David Hogg, vice president of business development with Logistyx, reviews four big challenges with which the parcel industry is currently grappling: the coronavirus, omnichannel fulfillment, e-commerce returns, and Brexit.
SCB: How is the coronavirus outbreak impacting businesses' supply chains and, more specifically, parcel supply chains?
Hogg: The impact is being felt in multiple phases. You're going to see a gradual breakdown of resources that are available to do shipping. What it does is highlight the lack of flexibility in companies' supply chains. If you're tied to single carriers, have reduced the number of sites holding inventory, and don't have the flexibility to find resources in other locations, you're going to struggle to meet your commitments.
SCB: And in the longer term?
Hogg: The people that do that better throughout the crisis will have more flexibility in their supply chains.
SCB: Even if you try to diversify your use of carriers, finding people to staff them during a pandemic is also an issue, right?
Hogg: Oh, absolutely. Supply chain is a relatively straightforward industry. The only thing you can do to mitigate risk is to have flexibility, with more carriers and more staff. There will be a point where you run out, but it's the one who lasts the longest that sells the most.
SCB: What should supply chains be doing today to meet the challenge of creating efficient omnichannel supply chains?
Hogg: I worked with another major technology company selling e-commerce systems for over 10 years. Parcel shipping and fulfillment were never included in the development plans for that organization. They sometimes spent hundreds of millions of dollars implementing e-commerce order-management systems. Then at the end of the projects, they would add on parcel shipping as an afterthought. With even the biggest and best companies out there, their parcel shipping isn’t managed. They have constrained contracts and very basic systems.
SCB: So what should companies be doing differently?
Hogg: In today's world, you need to build in flexibility, to have multi-carrier capability. More importantly, you need to be able to measure performance. The leading players today are embracing business-information aggregation so that they can analyze the performance of their own staff, as well as the carriers that are serving each node in their supply network, on a weekly, monthly, quarterly, and annual basis. If you want to do things better, you need to have the data, to analyze and make changes.
SCB: So a lot of the companies that are involved in omnichannel shipping aren’t yet achieving that level of oversight of their operations?
Hogg: Absolutely. Because when you have an e-commerce organization, it often operates separately from the supply chain. They throw challenges over the wall to the supply-chain organization. It's not thought through end to end. It tends to be done very much in a kind of a stovepipe process. Parcel shipping, which ironically is one of the fastest growing area of logistics today, is coming from a foundation of very limited strategic thinking.
SCB: What are some ways that companies can address the problem of returns, which can make or break the success of a company engaged in e-commerce?
Hogg: You can go back to the root source of capturing accurate orders in the first place, and provide people with technologies that allow them to see better sizing and fitting of clothes. There are always going to be people who want to buy multiples, so you want to give them the best range of options that reflects the price point of the merchandise that you're trying to sell. It’s important to have a very efficient way of reprocessing goods, making them available for resale if that's appropriate, or exiting them out of the business into discount channels or charity. For certain types of goods, you need a rapid way of destroying them — taking them out of the supply chain altogether.
SCB: What’s your view of the impact of Brexit on cross-border operations in the parcel shipping business?
Hogg: The root problem is that nobody knows what the requirements are going to be. Britain doesn't leave Europe until the first of December of this year. In that time period, there will need to be some last-minute definitions of what’s going to be allowed on the first of January in 2021.
From practical experience, I'm currently rolling out with one carrier a new cross-border service. It’s not a trivial process. It takes months of setting up new rate cards, origins and destinations, and documentation. When we get to the first of January, everything that Britain ships outside is no longer a domestic shipment, it's cross-border. It has tax and documentation implications, and the same goes for everybody in Europe shipping into Britain. All the cars that come from Germany, all the fine cheese and wine from France — those companies are going to have to take what was effectively a domestic shipping system, and find some way of sticking plasters on it in the short term. Then, most of them will need to reevaluate and change their shipping systems, so that they're more capable of supporting imports and exports. It would be the same in North America if shipping from New York to California suddenly became a cross-border transaction. Imagine the implications of that. That's what we face, and we don't actually know what the requirement is.
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