Almost every consumer good will have been transported by a third-party logistics provider at some point in its journey to the end consumer. MHD catches up with Joe Couto, CEO at Körber Supply Chain APAC to find out where the challenges and opportunities lie for this crucial part of the logistics puzzle.
As we move further into corporate reporting season in Australia, the impact of COVID-19 on the country’s largest corporations is unravelling.
Over the past few weeks, the vast majority of share market listed companies have updated investors on their results for the past financial year, revealing the true cost of COVID-19.
Never before has the Australian business sector seen a reporting season like this, with a global health pandemic, the first recession in Australia in 29 years and an unprecedented level of government financial support to prop businesses up during the challenge of a lifetime.
However, it’s not all doom and gloom as some companies have navigated through the challenges of the pandemic and pivoted their business model to not only survive, but in some cases thrive.
Large traditional retails such as Bunnings, Officeworks, JB Hifi, Rebel Sport and grocery retailer such as Coles and Woolworths have seen a significant increase in sales. Furthermore, online only retailers such as Catch and Kogan are expected to report record profits this season.
One thing these businesses have in common is their ability to service their online consumers. According to Joe Couto, CEO at Körber Supply Chain, e-commerce capability is the defining factor in creating winners and losers in the 2020 retail landscape.
“A good example coming out of the US this week would be Walmart, Target and Kohl’s. Walmart and Target are set to report an increase in sales, while Kohl’s is reporting a disappointing third quarter-earnings and has consequently slashed its full-year forecast,” Joe says.
The difference between Walmart and Target and Kohl’s is online and e-commerce capabilities. “Companies very quickly realised they needed to have an e-commerce strategy and for those who were forced to shut their bricks and mortar stores during COVID-19 and did not have an online strategy, they have really suffered,” Joe says.
This need and demand for online capabilities presents a huge opportunity for the 3PL sector. “A 3PL can offer a retailer a very fast and effective way for them to pivot their business and to get up and running in online retail. It’s essentially fast-tracking the entire process and going from little confidence in the e-commerce to offering a highly capable back-end in picking and shipping orders and handling returns,” Joe says.
Challenges for 3PLs
The increased importance of shipping speed for these retailers to meet consumer demands presents both challenges and opportunities for third-party logistics providers.
For instance, 3PLs might experience growing volumes year over year, but contract terms tend to be short and vary widely.
Furthermore, 3PLs often rely on a temporary workforce which can be difficult to predict and forecast. With flexibility and cost control as priorities, there is an opportunity for 3PLs to leverage technology to better achieve their goals. This is also an opportunity to implement technology such as Andorid Voice. “This solution is both user-friendly and scalable during peak and non-peak times, so is a quick and convenient way to scale up and increase productivity,” Joe says.
“To fulfil the last leg of the retail supply chain and get shipments to buyers on time, 3PLs must become faster and more efficient, as well as adept problem solvers. Unfortunately, many 3PLs don’t have a lot of capital to invest in expensive supply chain management solutions. The good news is that the two most innovative strategies for increasing efficiency and addressing common industry pain points – voice technology and robotics – are affordable and can rapidly achieve a return on investment,” Joe says.
Some 3PL organisations are using automation and technology to deal with the challenging consumer demands. “The productivity of Automated Mobile Robots is extremely high. Additionally, they are reliable and can work for 24 hours if needed,” Joe says.
Körber Supply Chain has had recent success with this solution in Australia, with leading 3PL providers CEVA Logistics and Bolloré Logistics implementing AMRs for e-commerce fulfilment. Boasting a productivity increase of up to 400 per cent, the AMRs have been a big win for these logistics providers and their retail customers.
Retail giants like Amazon have set the standard in terms of automation, and retailers now realise that they need to keep up with or get ahead of Amazon to compete.
For Joe, the answer to many challenges that 3PLs currently face is in flexible and agile technology solutions. “That could be software that sits on the cloud, robots on a monthly rental fee or scaleable voice picking technology,” he says.
Körber has been expanding its presence in this space, with the recent partnerships announced with Fetch Robotics and Locus Robotics to broaden its portfolio in cloud-based collaborative robot solutions.
Scaling up and down is easy with flexible automation like AMRs. “As your business changes, you can move the robots from one destination to another. You might have robots in Melbourne, but then you experience a peak in demand in your Sydney distribution centre (DC). In this instance you can easily ship them down to ship them up to Sydney to meet the demand you have there,” Joe says.
The scope around AMR is constantly changing, unlike fixed conventional automation that is bolted to the ground, it is possible to move them from one destination to another which gives a 3PL a significant benefit to deal with fluctuations in demand.
The post-COVID world
As consumers changed their habits dramatically during COVID, some of these behavioural changes will stick and are here to stay.
“In March and April, the prepared food sector went up 80 to 90 per cent. While this won’t stay at that level, it is expected to maintain around 50 per cent growth. This is huge and is a game-changer for the whole grocery supply chain,” Joe says.
For the 3PL providers servicing the grocery supply chain, there are many challenges around cost, speed and volume. “Home delivery in the cold chain is very tricky, and no one is really doing it well right now,” Joe says.
This means changing the backbone of the infrastructure that underpins the logistics processes. “This might be looking at more warehouses in urban locations. If you have time-sensitive goods, you need to be closer to your consumer,” he says.
These growth industries are creating a tremendous opportunity for 3PLs. “Any business in the food chain or consumer packaged goods has seen phenomenal growth during COVID. So have cosmetics, home improvement stores, furniture, the list goes on. If you are a 3PL in this space, this is a massive opportunity,” Joe says.
It’s up to the 3PLs to step up and accommodate the increasing demanding fulfilment times and look at ways to enhance their capabilities through technology and become more flexible to provide retailers with the tools needed to better serve their customers.