure from governments, end users and fellow industry participants to slash carbon emissions. Sustainability is now impacting the bottom line, with shippers increasingly contracting carriers based on their sustainability credentials, offering extended freight contracts to environmentally responsible companies, and even paying a premium for lower carbon transport.

Decarbonisation isn’t just about investing in expensive, cutting-edge technologies. Companies can make significant progress by implementing digital tools that enhance visibility into existing inefficiencies. With real-time data, they can reduce empty mileage, tackle lengthy dwell times, train employees on sustainable driving practices and combine transport modes to minimise emissions. Again, this is more effective when done collaboratively. For instance, it’s much simpler for carriers to reduce empty mileage by finding a return load if they’re operating as part of a wider network (rather than in a silo). All they have to do is inform the network when they’ve delivered their shipment, and wait for a match from a shipper looking for available capacity.

Another challenge currently facing the industry is the ongoing driver shortage, caused by an ageing workforce and increased demand for logistics services. With driver recruitment set to remain a persistent challenge, shippers and carriers must put their people first. This means taking tangible steps to lessen the administrative burden on drivers and minimise time spent waiting in yards, at ports and in traffic, as well as using tools and technologies to alleviate process-related stress .

To do so, shippers and carriers must first understand where there’s room for improvement. Digital tools can play a crucial role, with companies increasingly turning to real-time insights to uncover hidden inefficiencies and improve visibility by tracing deliveries. In particular, shippers and carriers can make significant efficiencies within the warehouse loading and unloading process, and by automating time slot and yard management processes. This can reduce waiting times from hours to minutes, freeing drivers to spend more time on the road.

The way forward

So, should the logistics transportation industry prepare for a phygital future? In short, yes. Companies already have all the necessary digital tools at their disposal, but success hinges on selecting and implementing them intelligently.

When companies embrace a true phygital approach, they can forget about optimising individual processes, and look holistically at improving their entire system. By embracing platform-based technologies to enhance their physical operations, they can be more efficient, improve visibility and make better decisions. This will help to reduce costs, improve efficiency, and meet customer demands, especially when tackling rapidly evolving challenges like decarbonisation and personnel issues.

Combatting growing pains within small retailers

Starting up as a retailer is easy – it’s managing growth that’s tricky. Entrepreneurial individuals can leverage any one of over 400 marketplaces to build up a brand and access global customers. Stock can be stored in a single location and orders quickly fulfilled by hand. But that’s just the start. Successful business expansion depends upon the ability to sustain customer experience and brand value irrespective of the number of additional customers, channels, or product lines. And that is where a great business – and business owner – can start to unravel. 

Identifying the right time to invest and scale up the business to the next level is difficult. But there are often signs the current model is beginning to creak. Whether it is spending evenings and weekends trying to keep up with orders, making mistakes in order processing and inventory that are leading to customer service issues, or feeling overwhelmed by a spiralling cost base, it is time to invest in technology before growth risks derailing the business.

Chris Timmer, CEO of Linnworks explains why an e-commerce platform that seamlessly manages inventory and order fulfilment across multiple marketplaces, third-party logistics, and couriers, as well as providing a real-time view of business performance, is essential to safeguarding both customers’ and owners’ retail experiences… 

Expanding Business Opportunities

The number of UK retail companies is on the rise, with a 14% increase in five years, resulting in an additional 27,445 new companies in the sector. Many of these companies have exploited the power of online marketplaces to take an idea from the kitchen table to potentially a global audience. Entrepreneurs have mastered product design, sourcing, and marketing; they have leveraged small start-up capital investments to build inventory, create the right pricing model, and curate a brand. All of this typically uses basic tools such as spreadsheets.

But what happens next? When customers like the product, sales soar and feedback is great, how does a business take the next step? Multi-channel retail is really important – with 70% of customer searches originating on marketplaces and social media– but each additional marketplace adds complexity and risk. How can the order process be managed effectively? Where should stock be located? Are third-party logistics (3PL) providers the best option? Which courier’s price and service delivery model provides the best fit for customer expectations? And is it possible to provide customers with the full visibility of order status throughout?

These decisions are daunting – and it can be tempting to stay small in order to control. But realistically, is the business really under control? Or is the business owner working 7 days a week simply to keep the wheels turning? Any growing small business will hit a point when change is inevitable. But what needs to change and where should the investment be focused? Adding people is expensive, inflexible, and higher risk, especially when sales can be cyclical at best, and volatile at worst. Extending the number of marketplaces the business sells through is simple on paper but can be a nightmare in practice, especially if a retailer is still trying to handle the entire process manually and can be a fast track to losing hard-won customer loyalty.

Timing is Everything

To scale without adding unnecessary risk or unacceptable cost, a retailer needs to connect and automate every aspect of the e-commerce process. With a flexible pricing model that aligns cost to value, dedicated Connected CommerceOps software affordably provides a level of cross-marketplace efficiency with inventory management and fulfilment excellence that cannot be achieved using multiple spreadsheets or home-grown databases.

By operationalising the entire e-commerce process, a small retailer can seamlessly scale up while sustaining a high-quality customer experience. With a single, reconciled view of inventory across warehouses and third-party logistics providers, the risk associated with expanding across multiple marketplaces is mitigated by enabling efficient order fulfilment processes that truly meet each customer’s expectations.

Leveraging an ecosystem of integrated solutions to include pricing, listing capabilities, or shipping to provide customers with full visibility of order status and delivery, with access to marketplace channels, the entire e-commerce process can be executed holistically. The retailer’s reach is extended while safeguarding the quality of experience that is at the heart of successful, profitable growth.

Retain Focus with Intelligence

Furthermore, Connected CommerceOps delivers new levels of insight into every part of the retail process, allowing early intervention when inevitable problems arise and supporting further growth plans. Rather than spending 100% of the time operationally firefighting, a business owner or management team can use insight to understand trends in customer behaviour, optimise inventory models, and continually assess courier performance.

For example, evidence suggests that a five or more marketplace model provides optimum performance for a small but growing retailer. It smooths out the volatility that can occur with a one or two-channel model and, with complete visibility and automation, provides a successful platform for growth. Once retailers have become established at that level, insight into performance across each marketplace, product line, and customer profile can then support further marketplace expansion as required.

Critically, this can be achieved without working seven days a week; without the need to constantly juggle order fulfilment with finance, and customer services with merchandising. Combining slick operational processes with accurate business insight not only allows a retailer to scale and sustain the customer experience but it also gives a retail owner their weekends back. 

Conclusion

Many entrepreneurs wait too long to make the change. They hit the moment when the excitement of business success tips over into the dread of business overwhelm. And while it is always tough to decide when it is right to invest in the technology required to support growth, it is far, far better to go early than wait too long, miss the boat, and watch hard-won success unravel.

Investing in the right technology at the right time safeguards not only business growth but an entrepreneur’s business commitment. No more problems associated with inconsistent stock information, leading to missed opportunities and the untenable costs associated with overstocking. Or nights spent second-guessing this season’s performance when planning what to buy for next season. And no more risk associated with unfocused multi-marketplace models that add complexity but fail to truly reflect the business concept.

By investing in automation at the right time and operationalising the business, a retailer owner reduces the risks associated with growth, while retaining the innovative spirit that was the original business inspiration.

Photo by Carlos Muza on Unsplash

Retail logistics: The year that was, and preparing for the retail year ahead…

2022 continued to present an array of challenges for retail, logistics and supply chain professionals. Although Covid19-related restrictions were lifted, its challenges were replaced by the war in Ukraine and the subsequent knock-on-effects relating to it; including energy cost increases, a rise in inflation and cost-of-living, and sustainability concerns. Meaning, for many retailers agility has remained key to business resilience, and growth.   

Andrew Tavener, Head of Fleet Marketing EMEA, Descartes Systems Group, reflects on the energy cost challenge businesses and consumers face. He explains the key role that route planning and optimisation plays in enabling retailers to tackle 2023 with optimism.

UK fuel and energy costs are a cause for concern for many in 2023

Since the war in Ukraine, inflation peaked in the UK at 11% in October 2022 – related to this is the cost of fuel and energy, which is presenting significant challenges for consumers and businesses. In the case of consumers, it has caused them to evaluate their spend on non-essential purchases.  For instance, UK homes have cancelled 2m streaming services as the cost of living has soared.

In comparison, the spike in energy and fuel costs has consequences for retailers that are operating buildings, outlets/stores, or delivering goods;  with diesel costing £2 per litre last autumn. Thankfully, though, in January, falling petrol and diesel prices have caused some relief; with petrol averaging around £1.50 a litre, and diesel on its way to below £1.70 (source: Parkers and RAC Fuel Watch). This cost decrease has to be viewed with pragmatic foresight. A predicted rise in fuel duty is expected in March 2023, with The Office for Budget Responsibility (OBR) forecasting fuel costs will rise by 23%. As you can imagine, this will impact retail deliveries across the board.

Alongside this, the cost of electricity continues to increase. This naturally has consequences for the entire retail value chain. Buildings will cost more to operate and electric vehicle fleets will likely cost more to run too. It begs the question – how can retailers minimise the impact on their costs and prices to the consumer?

Keeping vehicle fuel costs down with effective route planning and optimisation

Clearly, many macro-economic factors are challenging the retail outlook. So, what can retailers improve and control as they take on 2023? Digitisation continues to offer a powerful answer; but what technology in particular can help make a significant difference to retailers’ cost base as they seek to operate as efficiently as possible?

In the case of many bricks n’ mortar and ecommerce retailers, products will need to either be transported to a respective retail outlet and sold directly to the consumer; or stored within an ecommerce fulfilment centre and eventually delivered to a consumer. In either case, fleets of vehicles are used to transport goods. So, as fuel costs spike, this needs to be factored into the total cost of sale. With diesel and electricity costs set to increase, fleet managers need to consider the vital role their fleets can play in keeping the total cost of sale (and returns) down.

This is where specialised route optimisation and delivery scheduling tools enables retailers to minimise the miles driven and increase the delivery density; to reduce fuel consumption and CO2 emissions, to  offer a more sustainable delivery to consumers. Therefore, using less fuel and fewer vehicles to deliver more in fewer miles also equates to lower vehicle maintenance. Further, as many organisations face increasing global, governmental and consumer pressure to reduce carbon footprints, this technology has a crucial role to play. Used effectively it will cut costs and carbon emissions; which can hopefully be passed to the consumer in a way that enables the retailer to profit, while supporting consumer needs.

Topps Tiles, the leading U.K. tile retailer, for instance, is optimising its fleet delivery capabilities with Descartes’ cloud-based route planning and optimisation solution. It is decreasing the average kilometres driven per delivery route by two percent, and gaining a better understanding of the potential impact of changes to its delivery strategies.

Conclusion

As we come out of the pandemic, many retailers have had a rough 2022. Although the market is fraught with inflationary, cost of living, cost of energy and recessional pressures, consumers are still purchasing goods – their expectations and hopes are, however, somewhat skewed towards locating the best deals and delivery experiences  for their spend. So if retailers can get more out of their  transport operation they don’t need to pass excessive cost spikes to their shoppers. In addition to maintaining proof that their efforts are having a net positive effect on sustainability initiatives, this will all help provide a competitive edge and have a positive impact on their brands, as they look to make it through 2023 and onto growth.