Our recently launched 2021 Logistics Executive Survey aims to seek out the “New Normal of Logistics.” The survey tracks the pulse of the market as logistics operations are emerging from the COVID-19 pandemic to periods of adjustments, redefinition, and eventually a new equilibrium.
In Part 1, we looked at the drivers for investment, logistics technologies and the tightening labor situation. In Part 2, we examine the survey results further and highlight the key points from the LinkedIn Live session on the same topic. During the session, I spoke with two logistics and technologic experts from Blue Yonder: Fab Brasca, GVP, Global Solutions, and Raj Patel, Senior Director of 3PL Global Industry Strategy.
Importance of Sustainability is Growing in Logistics
The survey results highlight the growing importance of sustainability, with 59% of logistics executives (and within that group 71% of those in consumer manufacturing industry) planning to offer flexible delivery windows for online orders to maximize sustainability. The second highlight is the emphasis on identifying sustainable upstream operations in material sourcing, suppliers, and manufacturing.
There are two factors that are driving up the priority of sustainability for organizations, according to Fab:
The first is legislation, with more and more regions actively formulating laws.The second factor is a shift in consumer sentiment.
Fab points out that consumers are now looking to make choices based on sustainability. This in turn effects how companies behave. In the world of logistics, it is easy to make the correlation between sustainability and efficiency in logistics: increasing the efficiency of asset utilization and reduction of empty miles not only reduce the cost of serve, but also drives towards a lower carbon footprint and sustainability metric.
The interesting thing will be how far organizations are willing to go. Will organizations just continue with business as usual and then tag on to the sustainability gains, based upon their own reduction of cost to serve metrics? Or will they start to make decisions that may impact or increase their costs but can drive a lower carbon footprint? For example, if a company is making carrier decisions, will it select a higher cost carrier because the carrier has newer equipment? How will they make decisions to invest in electric vehicles? The clear question ahead will be whether consumer sentiment is enough to force many organizations to make these types of advanced investments.
Raj points out that logistics and manufacturing customers are looking at their supply chain results, resiliency, agility, and now sustainability in order to make sourcing or dual sourcing decisions. North American companies are comparing sourcing products from Asia, which has multiple modes of emissions, to building/sourcing products in the U.S., Canada, or Mexico. If companies pay a little bit more per unit to produce products in North America thus reducing the transit time and carbon emission, is the potential extra cost worth the change? Will companies award business to transportation providers because they have electric vehicles and new equipment? How will these factors be measured and how will sustainability be entered into the decision-making process?
The survey results also show that logistics executives are implementing eco-friendly packaging options. From Raj’s perspectives, consumers are definitely making sustainability a factor in their selection process. More and more consumers are buying based on: what they hear about sustainability, eco-friendly packaging, and sustainability tags on products (these tags showcase what percentage of recycled/sustainable material was used to make the product).
For those who put their sustainability efforts on hold during the pandemic, the survey showed that they plan to resume their efforts in the next 12 to 18 months. This means we might know who the real sustainability players are in the logistics space in the next year to two years. If the consumer has anything to say about it, a lot of companies will have to step up their sustainability game. Consumers will keep all that in mind when they’re making that selection, whether online or in stores.
Additional Points of View on Drivers for Investment
In Part 1, we discussed that meeting growing customer expectations is the top priority for logistics executives. Reducing service costs for transportation, warehousing, and labor and improving resiliency toward disruption are the second and third priorities. From Fab’s point of view, many consumers, including himself, used to drive short distances to major retailers to have the experience of seeing and touching products. During the pandemic, we saw a whole wave of consumers making the shift to online engagement and not really venturing out at all.
This is forcing organizations to look at how they can improve their technologies and supply chains. Interestingly, Fab saw an acceleration of digital transformation projects across Blue Yonder’s customer base, as these organizations wanted to solve the following problems right away:
How do I get closer to the customer?How do I deliver better customer experiences?How will new initiatives affect the cost of service, which is still a paramount metric?
To drill down further on the topic of customer experiences, the survey team wanted to understand the most important factors to enhance the experience as the economy transitions to a post-pandemic environment. Logistics executives responded that the most important factor for enhancing consumer experiences post-COVID-19 is maintaining and optimizing convenient fulfillment options, including curbside pickup, BOPIS, and at-home delivery. The Future of Logistics eBook covers how by unifying logistics, organizations have the opportunity to leverage top technologies to achieve omni-channel execution performance and customer-centric supply chain.
Rather surprisingly, the second most important priority is increasing sustainable delivery options. Raj has a unique way to explain the results: what COVID-19 did was to compound five years of e-commerce growth all into one year. Customers are getting used to what he calls the new norm: options. Customers wants to have options, period.
Today, a consumer might buy online and have it delivered. But tomorrow the same consumer might buy online and pick it up at the store. This is happening not just at fashion retailers but grocery stores, restaurants, and boutique retail stores. Raj imagines this trend is going to continue to grow.
The second aspect is that at these stores, there is a separate area dedicated for pick-up. A consumer walks in and picks up whatever he/she ordered online or at the store – and at some stores without speaking to an associate. As a result, retailers are changing their footprints to offer a dedicated line for online order pick-ups. In addition, stores have to cater to curbside pick-ups.
More to Come on Expectation Setting and Expectation Meeting
The third aspect is home delivery. The topic can be divided into two distinct parts: parcel and big bulky. The delivery window is getting tighter and tighter. What are logistics executives tackling increasing customer expectations? In an upcoming blog, we will continue to discuss the technology investment trends and the importance of setting and meeting expectations.
In the meantime, for more information about the Logistics Executive Survey:
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