A NEW OPPORTUNITY FOR LSP’S AND THEIR CLIENTS

In the several decades I have been in the supply chain industry, I have seen any number of changes in almost every aspect of the industry. However in my opinion, there are just three developments that have made more of an impact than everything else combined – globalization, technology, and Walmart. All three have influenced supply chain managers to adopt new mindsets and develop new skills and processes. Walmart, in particular, has raised the level of warehouse and trucking operations to an art form; and could aptly be called a state of the art supply chain that sells stuff.

But now there is a fourth significant development – the dramatic changes in customer ordering patterns and expectations. With the increase in on-line purchases, expected to total $1.4 trillion by 2015, consumers have become more demanding and overnight service is no longer enough. With an increasing frequency, buyers are requesting same day delivery. And ready, willing, and to a large extent able to make that happen is a companion development – possibly even more of a game changer than Walmart – Amazon.com. Since 2010, Amazon has spent well over $15 billion on new distribution centers. It now has over 100 facilities, and more are planned. Recently, they have begun adding sortation centers to which shipments are made from fulfillment centers and consolidated for last mile deliveries. They expect to have 15 of these by next year. Never mind that they don’t have stores. Their goal is to be in a position to deliver most of their orders the same day they are received, and most important, control them as long as they can.

Attempting to implement and maintain these levels of customer service is going to keep other supply chain managers up at night. While most of these developments have been in the business to consumer sector, I expect these concepts to spread to business to business marketing as well, although probably not to such an extent. But certainly in the B to C sector I believe it is quite possible that same day delivery could become the new norm.

To me this suggests a wonderful opportunity for a company to utilize a logistics service provider in a city that has easy access to major markets. The LSP can offer a service that provides various manufacturers an opportunity to consolidate their products with those of other manufacturers for same day delivery. Savings in freight delivery costs would almost offset the extra warehousing costs. I don’t believe many firms can afford to take the Amazon approach of building huge facilities in multiple markets. Nor do I think they should. Right now I believe many smaller competitors are frustrated by Amazon’s aggressive approach; but there is no need to be. There are several different ways to skin the same cat, and an efficient logistics service provider can provide a sharp knife.

Written By: Clifford F. Lynch