As we discussed in our previous post, shippers today are struggling to meet intensifying demand with a logistics model that was built for a different era and type of customer. The stark reality is that doing things better—i.e., continually improving on the existing model—won’t cut it any longer. Gone are the days of offloading logistics to a 3PL and declaring victory. Companies should do something fundamentally different. That “different,” according to 79 percent of executives in an Accenture Strategy study, is to replace the traditional fixed network with a flexible, asset-light model. An asset-light model helps a company to serve multiple customer segments through multiple logistics networks that are based on shared assets and that leverage partners and digital tools to foster large-scale agility and responsiveness.
In an asset-light model, a shipper maintains its own core capabilities to meet the requirements of core customer segments. It then uses providers across its ecosystem to fulfill incremental demand from much more granular segments that it can’t handle effectively or profitably by itself. These providers could be companies that come together to share resources and improve utilization for mutual benefits. They also could be third-party platforms that provide a particular service or capability—such as last-mile fulfillment, reverse logistics, crowd-sourced on-demand delivery, warehousing, and others that could be mobilized quickly to respond to unique demands. With the right kinds and number of partners, a shipper could theoretically activate thousands of different fulfillment networks at a moment’s notice when needed.
XPL can be a catalyst for logistics transformation by helping shippers identify the new ecosystem that underpins the asset-light model of the future. In an XPL environment, traditional vendors should still be a part of the logistics ecosystem. However, shippers should broaden their ecosystem to include companies with innovative, disruptive technologies that can reshape key aspects of their logistics operations.
A great example is Breakthrough Fuel LLC, which has fundamentally changed how shippers approach fuel surcharges. Breakthrough’s technology helps shippers to calculate a surcharge based on real-time fuel prices in the cities between which they’re actually shipping, rather than on the Department of Energy Index that’s calculated based on the average of fuel prices nationally. Carriers still get reimbursed for fuel-cost variability, but shippers avoid over-compensating carriers based on an inflated national average. The savings for a company with thousands of freight movements annually can be substantial. For instance, one of the largest arts and crafts retailers in the United States reduced its fuel costs by 30% in its first year of using Breakthrough’s technology.i
Another example is Peloton Technology, which has developed a system that digitally connects two trucks on the road via direct Vehicle to Vehicle (V2V) communications. This system allows the rear truck to react immediately to what the front truck is doing—meaning, the trucks accelerate and brake simultaneously and, thus, can safely operate more closely together to form a platoon. The “drafting” effect that platooning creates - similar to what race cars on a track experience - reduces fuel consumption on average by 4.5 percent for the lead truck and 10 percent for the following truck - or 7 percent overall.ii
These are just two examples of innovative technologies that can dramatically improve logistics operations. And the number of such vendors continues to grow rapidly, making it difficult for shippers to continually identify, monitor, and vet new vendors that could bring to the table truly transformative capabilities. Emerging XPL service providers can help. They’re plugged into all the relevant networks, so they can effectively sort through the available options, keep on top of new vendors and technologies as they emerge, and evaluate vendors’ potential role in and impact on a shipper’s ecosystem.
But creating the right ecosystem is only part of the battle. Another huge challenge for shippers in an XPL world is orchestrating the ecosystem in concert with suppliers and customers. We tackle that topic in our next and final installment in this series.
i Source: https://www.breakthroughfuel.com/blog/arts-crafts-retailer-case-study/, accessed July 20, 2018
ii Source: https://peloton-tech.com/, accessed July 20, 2018