Australian retailers face significant operational challenges today. From having to address a challenging sales environment, rising commercial rents and the increasing demands of online shoppers – it is harder than ever to operate profitably. Claudio Bratovic, ANZ Regional Manager at Honeywell looks into outsourcing as a viable alternative.
Worryingly, most retailers do not believe that they are prepared for the modern retail environment, with 2018 research undertaken by YouGov on behalf of Honeywell finding only 49% of retailers felt that they are doing an ‘excellent’ job with omnichannel integration. This finding is particularly alarming given that retailers need to move to an omnichannel operations model to compete for the connected consumer today.
Outsourcing your omnichannel operations
For many retail businesses struggling to adapt to an omnichannel environment, third party logistics (3PL) outsourcing represents a viable alternative for dealing with e-commerce fulfillment pressures directly. Rather than incurring the expense of expansion or establishing all-new distribution centre operations, retailers are partnering with 3PL providers to assume responsibilities and related costs.
3PL’s can assist Australian retailers with a range of mission-critical supply chain capabilities, including: order management and fulfillment (picking/packing/shipping), reverse logistics (returns), product packaging, assembly and kitting and information technology (IT) services. However, as 3PLs help take on some of the e-commerce responsibilities for local retailers, these same logistics specialist organisations are encountering many of the same business challenges — while being held to much higher standards.
3PLs face their own challenges
The rapidly growing e-commerce market is only making the impact of labour shortages more acute for 3PLs, presenting significant challenges to their business model. In the warehouse and fulfillment sector, finding a reliable workforce is a significant business challenge, especially given that a lot of work is seasonal and concentrated around peak selling periods like Christmas.
Becoming an e-commerce capable 3PL requires a long-term operational commitment, and many retailers are seeking longer-term contracts from their 3PL partners. Terms of these contracts are holding 3PLs to higher standards and specific service-level agreement and key performance indicator (KPI) metrics, such as: achieving higher order volumes and throughput; ensuring on-time deliveries; and maintaining 99.8% order accuracy. These standards, coupled with rising consumer expectations, mean that there is less margin for error than ever before for 3PLs.
3PLs automate to meet rising customer expectations
Omnichannel fulfillment is the fastest-growing segment of the 3PL industry globally. To stay competitive and meet increasing consumer expectations for on-time and accurate deliveries, many e-commerce retailers are tapping 3PL providers to supplement their order fulfillment capabilities. But as 3PL providers inherit many of the same market challenges faced by their retail customers, many are accelerating their transitions to automation and digital technologies.
An area of automation that is widely used by Australian 3PLs to increase the productivity and efficiency of warehouse workers, is mobile devices. Handheld computers and scanners, along with voice guided picking technologies are increasingly integral to the efficient operation of a 3PL distribution centre, to support key workflows and assure optimal productivity.
Moving beyond the four walls of a warehouse, mobile technologies benefit the delivery operations of a 3PL through improved routing, reducing downtime, keeping drivers safe and enhanced delivery tracking capabilities for customers. With workers constantly on the move, it means they need their operational technologies to be as mobile as they are.
While 3PL businesses can have different reasons behind their decision to invest in mobility, productivity remains the most important factor according to a recent study. A recent report conducted by VDC Research for SOTI revealed that 36.4% of T&L businesses consider improved worker productivity to be their main driver for investing in mobility, compared with 31.8% who viewed reduced paperwork as their main driver, and 27.3% who stated compliance mandates/reduced risk of litigation as the main factor for their investment in mobile devices.
“Mobile devices deliver real-time, end-to-end supply chain visibility to everything including drivers, vehicles and cargo. Mobility allows for tracking assets, both where they are and what they are doing. This in turn can improve productivity, as if there is any break down along the supply chain, it is visible, and the issue can be solved quickly,” said Michael Dyson, Managing Director at SOTI. “By having end-to-end visibility, businesses can have a more streamlined process with open communication between different stages of the supply chain, improving efficiency, accuracy and timeliness of the delivery process.”
Through better tracking delivery times with the enhanced supply chain visibility mobile devices bring, 3PLs can also expediate product offload and the cross-docking of time critical shipments. This visibility has a flow-on benefit for customers, through allowing accurate tracking of their delivery and which enables up-to-date delivery progress data.
Mobility is key in an omnichannel world
To meet the demands of online shoppers and fulfil service level contracts of their retail customers, 3PLs should adopt automated, mobile solutions. 3PLs that utilise mobile solutions to improve their business operations can help retailers meet customer expectations related to their product delivery, helping to turn casual shoppers into return customers.