In our previous blog post, we introduced the concept of XPL—the new operational mindset powered by new capabilities, technologies, and ecosystem partners—that can help a company transform its logistics operations to be better suited to today’s disruptive environment. In this installment, we take a closer look at the challenges shippers today are grappling with—and that XPL is designed to address.
With strong consumer spending and steady economic growth, demand today is extremely high. But it’s also getting more difficult to control, as customer expectations continue to undergo rapid and extensive changes. According to supply chain leaders participating in Accenture Strategy’s Future of Supply Chain research, customers increasingly demand a wider selection (71%) of customized (76%), reliable (73%), and sustainable (69%) products delivered as rapidly as possible (76%).
In other words, customers are quickly becoming hyper-local segments of one, each with their unique requirements, behaviors, and preferences. And every one of these segments is vital to incremental growth, so they can’t be ignored.
Shippers are working hard to keep up. But they keep hitting the wall in the form of familiar constraints: existing platforms, delivery systems, capabilities, and organization structure that are based on the “old” customer expectation of greatness. The “new” expectations, a symptom of today’s multichannel, digital world, are challenging these networks built to be hyper-productive in what was largely a traditional brick and mortar world. Worse, customer demand currently outstrips the supply of resources to fulfill it, leading to skyrocketing logistics costs.
Shippers have tried to modify their operations through incremental improvements. But making more significant change is akin to turning operational battleships into jet skis—an effort that’s hindered by disparate processes that are not integrated across the supply chain, lack of operational visibility due to organizational silos, and limitations in technology and skills needed to drive the change. Transforming the battleship takes a lot of effort and money, not to mention time—which shippers today simply don’t have.
For many, the solution has been to turn over their logistics operations to a third-party logistics services provider (3PL). The problem is, traditional 3PLs also are falling behind. Their entire business has been built to satisfy the requirements of the traditional demand model - less personalized and more predictable - and is effectively incompatible (operationally and financially) with where their customers are headed. Yet 3PLs have been slow to make the strategic shifts in their own businesses to help shippers better serve their customers.
On top of it all, by outsourcing their logistics operations to gain a cost advantage and offload overhead costs, major shippers have effectively “hollowed out” their logistics and supply chain talent - effectively surrendering the talent development and innovation pipeline to 3PLs. Reversing that talent decline won’t be easy.
The upshot: Shippers are suffering a one-two punch of failing to consistently meet customers’ expectations while incurring rising costs inherent in their increasingly inefficient model. And many aren’t quite sure where to go from here.
So what’s the answer? In our experience, it’s shifting to an “asset light” logistics network powered by XPL, which we explore in our next post.