Future of Sourcing - Logistics https://www.futureofsourcing.com/tags/logistics en Five Reasons Last Mile Logistics M&As Will Continue in 2022 https://www.futureofsourcing.com/five-reasons-last-mile-logistics-mas-will-continue-in-2022 <div class="field field-name-field-image field-type-image field-label-hidden"><div class="field-items"><div class="field-item even" rel="og:image rdfs:seeAlso" resource="https://www.futureofsourcing.com/sites/default/files/articles/Five%20Reasons%20Last%20Mile%20Logistics%20M%26As%20Will%20Continue%20in%202022.jpg"><a href="https://www.futureofsourcing.com/sites/default/files/articles/Five%20Reasons%20Last%20Mile%20Logistics%20M%26As%20Will%20Continue%20in%202022.jpg" title="As supply chain disruptions continue to mount, logistics companies are experiencing a boom in mergers and acquisitions to improve last mile delivery capabilities." class="colorbox" rel="gallery-node-2170-NPIJNggy3Bg"><img typeof="foaf:Image" src="https://www.futureofsourcing.com/sites/default/files/styles/juicebox_medium/public/articles/Five%20Reasons%20Last%20Mile%20Logistics%20M%26As%20Will%20Continue%20in%202022.jpg?itok=WimYtVmy" width="624" height="325" alt="As supply chain disruptions continue to mount, logistics companies are experiencing a boom in mergers and acquisitions to improve last mile delivery capabilities." title="" /></a></div></div></div><div class="field field-name-field-intro field-type-text-long field-label-hidden"><div class="field-items"><div class="field-item even"> <p><em>As supply chain disruptions continue to mount, logistics companies are experiencing a boom in mergers and acquisitions to improve last mile delivery capabilities, says Adam Bryant, CEO of <a href="https://axlehire.com/" target="_blank">AxleHire</a>. He gives five reasons why he expects the mergers and acquisitions trend to continue amid booming consumerism.&nbsp;</em></p> </div></div></div><div class="field field-name-field-related-news field-type-entityreference field-label-above"><div class="field-label">Related news:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/what-is-on-the-horizon-for-micro-fulfillment-centers">What is on the Horizon for Micro Fulfillment Centers?</a></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even" property="content:encoded"> <p>Last year saw a flurry of merger and acquisition activity in the logistics industry. In the last mile carrier sector, UPS acquired point-to-point carrier Roadie in September. A month later, regional last-mile carrier Lasership acquired another regional carrier, OnTrac, for a reported $1.3 billion.</p> <p>There is a lot of speculation about whether these are one-offs or more of a trend that will carry over into 2022 and beyond. We lean toward the latter and think there are at least five good reasons why you will see M&amp;A activity continue in the last mile carrier space in 2022.</p> <h1>1 &ndash; Basic Economics</h1> <p>We&rsquo;ve seen double-digit growth in ecommerce over the past few years, with projections of more double-digit growth to continue for the foreseeable future. Someone must deliver all those packages, and the logistics sector is currently projecting solid growth for at least the next five years. The economy is flush with investors looking for opportunities to throw money at hot properties. It&rsquo;s a match made in heaven.</p> <p>M&amp;A activity is a standard feature of rapidly growing industries. Existing carriers will seize opportunities to grow revenue, add market share and enter new markets by acquisition. VC investors will see opportunities to multiply their existing positions in last mile startups with strategic investment in complementary technologies.</p> <p>This will be good news for shippers, as industry competition will be fierce and at least some of the M&amp;A activity will likely result in innovations that improve service levels and reduce costs.</p> <h2>2 &ndash; Coverage Consolidation and the Search for the Holy Grail</h2> <p>Judging from much of the press coverage of our industry, the holy grail of logistics appears to be the creation of a new national carrier to compete with UPS and Fedex (and USPS).</p> <p>With its acquisition of OnTrac, the Lasership/OnTrac network covers roughly 75% of the U.S. population, with plans to add coverage in more major metro areas this year either through additional acquisitions or greenfield expansion. Other carriers will follow suit, with a primary focus on expansion in major metro areas, but it&rsquo;s unlikely that any carrier will be able to muster the resources to match the coverage of the big three. And why would they want to?</p> <p>Does a carrier need to deliver to Fargo, North Dakota, to be considered a national carrier? UPS, Fedex and USPS all deliver to Fargo. No offense to Bill Macy and the Coen Brothers, but they can have Fargo. The next &ldquo;national&rdquo; last-mile carrier probably won&rsquo;t deliver there and hardly anyone will notice. The cost to expand to cover small markets will be too high and the ROI isn&rsquo;t there.</p> <p>We think broader coverage is good for shippers, but the real holy grail for last mile carriers is density (combining packages from more shippers into shorter routes) in those urban markets where almost 90% of U.S. consumers live. Denser routes reduce costs for shippers and carriers and tend to be more profitable for gig drivers. We expect to see M&amp;A activity this year &ndash; some of which might fly under the radar &ndash; that will allow urban carriers to increase delivery density and bring new, more sustainable technologies to urban last mile delivery.</p> <h2>3 &ndash; Technology Acquisition</h2> <p>From 2017 to 2020, Roadie achieved revenue growth of 2,157%. No, that&rsquo;s not a typo, but it&rsquo;s also not the primary reason UPS went forward with the acquisition. According to UPS, &ldquo;Roadie&rsquo;s leading technology, combined with UPS&rsquo;s portfolio, will open doors for new growth opportunities. Roadie&rsquo;s technology platform also will provide opportunities to improve existing, and potentially add additional, UPS small package capabilities. The Roadie technology platform&hellip;&rdquo;</p> <p>How many times does the word technology appear in that release? It can take years to build new technology and the risk of failure is high. If you have cash in hand, the faster and safer play will be to acquire technology.</p> <p>One of the characteristics of the current crop of last mile startups is that they are technology savvy &ndash; using technology to attack the challenges of last mile delivery and then building tech-driven processes to optimize delivery. Legacy carriers have tended to follow a different approach, applying technology to automate existing manual processes.</p> <p>As legacy carriers hit capacity limits, we expect to see a pivot in how they view technology, and we expect to see more transactions where tech savvy startups are acquired by more established players, primarily for their technology.</p> <h2>4 &ndash; Talent Acquisition</h2> <p>If a carrier wants to enter a new metro market, it has two options for acquiring talent. The first is to rent some warehouse space and then post dozens of job openings for people to manage, sort, load and deliver packages. The second is to acquire or partner with a local or regional carrier that already has the infrastructure and talent in place. We see both scenarios currently happening in the industry.</p> <p>The driver shortage is a real thing, but there is also a shortage of trained logistics people in general. That shortage is likely to become more acute as we continue to experience annual double-digit growth in e-commerce. As discussed above, coverage consolidation in urban markets will help &ndash; and higher driver profitability may attract more drivers to the industry &ndash; but there is also a need for some more creative solutions in this area.</p> <p>We&rsquo;re not sure yet what the answer is, but we do know this problem won&rsquo;t solve itself. The industry is searching for long-term solutions. In the interim, one of the ways we will see carriers acquire new talent is to acquire other carriers&rsquo; existing talent through M&amp;A activity.</p> <h2>5 &ndash; Self-Preservation</h2> <p>One of the more interesting by-products of the pandemic and resulting supply chain disruptions has been the growing tendency of large retailers in the logistics space to grab more control of their supply chains. In recent months, American Eagle Outfitters acquired Air Terra and Quiet Logistics and Ashley Furniture acquired Wilson Logistics.</p> <p>These are moves aimed primarily at hardening supply chains, but it is probably just a matter of time before we see large retailers dip their toes into the last mile delivery waters. Whether this will come through M&amp;A or through more limited partnerships between shippers and carriers is probably a topic for a longer conversation than we have time for here.</p> <p>We believe the flurry of M&amp;A activity in the last mile logistics industry in 2021 is the precursor to a wave of activity that will carry through 2022 and beyond. Shippers will benefit from better service levels and cost containment. Carriers will see influxes of cash that will allow for new and creative service opportunities. We&rsquo;re looking forward to riding that wave.</p> </div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Tags:&nbsp;</div><div class="field-items"><div class="field-item even" rel="dc:subject"><a href="/tags/last-mile-delivery" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">last-mile delivery</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/logistics" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Logistics</a></div></div></div><div class="field field-name-field-addthis field-type-addthis field-label-hidden"><div class="field-items"><div class="field-item even"><div class="addthis_toolbox addthis_default_style " addthis:title="Five Reasons Last Mile Logistics M&amp;amp;As Will Continue in 2022 - Future of Sourcing" addthis:url="https://www.futureofsourcing.com/five-reasons-last-mile-logistics-mas-will-continue-in-2022"><a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_linkedin"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_facebook"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_twitter"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_googleplus"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_pinterest_share"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_reddit"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_email"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_print"></a> </div> </div></div></div><div class="field field-name-field-region field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Region:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/regions/global" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Global</a></div></div></div> Sun, 24 Apr 2022 19:43:06 +0000 Adam Bryant 2170 at https://www.futureofsourcing.com https://www.futureofsourcing.com/five-reasons-last-mile-logistics-mas-will-continue-in-2022#comments How to Digitize the Post-Sale Service Supply Chain https://www.futureofsourcing.com/how-to-digitize-the-post-sale-service-supply-chain <div class="field field-name-field-image field-type-image field-label-hidden"><div class="field-items"><div class="field-item even" rel="og:image rdfs:seeAlso" resource="https://www.futureofsourcing.com/sites/default/files/articles/Digitize%20the%20Post-Sale%20Service%20Supply%20Chain.jpg"><a href="https://www.futureofsourcing.com/sites/default/files/articles/Digitize%20the%20Post-Sale%20Service%20Supply%20Chain.jpg" title="The service supply chain requires the logistics infrastructure to manage additional complexity while both providing efficient customer service and maintaining inventory levels." class="colorbox" rel="gallery-node-2096-NPIJNggy3Bg"><img typeof="foaf:Image" src="https://www.futureofsourcing.com/sites/default/files/styles/juicebox_medium/public/articles/Digitize%20the%20Post-Sale%20Service%20Supply%20Chain.jpg?itok=aFCp4Ah1" width="624" height="325" alt="The service supply chain requires the logistics infrastructure to manage additional complexity while both providing efficient customer service and maintaining inventory levels." title="" /></a></div></div></div><div class="field field-name-field-intro field-type-text-long field-label-hidden"><div class="field-items"><div class="field-item even"> <p><em>As organizations position themselves to better navigate future disruptions, OnProcess CEO Oliver Lemanski sees four significant benefits for digitizing the service supply chain.</em></p> </div></div></div><div class="field field-name-field-related-news field-type-entityreference field-label-above"><div class="field-label">Related news:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/how-digital-world-class-procurement-organizations-outperform-peers">How Digital World-Class Procurement Organizations Outperform Peers</a></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even" property="content:encoded"> <p>As the Ever Given jammed the Suez Canal, disruption rippled across the supply chain and cargo owners scrambled to determine whether their goods were trapped in one of the containers. Shippers and receivers found it challenging to come up with an authoritative answer.</p> <p>Unfortunately, the fragmented nature of supply chain data isn&rsquo;t transparent until the flow of goods and information grinds to a halt. All too often, supply chain and service functions operate in data silos. Information is kept in spreadsheets or outdated or homebuilt systems that don&rsquo;t talk to each other. A surprising amount of global shipping information still relies on phone calls, emails and faxes. These silos of static information make it difficult for companies to navigate supply chain disruptions and crises that arise regularly.</p> <p>The opportunities for&nbsp;digitalization are significant as the average supply chain has a digitization level of 43%, according to a recent <a href="https://nam02.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwww.mckinsey.com%2Fbusiness-functions%2Foperations%2Four-insights%2Fdigital-transformation-raising-supply-chain-performance-to-new-levels&amp;data=04%7C01%7Ctbreton%40corporateink.com%7C943fbb1b77bd48ddc7ee08d9aeacf5a3%7Cc9239bde19544dc79e6b1a96daecb7a3%7C0%7C1%7C637732880172634553%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C1000&amp;sdata=OcHlO2T9eGecScZle8vYKiB9jyVdv1MjpwrwiyMhqcw%3D&amp;reserved=0" target="_blank">McKinsey study</a>. That research also calculated that companies that aggressively digitize their post-sale service supply chain boost efficiency 60% to 70% (the largest increase from digitization anywhere in the supply chain).</p> <p>Digitizing processes is the only way to embrace the challenges and position your organization for growth. Digitizing doesn&rsquo;t mean shifting from email to Excel or a simple database. It requires rethinking how business gets done in the organization. If you don&rsquo;t examine your processes and rebuild them for the digital environment, you may wind up simply doing the wrong things faster.</p> <p>While previous digitization efforts may have focused on sales channels, digitizing the post-sale service supply chain is critical. Sure, making it easier for customers to order through ecommerce and other channels drives revenue. But for long-term impact, digitizing the post-sale service supply chain allows you to better plan, source, collaborate, execute, automate and generate analytics. With a holistic view, your organization can ensure the product is efficiently managed and that the customer receives the best service experience in the process.</p> <p>The Ever Given situation and ongoing port congestion around the globe highlight the need for transparency and visibility in the service supply chain. Traditional supply chains consist of a series of one-way steps that don&rsquo;t anticipate the need for reverse logistics. The boom in ecommerce in both B2C and B2B channels results in an upstream flow of returns for repair, servicing, replacement or recycling.</p> <p>The service supply chain requires the logistics infrastructure to manage additional complexity while both providing efficient customer service and maintaining inventory levels.</p> <p>Without digitization, orchestrating a circular supply chain in which manufacturers and sellers order, consume, return and refurbish used parts to slash costs and waste, and improve service is nearly impossible.</p> <p>As organizations position themselves to better navigate future disruptions, we see four significant benefits for digitizing the service supply chain.</p> <h2>Visibility</h2> <p>Customers value real-time updates with personalized information reflecting their communications preferences. Waiting days to provide customer information or pinpoint where in-transit inventory is located is no longer good enough.</p> <p>Real-time tracking information is the foundation. Digital solutions are available to integrate the entire service supply chain into a single platform and automatically capture and blend parts data, customer data and analytics data across the post-sale service lifecycle for proactive decision-making and customer communication.</p> <h2>Sustainability</h2> <p>90% of an organization&rsquo;s environmental impact <a href="https://nam02.safelinks.protection.outlook.com/?url=https%3A%2F%2Fyoumatter.world%2Fen%2Fsustainability-supply-chain-27935%2F&amp;data=04%7C01%7Ctbreton%40corporateink.com%7C943fbb1b77bd48ddc7ee08d9aeacf5a3%7Cc9239bde19544dc79e6b1a96daecb7a3%7C0%7C1%7C637732880172634553%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C1000&amp;sdata=Qiaq1HZZFo3a92NISXFwNWJHU4cgv4rAPYWO%2BhFWRGs%3D&amp;reserved=0" target="_blank">comes from its supply chain</a>. Instead of operating with the traditional linear &ldquo;throw-away&rdquo; supply chain model, companies can embrace the <a href="https://futureofsourcing.com/why-supply-chain-leaders-need-to-bolster-the-circular-economy" target="_blank">circular economy model</a>.</p> <p>This model prioritizes reusability by keeping materials within the supply chain by re-purposing rather than buying new materials all the time. Digital technologies can efficiently predict when assets need recovering, when repairs are imminent as well as streamlining the complex dataflows and logistics between the processes.</p> <h2>Agility</h2> <p>A digital platform can integrate with almost any application or data source to give customers a holistic view of the parts recovery cycle. The resulting intelligence supports the circular service supply chain by reducing unnecessary transportation costs and intelligently redirecting recovered parts based on demand, value and reusability.</p> <h2>Resiliency</h2> <p>Resilient supply chains are those that can bend but not break, and snap back into place (perhaps more robust than before). With improved visibility across the network, your organization is prepared for continuous rebalancing and optimization. Your circular supply chain can flex as required.</p> <h2>The Business Case for Digitalization</h2> <p>Building the organization&rsquo;s fortitude for a digitalization effort may prove challenging, especially if previous efforts failed to meet expectations. Analyze your existing after-sale supply chain to understand the direct and substantial impact on customer service, sustainability outcomes and the bottom line. The opportunities may be more significant than you know.</p> <p>Supported by your analysis, you can make the business case for digitalization efforts that align with the organization&rsquo;s long-term business priorities, like growth, talent retention and sustainability goals.</p> <p>Digitalizing the after-sales service supply chain enables organizations to recover value from inventory and provide new digital services for a better customer experience. With real-time information flowing to the right people at the right time, your teams can recover product faster, make better decisions, optimize operations, improve warranty recovery, reduce costs and emissions, and significantly improve customer satisfaction.</p> <p>Your organization can empower your circular service supply chain and place sustainability and customer lifetime value at the heart of the everything-as-a-service economy we live in today.</p> </div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Tags:&nbsp;</div><div class="field-items"><div class="field-item even" rel="dc:subject"><a href="/tags/circular-economy" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Circular Economy</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/onprocess" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">OnProcess</a></div><div class="field-item even" rel="dc:subject"><a href="/tags/logistics" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Logistics</a></div></div></div><div class="field field-name-field-addthis field-type-addthis field-label-hidden"><div class="field-items"><div class="field-item even"><div class="addthis_toolbox addthis_default_style " addthis:title="How to Digitize the Post-Sale Service Supply Chain - Future of Sourcing" addthis:url="https://www.futureofsourcing.com/how-to-digitize-the-post-sale-service-supply-chain"><a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_linkedin"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_facebook"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_twitter"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_googleplus"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_pinterest_share"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_reddit"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_email"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_print"></a> </div> </div></div></div><div class="field field-name-field-region field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Region:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/regions/global" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Global</a></div></div></div> Thu, 16 Dec 2021 17:00:00 +0000 Oliver Lemanski 2096 at https://www.futureofsourcing.com https://www.futureofsourcing.com/how-to-digitize-the-post-sale-service-supply-chain#comments Digitization: A Path to Resilience Through Disruption https://www.futureofsourcing.com/digitization-a-path-to-resilience-through-disruption <div class="field field-name-field-image field-type-image field-label-hidden"><div class="field-items"><div class="field-item even" rel="og:image rdfs:seeAlso" resource="https://www.futureofsourcing.com/sites/default/files/articles/Digitization%20A%20Path%20to%20Resilience%20through%20Disruption.png"><a href="https://www.futureofsourcing.com/sites/default/files/articles/Digitization%20A%20Path%20to%20Resilience%20through%20Disruption.png" title="Digitization: A Path to Resilience through Disruption" class="colorbox" rel="gallery-node-2037-NPIJNggy3Bg"><img typeof="foaf:Image" src="https://www.futureofsourcing.com/sites/default/files/styles/juicebox_medium/public/articles/Digitization%20A%20Path%20to%20Resilience%20through%20Disruption.png?itok=shl6VYkT" width="624" height="325" alt="Digitization: A Path to Resilience through Disruption" title="" /></a></div></div></div><div class="field field-name-field-intro field-type-text-long field-label-hidden"><div class="field-items"><div class="field-item even"> <h1>Digitization: A Path to Resilience Through Disruption</h1> </div></div></div><div class="field field-name-field-related-news field-type-entityreference field-label-above"><div class="field-label">Related news:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/logistics-outsourcing-explained-defining-the-3pl-4pl-and-5pl-models">Logistics Outsourcing Explained: Defining the 3PL, 4PL and 5PL Models</a></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even" property="content:encoded"> <p>The supply chain headaches continue. Only <a href="https://www.wsj.com/articles/shipments-delayed-ocean-carrier-shipping-times-surge-in-supply-chain-crunch-11621373426" target="_blank">40% of global container ships were on time</a> in March 2021, with average delays extending more than six days.</p> <p>The pervasive disruptions have made effectively managing supply chain demand, accurately forecasting inventory levels, and ensuring on-time delivery mission critical in today&rsquo;s market. Coming out of a recession, the stakes have never been higher.</p> <p>Organizations will continue to struggle and play catch-up until they fundamentally change their approach. Here&rsquo;s how to build resilience and overcome delays and disruptions by adopting a proactive and digital approach to supply chain management.</p> <h2>A Rising Dilemma Around Inventory and Delivery</h2> <p>Volatile inventory demand coupled with delivery issues are wreaking havoc on supply chains. Economic stimulus <a href="https://www.wsj.com/articles/consumer-spending-personal-income-march-2021-11619732790" target="_blank">spiked consumer spending up to 4.2%</a>&nbsp;&ndash; and while positive for the economy, heightened demand is leaving suppliers scrambling to keep up. Rising costs of materials, short staffing, and lack of communication further exacerbate the dilemma.</p> <p>Why? Because when <a href="https://www.wsj.com/articles/consumer-demand-snaps-back-factories-cant-keep-up-11614019305" target="_blank">operations shut down </a>in 2020, manufacturers deployed the standard recession playbook &ndash; slash costs to preserve as much cash as possible. The lockdowns and quarantines multiplied the problems. But when demand rebounded sharply just weeks after the shutdown, warehouses were left unprepared. Now, manufacturers also face severe <a href="https://www.businessinsider.com/economic-recovery-manufacturing-worker-shortage-diversity-training-labor-market-study-2021-5" target="_blank">labor shortages</a>.</p> <p>For shippers, crowded oceans and airways &ndash; not to mention the blockage of major passageways like the Suez Canal debacle &ndash; continue to hinder deliveries, causing a domino effect of delays down the supply chain.&nbsp;</p> <p>As we look ahead, buyer demand is bouncing back with accelerated velocity. Companies are placing larger orders to overcompensate and avoid being stuck without products in the face of another crisis or inventory shortage. But with limited budgets, manpower and inconsistent third parties, manufacturers are struggling to keep up with the renewed demand.</p> <h2>The Costly Consequences of Shortages and Delays</h2> <p>The price of being ill-prepared takes a toll across the organization. When companies can&rsquo;t meet sudden spikes in demand, customers look elsewhere to keep their business afloat, which results in lost revenue.</p> <p>The lack of contingency really hurts. Backorders can cost companies thousands, millions, even billions of dollars. As the current global chip shortage has shown, major manufacturers such as Ford have experienced unforeseen headwinds of <a href="https://fortune.com/2021/05/04/chip-shortage-when-will-it-end-2023/" target="_blank">$2.5 billion hitting its bottom line</a>.</p> <p>Furthermore, delivery delays can result in fines &ndash; or chargebacks &ndash; that come with hefty price tags. Big brands like Walmart recently informed suppliers that all orders are required to be 98% full and on time. Missing or delayed items would be hit with a 3% fee. What may seem like an insignificant number can equate to thousands &ndash; even hundreds of thousands &ndash; of dollars.</p> <p>With your reputation &ndash; and bottom line &ndash; at stake, it is critical to digitize processes in order to better manage supply chain demand, accurately forecast, and anticipate inventory levels to ensure business continuity and strong partnerships. &nbsp;</p> <h2>Digitization Provides a Competitive Edge</h2> <p>Overcoming significant inventory and delivery issues begins with real-time visibility. But as supply chains grow and expand, maintaining visibility is no easy task. With millions of datapoints and hundreds of touchpoints, information often gets trapped in silos and is rendered useless.&nbsp;&nbsp;</p> <p>Digitizing the supply chain and EDI creates a clear view into every aspect of your operations and suppliers. When all relevant data and communications sit in a central and intelligent platform, supply chain planners benefit from crystal-ball like insights that enable them to make strategic, prudent and impactful inventory decisions.</p> <p>For example, real-time transparency into warehouse and labor resources enables businesses to swiftly anticipate supply chain backlogs, shifts in demand, third-party shortages and more. Organizations can act before disruption occurs by proactively identifying weak spots.</p> <p>The right digitization strategy centralizes your supply chain data and unveils a comprehensive view across your enterprise &ndash; and helps you ensure on-time deliveries by giving you a clear view into operations. And with the right data analytics platform, this allows you to prevent disruptions before they occur.&nbsp;</p> <p>Given the millions of data points, dozens of touchpoints and constantly changing information, the ultimate driver in the success of operations comes with investing in the right technology to aggregate and sort through this vast amount of information. From analyzing your supply network and flagging potential threats to integrating and streamlining complex EDI data, the right tech and analysis will pivot you from a reactive to proactive approach.</p> <h2>The Path Ahead</h2> <p>With operations running at optimal level, businesses can ensure the speed and agility needed to deliver accurately and on time. This competitive edge enables brands to rise above simply surviving and begin to thrive.</p> <p>The ability to expect separates who sinks or swims in business. While COVID-19 drove disruption on a monumental level, supply chain disturbances will continue to occur as complexities in global market demand mount and delivery expectations grow higher. With proper preparation, robust procedures, and contingency plans complimented by the right tech, organizations will put themselves in a prime position to survive any unforeseen circumstance.&nbsp;&nbsp;</p> </div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Tags:&nbsp;</div><div class="field-items"><div class="field-item even" rel="dc:subject"><a href="/tags/container-ships" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Container Ships</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/logistics" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Logistics</a></div><div class="field-item even" rel="dc:subject"><a href="/tags/digitization" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Digitization</a></div></div></div><div class="field field-name-field-addthis field-type-addthis field-label-hidden"><div class="field-items"><div class="field-item even"><div class="addthis_toolbox addthis_default_style " addthis:title="Digitization: A Path to Resilience Through Disruption - Future of Sourcing" addthis:url="https://www.futureofsourcing.com/digitization-a-path-to-resilience-through-disruption"><a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_linkedin"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_facebook"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_twitter"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_googleplus"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_pinterest_share"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_reddit"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_email"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_print"></a> </div> </div></div></div><div class="field field-name-field-region field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Region:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/regions/global" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Global</a></div></div></div> Wed, 11 Aug 2021 02:00:00 +0000 Michael Rabinowitz 2037 at https://www.futureofsourcing.com https://www.futureofsourcing.com/digitization-a-path-to-resilience-through-disruption#comments 4 Tips to Improve Supply Chain Resilience https://www.futureofsourcing.com/4-tips-to-improve-supply-chain-resilience <div class="field field-name-field-image field-type-image field-label-hidden"><div class="field-items"><div class="field-item even" rel="og:image rdfs:seeAlso" resource="https://www.futureofsourcing.com/sites/default/files/articles/4%20Tips%20to%20Improve%20Supply%20Chain%20Resilience.png"><a href="https://www.futureofsourcing.com/sites/default/files/articles/4%20Tips%20to%20Improve%20Supply%20Chain%20Resilience.png" title="4 Tips to Improve Supply Chain Resilience" class="colorbox" rel="gallery-node-2023-NPIJNggy3Bg"><img typeof="foaf:Image" src="https://www.futureofsourcing.com/sites/default/files/styles/juicebox_medium/public/articles/4%20Tips%20to%20Improve%20Supply%20Chain%20Resilience.png?itok=zrguHnos" width="624" height="325" alt="4 Tips to Improve Supply Chain Resilience" title="" /></a></div></div></div><div class="field field-name-field-intro field-type-text-long field-label-hidden"><div class="field-items"><div class="field-item even"> <h1>4 Tips to Improve Supply Chain Resilience</h1> </div></div></div><div class="field field-name-field-related-news field-type-entityreference field-label-above"><div class="field-label">Related news:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/the-case-for-changing-the-chief-procurement-officer-role">The Case for Changing the Chief Procurement Officer Role</a></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even" property="content:encoded"> <p>The year that started the global pandemic also brought more than just the coronavirus. The world became acutely aware of the weak links within the global supply chain. At the onset, product and people movements were challenging. We saw supply shortages not entirely driven by hoarding behavior, but because the supply chain was stuck.</p> <p>The question became this: How do we get people and products moving safely, without jeopardizing employees&rsquo; health, safety and well-being, as well as customers?</p> <p>With many suppliers unable to operate, organizations of all sizes scrambled to find alternate sources of supply across direct and indirect categories. Procurement, supply chain and business leaders were all scrambling to find PPE equipment when most of us didn&#39;t even know where to start.</p> <p>Despite the ingenuity of procurement and supply chain leaders who were accustomed to finding cheaper sources of supply, they soon had to look closer to home to make effective purchasing decisions. They watched the bottom line of the company, while witnessing the top-line come to an abrupt halt for most industries.</p> <p>2020 also brought additional considerations around safety and sustainability, and the social aspects of our operations. Organizations were left with no choice but to self-reflect, acknowledge, engage in a well-meaning dialogue, and demonstrate accountability through metrics and measurements. Among all of this, it feels like we&rsquo;ve had no time to think, let alone act, when the expectation is to deliver results fast (largely due to the lack of action that has gone on far too long for acceptability).</p> <p>While we may not be able to prevent this from happening again, we can be better prepared. Central to this is paying more attention to the key themes identified in 2020 and creating a responsiveness plan on how to address them.</p> <h2>1. Localize the Supply Chain</h2> <p>With the challenges brought by the pandemic, the Suez Canal blockage and a polarized global political climate, we need to consider having some level of localized supply chain capabilities for critical goods and services. While we were saved from the empty toilet paper shelves this time, it may not be the case next time. Also, fundamentally, we may want to reset what we deem critical as individuals, families, communities and organizations to focus on localization.</p> <p>Having access to local or near-shore suppliers is one way for organizations to improve access to goods. However, the thought shouldn&#39;t be limited to finished goods and products but rather the material needed to create those final goods. During the pandemic, all countries discovered and learned a hard lesson of how dependent we are on the global supply chain. While this is something we already knew, no one quite understood the impact of what it meant until it happened.</p> <p>There were some hard truths to confront about how patents work, the lack of raw materials and equipment needed to create lifesaving products, and how these can be controlled in such a way that cripples entire nations and organizations.</p> <h2>2. Invest in Supplier Risk Management</h2> <p>Supplier risk has become a regular part of our business vocabulary beyond the procurement team. After the past year, there is a lot more awareness of it. Investments in monitoring and governing supplier risk have become a topic of discussion at the board and C-suite levels that were never given consideration in the past.</p> <p>However, the lack of investment means that businesses have a lot of catching up to do in order to measure and monitor supplier risks of various types in a cost-effective manner.</p> <p>Many organizations weren&#39;t even aware of their reliance on second-, third- and or fourth-tier suppliers until the pandemic. Organizations need to review their existing supplier risk programs to identify the depth of their supply chains and monitor risks associated with each tier of the supplier.</p> <h2>3. Move Toward Cybersecurity Resilience</h2> <p>While cybersecurity is deemed one type of critical supplier risk, it requires special attention and unique consideration since technology continues to be heavily integrated with our daily lives at home, work, school and even our surroundings.</p> <p>The bad actors are finding ways to access any environment to manipulate and harm individuals and organizations. Investment in cybersecurity tools and skilled professionals shouldn&#39;t be seen as a mere P&amp;L cost center but rather as critical to an organization&rsquo;s survival to protect its financials, assets and reputation.</p> <p>Cybersecurity as a practice is relatively deep and wide. While technological advances continue to improve monitoring by leaps and bounds, it is still reasonably reactive. Look for AI-driven tools that provide predictive capabilities to help get ahead of cyber threats that may be looming in your environment. While this space is continuing to evolve, and we will see more sophisticated tools that provide better predictions with accuracy and precision that humans cannot match come to market, it will require practitioners partnering with cybersecurity providers in the future.</p> <h2>4. Capacity Planning Focus Due to Persistent Cargo Constraints</h2> <p>Who knew and anticipated that cargo movements would bring the constraints we saw in the past year? Movement of goods that we took for granted or perhaps forgotten about reminded all of us about the fragility of our supply chain when cargo is restricted either due to inability to access the cargo, move the cargo or even house the cargo in a cost-effective manner. With a sharp reminder of how critical cargo routes are for the effective movement of goods, we likely need to reimagine how we can reduce cargo constraints by air, sea or roads. Much attention is paid to cargo movements using trucks on the road, but what about other cargo routes?</p> <p>Multi-modal route planning is needed to connect cargo to the supply chain through different routes that don&rsquo;t include single points of failure. For example, major trade routes that connect Asia, Europe and North America were driven by cost considerations, but now they need to be planned based on the route&#39;s availability. We should reconsider how we think about backup routes. What if none exist or they are not cost-effective?</p> <p>Procurement, sourcing and supply chain leaders must work with business leaders to revisit and reimagine how we can do things differently and plan business continuity with minimal impact. Many organizations are exploring local supply chain availability and building up near-shore capabilities that can be more cost-effective in such scenarios.</p> <p>While the events over the past year have taught us a lot about the need to be resilient in many ways, however how we solve it will be dependent on leaders&rsquo; ability to think outside of the box, embrace a diversity of thoughts from those on the front line and adding domain expertise to improve supply chain resiliency.</p> </div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Tags:&nbsp;</div><div class="field-items"><div class="field-item even" rel="dc:subject"><a href="/tags/cybersecurity" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Cybersecurity</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/supplier-risk-management" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Supplier Risk Management</a></div><div class="field-item even" rel="dc:subject"><a href="/tags/logistics" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Logistics</a></div></div></div><div class="field field-name-field-addthis field-type-addthis field-label-hidden"><div class="field-items"><div class="field-item even"><div class="addthis_toolbox addthis_default_style " addthis:title="4 Tips to Improve Supply Chain Resilience - Future of Sourcing" addthis:url="https://www.futureofsourcing.com/4-tips-to-improve-supply-chain-resilience"><a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_linkedin"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_facebook"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_twitter"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_googleplus"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_pinterest_share"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_reddit"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_email"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_print"></a> </div> </div></div></div><div class="field field-name-field-region field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Region:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/regions/global" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Global</a></div></div></div> Mon, 12 Jul 2021 02:00:00 +0000 Purvee Kondal 2023 at https://www.futureofsourcing.com https://www.futureofsourcing.com/4-tips-to-improve-supply-chain-resilience#comments Why You Need to Track Indirect Procurement Category Inflation https://www.futureofsourcing.com/why-you-need-to-track-indirect-procurement-category-inflation <div class="field field-name-field-image field-type-image field-label-hidden"><div class="field-items"><div class="field-item even" rel="og:image rdfs:seeAlso" resource="https://www.futureofsourcing.com/sites/default/files/articles/Why%20You%20Need%20to%20Track%20Indirect%20Procurement%20Category%20Inflation.png"><a href="https://www.futureofsourcing.com/sites/default/files/articles/Why%20You%20Need%20to%20Track%20Indirect%20Procurement%20Category%20Inflation.png" title="Since 2011, global indirect procurement spend has grown by around 7% annually. To take control, you need to start tracking indirect category inflation." class="colorbox" rel="gallery-node-1937-NPIJNggy3Bg"><img typeof="foaf:Image" src="https://www.futureofsourcing.com/sites/default/files/styles/juicebox_medium/public/articles/Why%20You%20Need%20to%20Track%20Indirect%20Procurement%20Category%20Inflation.png?itok=YfE3pBuw" width="624" height="325" alt="Since 2011, global indirect procurement spend has grown by around 7% annually. To take control, you need to start tracking indirect category inflation." title="" /></a></div></div></div><div class="field field-name-field-intro field-type-text-long field-label-hidden"><div class="field-items"><div class="field-item even"> <h1>Why You Need to Track Indirect Procurement Category Inflation</h1> <p><em>Since 2011, global indirect procurement spend has grown by around 7% annually. To take control, you need to start tracking indirect category inflation.</em></p> </div></div></div><div class="field field-name-field-related-news field-type-entityreference field-label-above"><div class="field-label">Related news:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/value-beyond-savings-4-ways-procurement-can-make-an-impact">Value Beyond Savings: 4 Ways Procurement Can Make An Impact </a></div><div class="field-item odd"><a href="/libby-weber-the-importance-of-framing-your-contracts">Libby Weber: The Importance of Framing Your Contracts</a></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even" property="content:encoded"> <p>According to McKinsey, global indirect procurement spend has been <a href="https://www.mckinsey.com/business-functions/operations/our-insights/revolutionizing-indirect-procurement-for-the-2020s#:~:text=There's%20a%20new%20vision%20for,7%20percent%20per%20year%20globally." target="_blank">growing by an estimated 7% each year</a> since 2011. Many of the inflationary factors driving this rise are well outside of most organizations&rsquo; control &ndash; so what can today&rsquo;s procurement teams do to keep these essential costs under control?</p> <p>The short (and deceptively simple) answer is to improve inflation forecasting. Just as they do for their direct categories, procurement teams should be collecting intelligence to help them understand what will happen next in their indirect procurement categories, so they can stay ahead of costly shifts.</p> <p>Armed with that insight, procurement teams can begin negotiating better contracts and deals. They can also start making proactive improvements to sourcing strategies for their indirect procurement categories, helping to keep spend under control.</p> <h2>If the answer is so simple, why aren&rsquo;t procurement teams already doing it?</h2> <p>It sounds simple. But in practice, keeping up with what&rsquo;s happening in major indirect procurement categories can be an extremely challenging task.</p> <p>Subcategories like global shipping, logistics services and real estate are all governed and impacted by a huge number of complex global drivers, regulations and indices.</p> <p>That complexity, paired with an entrenched perception that many of these indirect commodities and services are inflexibly priced, with little room for negotiation, naturally leads procurement teams to focus their efforts elsewhere.</p> <p>The result is that most teams do very little indirect category forecasting, leaving them at the mercy of their global suppliers &ndash; a big reason why spend is slowly creeping upwards every year.</p> <h2>Retaking Control with Market Intelligence Services&nbsp;<a href="https://futureofsourcing.com/understanding-outcome-based-contracts" target="_blank"><img alt="An outcome-based contract is an operational model that requires a strong customer and service provider relationship, trust, and a genuine sharing of risk and reward." src="https://futureofsourcing.com/sites/default/files/Understanding%20Outcome%20Based%20Contracts.png" style="width: 400px; height: 250px; float: right;" /></a></h2> <p>By using the intelligence and forecasting services offered by an expert partner, procurement teams can take the complexity out of understanding shifts in their indirect procurement categories.</p> <p>Those services translate the vast array of global forces impacting prices into easily understandable shifts and trends. When paired with a procurement team&rsquo;s own insights and data, they can enable better supplier, contract and pricing discussions worldwide.</p> <p>Let&rsquo;s look at three key global indirect procurement categories as examples:</p> <h3>Road Transportation</h3> <p>In anticipation of the world returning to its pre-COVID state, organizations of all kinds are restocking and refilling shelves to meet the expected rise in consumer demand.</p> <p>Unfortunately, thanks to COVID restrictions in regions like the EU, and an existing global driver shortage, the volume of available drivers won&rsquo;t be able to scale to meet this demand perfectly.</p> <p>Together, those forces will see trucking costs rise by 3.04% in the U.S., and as much as 5.45% in the U.K., in 2021.</p> <p>However, the easing of COVID restrictions on drivers across the EU means this increase will be far less pronounced in much of mainland Europe.</p> <h3>Ocean Logistics</h3> <p>As manufacturing outputs return to pre-COVID levels, and businesses begin to restock at higher volumes once more, demand for ocean logistics services is also predicted to rise significantly over the coming months.</p> <p>Ocean logistics operators are facing all the same challenges as their road logistics counterparts &ndash; rising demand, worker shortage and COVID-based limitations on movement. However, they&rsquo;re also contending with major regulatory changes.</p> <p>The shift to low-sulphur fuels in particular means that many ships must spend long periods of time out of commission, as they&rsquo;re retrofitted to meet new standards.</p> <p>This means that shipping prices in 2021 will rise even more sharply than trucking costs &ndash; with prices projected to rise by an average of around 13% worldwide.</p> <h3>Warehousing</h3> <p>With the COVID-19 crisis keeping shoppers away from physical stores, many brands are expanding their ecommerce operations. This has caused a surge in demand for warehouse space.</p> <p>In many regions, this demand has been largely offset by reduced manufacturing outputs, and by companies going out of business and therefore freeing up existing warehouse stock.</p> <p>In the APAC region for example, 68% of total shoppers have turned to online channels. But reductions in the volumes of products being manufactured in countries such as China mean that warehouse prices are only projected to increase by 1.37% year on year.</p> <h2>Indirect Inflation Forecasting in Action</h2> <p>Those examples are just three of the areas that a trusted partner can research and evaluate as part of indirect inflation forecast reports.</p> <p>One major CPG company specifically, before engaging with its expert partner in the space, relied purely on its own historical data to forecast indirect spend inflation. So, the company relied on the partner to provide visibility of the macro factors impacting its indirect subcategories that it could use alongside its own data to build up a reliable, personalised view of forecasted inflation.</p> <p>Using projected year-on-year price change forecasts for everything from packaging and pallet pricing to facilities management costs, the company is now empowered to make informed indirect purchasing and contract decisions. Now, the company can negotiate indirect procurement contracts just as shrewdly and confidently as it does its direct procurement agreements.</p> <p>Indirect inflation forecasting is necessary in order to take control of global indirect procurement spending. Just as they do for their direct categories, procurement teams must source robust intelligence to help them understand what will happen next.</p> </div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Tags:&nbsp;</div><div class="field-items"><div class="field-item even" rel="dc:subject"><a href="/tags/indirect-category-inflation" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">indirect category inflation</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/category-management" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Category Management</a></div><div class="field-item even" rel="dc:subject"><a href="/tags/logistics" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Logistics</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/indirect-procurement" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">indirect procurement</a></div></div></div><div class="field field-name-field-addthis field-type-addthis field-label-hidden"><div class="field-items"><div class="field-item even"><div class="addthis_toolbox addthis_default_style " addthis:title="Why You Need to Track Indirect Procurement Category Inflation - Future of Sourcing" addthis:url="https://www.futureofsourcing.com/why-you-need-to-track-indirect-procurement-category-inflation"><a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_linkedin"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_facebook"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_twitter"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_googleplus"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_pinterest_share"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_reddit"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_email"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_print"></a> </div> </div></div></div><div class="field field-name-field-region field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Region:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/regions/global" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Global</a></div></div></div> Wed, 10 Mar 2021 02:00:00 +0000 Ranajit Dey 1937 at https://www.futureofsourcing.com https://www.futureofsourcing.com/why-you-need-to-track-indirect-procurement-category-inflation#comments Logistics Outsourcing Explained: Defining the 3PL, 4PL and 5PL Models https://www.futureofsourcing.com/logistics-outsourcing-explained-defining-the-3pl-4pl-and-5pl-models <div class="field field-name-field-image field-type-image field-label-hidden"><div class="field-items"><div class="field-item even" rel="og:image rdfs:seeAlso" resource="https://www.futureofsourcing.com/sites/default/files/articles/Logistics%20Outsourcing%20%20%281%29.png"><a href="https://www.futureofsourcing.com/sites/default/files/articles/Logistics%20Outsourcing%20%20%281%29.png" title="Logistics Outsourcing" class="colorbox" rel="gallery-node-1815-NPIJNggy3Bg"><img typeof="foaf:Image" src="https://www.futureofsourcing.com/sites/default/files/styles/juicebox_medium/public/articles/Logistics%20Outsourcing%20%20%281%29.png?itok=8HPzKX0U" width="624" height="325" alt="Logistics Outsourcing" title="" /></a></div></div></div><div class="field field-name-field-related-news field-type-entityreference field-label-above"><div class="field-label">Related news:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/b2b-last-mile-delivery-challenges-that-still-exist">B2B last-mile delivery challenges that still exist</a></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even" property="content:encoded"> <p>Cloud-based platforms and globalization have pushed supply chains to new limits and capabilities, creating many new business opportunities for those who can manage the growing complexity.</p> <p>Outsourcing is becoming a common way companies handle these changes and needs, but it can be confusing, especially when new industry terms crop up with little explanation. So, we&#39;re looking at three common logistics outsourcing models to explain what they are and what they can do for your business: the 3PL, 4PL and 5PL.</p> <h1>What Is a 3PL?</h1> <p>Third-party logistics providers (3PLs) are the most familiar outsourcing option for many businesses, especially in the e-commerce space. A 3PL is designed to help individual companies manage their inbound and outbound moves, plus operate warehouses and distribution centers for their clients to use.</p> <p>The company that owns products will work with its manufacturing partners and producers to deliver the goods to a warehouse owned by the 3PL. Then, the 3PL will use its own staff to manage inventory storage, counts and fulfillment of orders. By integrating with sales software &mdash; especially e-commerce tools, but also delivery support for brick-and-mortar operations &mdash; the 3PL can ensure delivery to the end customer.</p> <p>In these scenarios, the 3PL can automate the delivery of tracking and other information to the client. Automation allows this interaction so that a company&rsquo;s customer management software can instantaneously put this in emails and send that to customers are soon as orders are created.</p> <p>Typically, a 3PL will not have its own fleet of trucks or other vehicles. They&#39;ll work with established carriers like FedEx, UPS and USPS to handle freight and shipping. However, some 3PLs do manage a small fleet, not for parcel delivery to final destinations but to move client inventory between distributions locations. This can help the 3PL limit risks in the event of a local disaster or ensure they have proper inventory allocation to reach end-consumers by a specific date.</p> <p>The now-standard two- to three-day shipping options can be much more affordable for 3PLs and their clients when they operate multiple warehouses.</p> <h1>Who Are 4PLs?</h1> <p>Fourth-party logistics companies (4PLs) are logistics outsourcing partners that don&rsquo;t own the physical assets they rely on to support customers. Generally, a 4PL operates more like a consultant that can help run your logistics programs and operations as needed. They can be short-term partners who set you up with a 3PL, carriers or other arrangements that you then simply need to keep to for ongoing support.</p> <p>However, a 4PL can be a long-term partner that manages your ongoing contracts and support, too. In this case, your 4PL will set up your distribution supply chain and manage contracts and requirements with freight companies, 3PLs and other service providers on your behalf. Some <a href="https://futureofsourcing.com/4-major-procurement-trends-to-watch-for-in-2020" target="_blank">procurement support</a> is possible, too.</p> <p>They offer a little more flexibility and can generally integrate with different services based on your options. Their job is to help you accomplish logistics goals and answer questions while also troubleshooting problems, so you don&rsquo;t need to intervene. Not only can they contract with 3PLs and freight carriers, but a 4PL could also work with platforms like <a href="https://www.mothership.com/open-api" target="_blank">Mothership</a> to manage local moves between any of your locations, partners or customers when there&rsquo;s an issue with an existing partner.</p> <p>A 4PL will often work both up and down the supply chain and can be used to manage how goods move from the moment they leave a manufacturer. So, they&rsquo;ll have a lot more data at their fingertips, which they can use or provide to clients to help optimize supply chain moves. It&rsquo;s a way to outsource much more of your operations, including <a href="https://futureofsourcing.com/supplier-relationship-management-in-the-2020s" target="_blank">coordination of suppliers</a>.&nbsp;</p> <h1>How Does a 5PL Operate?</h1> <p>The fifth-party logistics model (5PL) is a level higher and often involves more complex consulting arrangements. Many 5PLs provide support for multiple 3PLs, bringing all of their operations under a single set of agreements and software platforms to handle all sourcing and movement of goods.</p> <p>A 5PL can often negotiate significant freight and shipping discounts with carriers because they &quot;control&quot; all of the parcels and other shipments coming from multiple large warehouses. They&#39;re a large-scale logistics aggregator. There&#39;s a focus for 5PLs on minimizing service and shipping costs and this comes with significant demand for software to look at your supply chain from manufacturing through final delivery.</p> <p>Due to the way contracts and data are handled, you might benefit from a 5PL&rsquo;s negotiation power even if you&rsquo;re working directly with a 3PL. Or, you may engage directly with a 5PL and have them handle your entire supply chain from start to finish. You&rsquo;ll empower them to select what they feel is the best way to move your goods.</p> <p>If you consider working with a 5PL, it&rsquo;s a smart idea to iron out exactly how customer service is managed. You&rsquo;ll want to define how to handle packaging errors, damaged products, mis-picks and returns. Typically, you&rsquo;ll want the customer to be able to turn to you for support, and have integration with the 5PL so you can seamlessly deliver information and solve issues without the customer having to deal with any contracted party.</p> <h1>A Mix of Control and Choice</h1> <p>The 3PL, 4PL and 5PL models are just the starting point of <a href="https://redstagfulfillment.com/3pl-4pl-5pl-explained/" target="_blank">many new logistics companies</a> and services. Determining which is right for you will depend on your company&rsquo;s size and shipping volume, as well as the amount of direct control you want to maintain over your supply chain.</p> <p>Look at what you believe you must control, the choices you&rsquo;re willing to give up and the value of convenience for empowering others to make decisions or troubleshoot on your behalf. You might find that a 3PL helps you best ensure that customer service can be managed to specific expectations, while a 4PL can be a logistics concierge ready to take care of things for you as you need. If you&rsquo;re a large operation or are considering splitting inventory between multiple 3PLs, a 5PL could help you do this best and cut costs, though you&rsquo;re putting more of your operations in their hands.</p> <p>As with any logistics decision, it&#39;s smart to discuss specifics with providers and walk-in with something like a <a href="https://redstagfulfillment.com/fulfillment-company-questionnaire/" target="_blank">standard fulfillment questionnaire</a> that makes it easy to evaluate each fairly and equally.</p> </div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Tags:&nbsp;</div><div class="field-items"><div class="field-item even" rel="dc:subject"><a href="/tags/logistics" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Logistics</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/logistics-outsourcing" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Logistics Outsourcing</a></div><div class="field-item even" rel="dc:subject"><a href="/tags/outsourcing" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Outsourcing</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/third-party-logistics" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Third-party logistics</a></div><div class="field-item even" rel="dc:subject"><a href="/tags/fourth-party-logistics" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Fourth-party logistics</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/fifth-party-logisti" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">fifth-party logisti</a></div></div></div><div class="field field-name-field-addthis field-type-addthis field-label-hidden"><div class="field-items"><div class="field-item even"><div class="addthis_toolbox addthis_default_style " addthis:title="Logistics Outsourcing Explained: Defining the 3PL, 4PL and 5PL Models - Future of Sourcing" addthis:url="https://www.futureofsourcing.com/logistics-outsourcing-explained-defining-the-3pl-4pl-and-5pl-models"><a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_linkedin"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_facebook"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_twitter"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_googleplus"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_pinterest_share"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_reddit"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_email"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_print"></a> </div> </div></div></div><div class="field field-name-field-region field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Region:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/regions/global" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Global</a></div></div></div> Tue, 07 Jul 2020 22:21:30 +0000 Jake Rheude 1815 at https://www.futureofsourcing.com https://www.futureofsourcing.com/logistics-outsourcing-explained-defining-the-3pl-4pl-and-5pl-models#comments B2B last-mile delivery challenges that still exist https://www.futureofsourcing.com/b2b-last-mile-delivery-challenges-that-still-exist <div class="field field-name-field-image field-type-image field-label-hidden"><div class="field-items"><div class="field-item even" rel="og:image rdfs:seeAlso" resource="https://www.futureofsourcing.com/sites/default/files/articles/last-mile%20delivery.png"><a href="https://www.futureofsourcing.com/sites/default/files/articles/last-mile%20delivery.png" title="last-mile delivery" class="colorbox" rel="gallery-node-1799-NPIJNggy3Bg"><img typeof="foaf:Image" src="https://www.futureofsourcing.com/sites/default/files/styles/juicebox_medium/public/articles/last-mile%20delivery.png?itok=Uu3j0LMo" width="624" height="325" alt="last-mile delivery" title="" /></a></div></div></div><div class="field field-name-field-related-news field-type-entityreference field-label-above"><div class="field-label">Related news:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/autonomous-last-mile-delivery-in-e-commerce">Autonomous Last-Mile Delivery in E-commerce</a></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even" property="content:encoded"> <p>The phrase &ldquo;last-mile logistics&rdquo; refers to the process of moving products from the last transit stop to the final destination, which may be anywhere from one to one thousand miles. Last-mile logistics does not involve transporting goods from a single route to a single destination like port-to-port or terminal-to-terminal logistics. Instead, it involves road transportation primarily to complete the final delivery stage. It is also one of the biggest logistics challenges that businesses face.</p> <p>Consumers have come to expect the same or next-day delivery. Expectations on the B2B side are also rising, with buyers demanding the same convenient experience they are used to as consumers. <a href="https://www.capgemini.com/wp-content/uploads/2019/01/Report-Digital-%E2%80%93-Last-Mile-Delivery-Challenge1.pdf" target="_blank">55%</a> of those surveyed in a Capgemini Research Institute report claimed they would switch to a competing brand if it offers a faster delivery service. However, the complexities and costs of B2B logistics still make meeting accelerated delivery demands difficult.</p> <p><a href="https://futureofsourcing.com/media/2571"><img alt="last-mile delivery" src="https://futureofsourcing.com/sites/default/files/Last%20mile%20delivery.png" style="border-width: 0px; border-style: solid; width: 624px; height: 388px;" /></a></p> <p>On the B2B side, shippers deal with much larger purchase orders and deliveries that are more consistent over an extended period due to customer contracts. Handling these deliveries poorly can result in damaged relationships. B2B sellers must monitor the delivery process closely; however, it can be difficult for small-to-midsize companies to monitor their operations and deliveries efficiently and cost-effectively. And while there are too many factors involved in last-mile delivery for a single solution to address, new logistics approaches backed by technology are helping businesses improve their B2B delivery processes and gain a competitive edge, especially during this challenging time.</p> <h1>Decreasing Delivery Times</h1> <p>The &lsquo;Amazon effect&rsquo; is nothing new in the logistics industry and many consumers now value the speed of delivery over any savings on orders. In the B2C world, the additional cost that consumers pay to receive their goods faster provides shippers with a big incentive to optimize their last-mile logistics as much as they can.</p> <p>For B2B shippers, providing faster deliveries can mean a significant competitive advantage. One strategy being used to get products closer to end customers is establishing local warehouses in densely populated areas. These smaller delivery hubs help decrease last-mile delivery times and improve delivery efficiency.</p> <p>Many B2B sellers have also decreased order size minimums so they can balance out the added costs of managing more warehouses. <a href="https://www.capgemini.com/wp-content/uploads/2019/01/Report-Digital-%E2%80%93-Last-Mile-Delivery-Challenge1.pdf" target="_blank">74%</a> of customers who said they were satisfied with their delivery experience intended to increase their purchase levels by 12% with their preferred seller. Furthermore, <a href="https://www.capgemini.com/wp-content/uploads/2019/01/Report-Digital-%E2%80%93-Last-Mile-Delivery-Challenge1.pdf" target="_blank">55%</a> of consumers said that a two-hour delivery option would increase their loyalty. Still, only 19% of companies provide two-hour or faster delivery options.</p> <p>Consumers located in rural areas have become accustomed to receiving goods with same or next-day delivery, and local businesses are no exception. B2B sellers must be able to deliver anywhere and at any time to remain competitive.</p> <h1>Consolidating and Sharing Resources</h1> <p>The sharing model has become popular in the B2C last-mile delivery space, with companies like Uber, Glovo, Postmates and many others now competing alongside UPS, FedEx, DHL and the USPS. This relatively new delivery model is starting to gain traction in the B2B logistics space as well. Companies like uShip, Uber Freight, Freightos and CargoX have developed new models to share resources and to optimize and reduce the costs involved with making larger B2B shipments.</p> <p>For one, the traditional delivery business models that involve trucking companies owning their entire fleets are changing. By bringing in contract truck drivers, local companies have more flexibility when it comes to fleet size and can scale fleets up or down easily depending on demand. Hybrid fleet models are also emerging, allowing companies to create fleets through a mix of contracts, third-party partners and their own workers.</p> <p>Route optimization software solutions are also playing substantial roles in helping businesses forecast future demands, consolidate orders and identify new opportunities for improvement. Route optimization technology can create the best combination of routes and deliveries in order to minimize the miles per delivery and total miles driven. Driver shortages are common and route optimization software can also help businesses gain more visibility into the schedules of contractors, employees and other partners.</p> <p>Big data is also having a real impact on daily operations in the B2B last-mile delivery industry. &nbsp;The use of data can help pinpoint weaknesses in last-mile operations, such as communication problems during delivery providing the ability to solve any unexpected issues in real-time. Several external factors can affect last-mile operations &ndash; such as traffic, changes in fuel prices, etc. &ndash; and businesses need to be able to analyze these factors in real-time to make decisions.</p> <h1>Entering the Next Phase of B2B Last-Mile Delivery</h1> <p>Though many B2B last-mile delivery challenges still exist, technology companies are addressing them with innovative new solutions every day. As more businesses turn to technology to optimize their operations during this surge in delivery demand, the B2B last-mile delivery experience is steadily becoming more like the B2C experience consumers have come to expect.</p> </div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Tags:&nbsp;</div><div class="field-items"><div class="field-item even" rel="dc:subject"><a href="/tags/last-mile-delivery" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">last-mile delivery</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/b2b" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">B2B</a></div><div class="field-item even" rel="dc:subject"><a href="/tags/logistics" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Logistics</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/cost-optimization" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">cost optimization</a></div><div class="field-item even" rel="dc:subject"><a href="/tags/big-data" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Big Data</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/supply-chain" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Supply Chain</a></div></div></div><div class="field field-name-field-addthis field-type-addthis field-label-hidden"><div class="field-items"><div class="field-item even"><div class="addthis_toolbox addthis_default_style " addthis:title="B2B last-mile delivery challenges that still exist - Future of Sourcing" addthis:url="https://www.futureofsourcing.com/b2b-last-mile-delivery-challenges-that-still-exist"><a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_linkedin"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_facebook"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_twitter"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_googleplus"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_pinterest_share"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_reddit"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_email"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_print"></a> </div> </div></div></div><div class="field field-name-field-region field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Region:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/regions/global" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Global</a></div></div></div> Tue, 23 Jun 2020 22:22:45 +0000 Geoffrey Michener 1799 at https://www.futureofsourcing.com https://www.futureofsourcing.com/b2b-last-mile-delivery-challenges-that-still-exist#comments Is the Tesla Semi the next big thing in logistics? https://www.futureofsourcing.com/is-the-tesla-semi-the-next-big-thing-in-logistics <div class="field field-name-field-image field-type-image field-label-hidden"><div class="field-items"><div class="field-item even" rel="og:image rdfs:seeAlso" resource="https://www.futureofsourcing.com/sites/default/files/articles/tesla%20semi624x325.jpg"><a href="https://www.futureofsourcing.com/sites/default/files/articles/tesla%20semi624x325.jpg" title="Is the Tesla Semi the next big thing in logistics? " class="colorbox" rel="gallery-node-1274-NPIJNggy3Bg"><img typeof="foaf:Image" src="https://www.futureofsourcing.com/sites/default/files/styles/juicebox_medium/public/articles/tesla%20semi624x325.jpg?itok=YQqPm7Q3" width="624" height="325" alt="" title="" /></a></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even" property="content:encoded"> <div style="clear:both;"> <div>Well over 100 years ago, the gasoline powered internal combustion engine revolutionized the &ldquo;modern&rdquo; transportation industry. Back then, the term modern could be used for technologies like the linotype machine or the electric fan. Fast forward to today and we are standing on the brink of an innovation that is set to rewrite transportation, and in turn, the logistics Industry. &nbsp;</div> <div>&nbsp;</div> <div>Tesla Inc., Elon Musk&rsquo;s US-based company specializing in electric vehicles, has fast grown into the leader in electric vehicles in the auto sector. Their latest product &ndash; Tesla Semi &ndash; has been called the safest and the most comfortable truck ever. That&rsquo;s not Elon bragging, those are from third-party reviews.&nbsp;</div> </div> <div style="clear:both;"> <p paraeid="{5514423c-d5b2-4137-9007-03fc97773434}{87}" paraid="1252698657"><span xml:lang="EN-IN">The&nbsp;</span><span xml:lang="EN-IN">Se</span><span xml:lang="EN-IN">mis are</span><span xml:lang="EN-IN">&nbsp;expected to be priced at $150,000 for the 300-mile-range variant (the truck can cover 300 miles in a single charge) and $180,000 for the 500-mile-range variant.&nbsp;</span><span xml:lang="EN-IN">Here are some&nbsp;</span><a href="http://fortune.com/2017/11/25/tesla-semi-price-180000/" target="_blank"><span xml:lang="EN-IN">interesting</span><span xml:lang="EN-IN">&nbsp;facts&nbsp;</span></a><span xml:lang="EN-IN">about the</span><span xml:lang="EN-IN">se</span><span xml:lang="EN-IN">&nbsp;mean machine</span><span xml:lang="EN-IN">s</span><span xml:lang="EN-IN">:&nbsp;</span></p> </div> <p><img alt="" src="http://www.futureofsourcing.com/sites/default/files/Tesla%20Facts%20Sheet%20Image.png" /></p> <div>The Tesla Semi seems like the more economical choice when compared to the common truck, not to mention a smaller impact on the environment. But cost reduction and eco-friendliness are not the only benefits that this smart truck offers to companies involved with the logistics industry.&nbsp;</div> <div>&nbsp;</div> <div>A huge problem looming over the trucking industry in North America is the shortage of truck drivers, which is limiting the supply of truckload capacity, consequently pushing costs higher. A Tesla Semi is a semi-autonomous vehicle which can be operated for an entire day, which is three times as much as a conventional truck driven by a single driver. This presents an opportunity to increase capacity with a reduced fleet. &nbsp;</div> <div>&nbsp;</div> <div>The metamorphosis is in motion: trucking super users such as UPS, DHL, JB Hunt, Ryder and JK Moving are just some of the big names that have already pre-ordered Tesla Semis, which are set to roll out in 2019. Even organizations with significant logistics operations like Pepsi, Anheuser-Busch and Walmart are leading the race to digitize their truckload transportation. &nbsp;</div> <div>&nbsp;</div> <div>With all the buzz around this truck-sized disruption, questions remain to be answered. The recent death associated with an autonomous Uber vehicle has raised even more safety concerns. Even though the Tesla Semi is semi-autonomous, there are laws governing how long a driver can spend behind the wheel. Does it matter if the driver is actually driving or not? Will there be special training and new classes of licenses for operators of autonomous commercial vehicles? We are still in the learning stages.&nbsp;</div> <div>&nbsp;</div> <div>It may take a while to figure out all these questions because for all this talk of revolutionizing the delivery industry, even Tesla has failed to deliver their products on time.</div> </div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Tags:&nbsp;</div><div class="field-items"><div class="field-item even" rel="dc:subject"><a href="/tags/logistics" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Logistics</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/supply-chain-management" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Supply Chain Management</a></div><div class="field-item even" rel="dc:subject"><a href="/tags/tesla" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Tesla</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/disruptive-technology" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Disruptive Technology</a></div><div class="field-item even" rel="dc:subject"><a href="/tags/automation" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Automation</a></div></div></div><div class="field field-name-field-addthis field-type-addthis field-label-hidden"><div class="field-items"><div class="field-item even"><div class="addthis_toolbox addthis_default_style " addthis:title="Is the Tesla Semi the next big thing in logistics? - Future of Sourcing" addthis:url="https://www.futureofsourcing.com/is-the-tesla-semi-the-next-big-thing-in-logistics"><a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_linkedin"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_facebook"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_twitter"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_googleplus"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_pinterest_share"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_reddit"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_email"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_print"></a> </div> </div></div></div><div class="field field-name-field-region field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Region:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/regions/global" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Global</a></div></div></div> Fri, 07 Sep 2018 14:00:40 +0000 Tejas Thakur 1274 at https://www.futureofsourcing.com https://www.futureofsourcing.com/is-the-tesla-semi-the-next-big-thing-in-logistics#comments All in the Game https://www.futureofsourcing.com/all-in-the-game <div class="field field-name-field-image field-type-image field-label-hidden"><div class="field-items"><div class="field-item even" rel="og:image rdfs:seeAlso" resource="https://www.futureofsourcing.com/sites/default/files/articles/FOS%20Digital_Kate%20Vitasek_Slider%20Graphic%20%281%29%20%281%29_120.png"><a href="https://www.futureofsourcing.com/sites/default/files/articles/FOS%20Digital_Kate%20Vitasek_Slider%20Graphic%20%281%29%20%281%29_120.png" title="All in the Game" class="colorbox" rel="gallery-node-1146-NPIJNggy3Bg"><img typeof="foaf:Image" src="https://www.futureofsourcing.com/sites/default/files/styles/juicebox_medium/public/articles/FOS%20Digital_Kate%20Vitasek_Slider%20Graphic%20%281%29%20%281%29_120.png?itok=JMqtMfqD" width="624" height="325" alt="" title="" /></a></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even" property="content:encoded"> <p><em>This article originally appeared in&nbsp;</em>Outsource<em>&nbsp;Magazine Issue #23 Spring 2011</em></p> <p>Leading academics charted a path that challenges the conventional definition of winning. Smart companies are applying these concepts, showing that win-win thinking is not just something nice to say: it&rsquo;s smart business &ndash; and really is beautiful&hellip;</p> <p>No one plays to lose in life or in business. You&rsquo;ve all heard the clichés and their infinite variations: &ldquo;Win at all costs.&rdquo; &ldquo;Winning isn&rsquo;t everything, it&rsquo;s the only thing.&rdquo; &ldquo;Losing is for losers.&rdquo; &ldquo;Nice guys finish last.&rdquo;&nbsp; You get the idea.</p> <p>Smart companies are starting to challenge the winner-takes-all approach by applying what is popularly referred to as win-win thinking. Now I know that &ldquo;win-win&rdquo; itself is a perhaps an overindulged buzzword, used by companies indiscriminately no matter the true nature of the deal at hand. But companies like Microsoft and Accenture have come to realise that it&rsquo;s not just something nice to say; applying win-win thinking can bring real value and bottom-line benefits.</p> <p>For Microsoft, these benefits are the kind that Henric Häggquist, Sr. Director of Fin Ops Global BPO Management, referred to as &ldquo;transformational&rdquo; when the team accepted the International Association for Outsourcing Professionals&rsquo; (IAOP) GEO Award for Innovation.&nbsp; The award is given to a company that has recently implemented either a new outsourcing relationship or new outsourcing approach that is groundbreaking and worth special attention by other organisations.</p> <p>Microsoft and Accenture have learned that winning is about forging collaborative, innovative and flexible performance-based relationships. Researchers at the University of Tennessee and I have come to describe this approach as Vested Outsourcing because companies shun the conventional short-term,&nbsp; transaction-based model for outsource agreements in favor of working together to reach mutually beneficial goals &ndash; which I refer to as Desired Outcomes. While many companies are saying win-win, few in my opinion really adopt true collaborative relationships that can drive the kind of innovation companies are yearning for. That is because business people say partnership, but the legal and contracting people rarely contract for partnership. Case in point: how can you have a real partnership when your contract has a 30-day term for convenience?</p> <p><strong>Win-Win Thinking: It&rsquo;s Not Only Real, It is Really Beautiful</strong><br />Work by leading academics has proven win-win approaches are not only real &ndash; they are really beautiful. In fact, there is an entire discipline of economics devoted to win-win thinking known as behavioural economics or game theory. Technically speaking, behavioural economics is the study of incentives and strategic interactions. Its application, dating back more than 70 years, is also popularly referred to as game theory because it attempts to model human behaviours, especially when there is an incentive at stake. Specifically, game theory attempts to model how an individual&rsquo;s success in making a strategic decision depends on the choices of others.</p> <p>Win-win thinking came into the general public&rsquo;s consciousness with the release of the film&nbsp;<em>A Beautiful Mind</em>, which profiled the genius of mathematician John Nash. If you&rsquo;ve seen the film, think back to the bar scene where Nash and his friends have their sights set on the same blonde woman, during which Nash gets a &ldquo;eureka moment.&rdquo; In the scene, Nash says, &ldquo;If we all go for the blonde, we block each other, not a single one of us is going to get her. So, then we go for her friends, but they will all give us the cold shoulder, because nobody likes to be second choice. But what if no one goes for the blonde? We don&rsquo;t get in each other&rsquo;s way, and we don&rsquo;t insult the other girls. It&rsquo;s the only way we win (and go home with a girl).&rdquo; He goes on to say: &ldquo;The best result would come from everyone in the group doing what&rsquo;s best for himself, and the group.&rdquo;</p> <p>Deeply rooted in mathematics, Nash published his theory of equilibrium in 1950. Nash went on to devote his life to studying the concept of win-win thinking and in 1994 he won a Nobel Prize that he shared with John C. Harsanyi and Reinhard Selten. After Nash won the Nobel Prize, the study of game theory and win-win thinking really took off. Modern game theorists have taken the concepts of game theory to new levels by applying the concepts to cooperative, or win-win, games.</p> <p>So far, eight Nobel Prizes have been awarded to Game Theorists. In short, they have proven that win-win thinking is not just a buzzword. It is real, and it is really beautiful.</p> <p><strong>Playing the Game</strong><br />There are two types of games that can be played: zero-sum games and non-zero sum games. In the case of zero-sum games the size of the pie is fixed. For one participant to get more, other participants get less. In non-zero sum games, the size of the pie is not fixed; therefore everyone can do better, or much worse, depending on their interactions.</p> <p>One of the core principles of game theory that Nash made famous &ndash; and the one that&rsquo;s of particular interest to Vested Outsourcing &ndash; is the concept of equilibrium. Equilibrium is also referred to a solution concept. In essence, applying game theory involves developing a strategy that will optimise the payout for all players &ndash; not just transfer part of a fixed payout. In other words, the power of partnerships, relationships and collaboration is not to accept the status quo, but to look for ways to change the game by playing together to create value that currently does not exist for either party.</p> <p>For example, can a call centre help drive customer satisfaction or customer loyalty? Or how can a supply chain service provider like Unipart Logistics help Jaguar move from worst to first in customer satisfaction rankings of service parts maintenance?&nbsp; The duo did just that over the last three years, as ranked by JD Power and Associates.</p> <p>At the heart of game theory is the statistical rigour that illustrates what can happen when people set out to develop a win-win solution: both parties can indeed go home winners.</p> <p>Robert Axelrod&rsquo;s work helped put the concept of win-win game theory on the map in his book&nbsp;<em>The Evolution of Cooperation</em>. The book describes computer games with participants from around the world, focusing on determining how individuals in groups are likely to interact with others act in a competitive situation. These computer game simulations prove that when individuals cooperate they came out better than when they do not cooperate.</p> <p>The lessons are simple but very profound: playing a game together to achieve a mutual goal is always better than playing it with self-interest in mind. Working together towards a win-win strategy is always better than a win-lose strategy aimed at promoting self-interest.</p> <p><strong>The 21st Century Definition of Winning is Collaboration</strong><br />So how can you apply these lessons to an outsourcing situation? One of the most common outsourcing problems occurs when companies fall into the conventional trap of beating up their suppliers on price. They wrongly assume that they are operating in a zero-sum game and that the only way to make money is to extract it from the supplier base. The total gains and losses will add to zero. One side wins, one side loses.</p> <p>This zero sum-game attitude is typical in conventional outsourcing negotiations. And that is why too many deals fail to deliver the benefits that are possible for all parties.&nbsp; This is particularly true when it comes to driving innovation. Think back to my point about having a contract with a 30-day term of convenience. What supplier in its right mind would invest its own capital to develop innovations for a client&rsquo;s business if there is the risk of being fired without cause?</p> <p>A true win-win approach requires effort and commitment by all parties. &ldquo;Getting to We&rdquo; is the essential precondition &ndash; the philosophical mantra, if you will &ndash; that forms the architecture for a collaborative, trusting endeavour while keeping narrow, win-at-all-costs urges at bay. It is really not possible to have a successful Vested Outsourcing agreement and framework in place without first committing to a &ldquo;What&rsquo;s in it for We&rdquo; &ndash; or WIIFWe &ndash; approach.</p> <p>The problem is that businesspeople often have a blind spot when it comes to the very notion of collaboration. Many organisations firmly believe, and even boast, that they have solid partnerships in place. They brag about &ldquo;partnership&rdquo; and &ldquo;win-win,&rdquo; but my experience and research has found that individuals and companies often revert to selfish &ldquo;What&rsquo;s in it for Me&rdquo; (WIIFMe) behaviours when they sit down at the negotiation table. This is a natural instinct, seen all the time in almost every human endeavour. Many organisations train procurement and sales professionals in the art of negotiation tactics designed to give their organisation leverage and a winning edge. It is exceedingly tough to change a mind-set to WIIFWe.</p> <p>In order to be a true partner, the service provider and the company outsourcing must have a vested interest in each other&rsquo;s success. This starts with a mutual commitment to each other &ndash; and each other&rsquo;s success &ndash; over the long haul. The mentality must shift from an &ldquo;us-versus-them&rdquo; to a &ldquo;we&rdquo; philosophy &ndash; and that&rsquo;s where game theory provides the foundation for that essential leap.</p> <p>The bottom line is that behavioural economics is real, and powerful. Outsourcing contracts written in the zero-sum mind-set are flawed structures because they create inefficient contractual agreements and uneasy relationships. Once this problem is recognised, smart business leaders will begin to think strategically about designing a win-win outsourcing solution with their most strategic suppliers so that all parties can work together for a better overall solution.</p> <p><strong>Together drives Transformation</strong><br />I believe &ldquo;winner-take-all&rdquo; thinking is fast becoming passé, especially in light of recent economic and financial history. I also predict the 21st century definition of winning in a the world of outsourcing will be vested, and will come when both parties create true collaborative business agreements where they have a vested interest in each other&rsquo;s success.</p> <p>I encourage you to learn the new game of outsourcing by joining us at the University of Tennessee for one of our open enrollment classes. You can learn more by visiting our dedicated website at&nbsp;<a href="http://www.vestedoutsourcing.com/" target="_blank">www.vestedoutsourcing.com</a>&nbsp;and signing up for one of our classes at&nbsp;<a href="http://www.vo.utk.edu/" target="_blank">www.vo.utk.edu</a></p> </div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Tags:&nbsp;</div><div class="field-items"><div class="field-item even" rel="dc:subject"><a href="/tags/academic" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Academic</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/awards" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Awards</a></div><div class="field-item even" rel="dc:subject"><a href="/tags/behavioural-economics" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Behavioural Economics</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/collaboration" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Collaboration</a></div><div class="field-item even" rel="dc:subject"><a href="/tags/desired-outcomes" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Desired Outcomes</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/equilibrium" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Equilibrium</a></div><div class="field-item even" rel="dc:subject"><a href="/tags/game-theory" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Game Theory</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/innovation" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Innovation</a></div><div class="field-item even" rel="dc:subject"><a href="/tags/transformation" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Transformation</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/logistics" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Logistics</a></div><div class="field-item even" rel="dc:subject"><a href="/tags/vested-outsourcing" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Vested Outsourcing</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/zero-sum" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Zero-Sum</a></div></div></div><div class="field field-name-field-addthis field-type-addthis field-label-hidden"><div class="field-items"><div class="field-item even"><div class="addthis_toolbox addthis_default_style " addthis:title="All in the Game - Future of Sourcing" addthis:url="https://www.futureofsourcing.com/all-in-the-game"><a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_linkedin"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_facebook"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_twitter"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_googleplus"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_pinterest_share"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_reddit"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_email"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_print"></a> </div> </div></div></div><div class="field field-name-field-region field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Region:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/regions/global" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Global</a></div></div></div> Tue, 05 Apr 2011 17:00:00 +0000 Kate Vitasek 1146 at https://www.futureofsourcing.com https://www.futureofsourcing.com/all-in-the-game#comments