Trends such as the explosive growth of e-commerce, the continued urbanization of markets, big data analytics and digitization, are driving a massive change in the global freight transportation sector.
A new study from DHL Supply Chain, “The Logistics Transport Evolution: The Road Ahead,” notes that ground transportation is undergoing change that far exceeds the norms of regular market fluctuation. This shift is ratcheting up service expectations, supporting growth in emerging markets, creating new ground transportation solutions and injecting advanced technologies and service options into how shippers and third party logistics (3PLs) manage global transportation flows.
DHL surveyed more than 200 transportation decision makers around the world and within all major industry sectors to decipher their current and future transportation operations and strategies. Customers across all regions recognize that transportation is a strategic component of their business and if managed effectively and efficiently, can help improve business growth.
Consequently, transportation is moving up the “strategic importance ladder.”
Companies in mature markets indicated a growing willingness to pay for certain value-added services and options in transportation, but naturally, they’re expecting a measurable return from incorporating those services.
Seventy-one percent of those surveyed agree that ground transportation is strategic to their organization’s operation, 75 percent believe spending time and resources to improve their ground transportation will directly help sales, and 83 percent are willing to pay more for better service.
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Shippers in various regions had different requirements and expectations of their transportation carriers and 3PLs. Asked whether they have the appropriate software tools to integrate ground transportation into their business, globally, 55 percent believed they did. But in North America, only 43 percent of respondents said they have these data toolsets and integration capabilities in their transportation operations, while 76 percent of Latin American executives did.
“In a more established country like the United States, shippers look not just to manage transportation, but to leverage and incorporate analytics and big data into their overall transportation strategies and operations,” the report said. “By comparison, an emerging region such as Latin America focuses on more transactional transportation data requirements,” such as status updates and delivery confirmations. “In the future, as developing regions mature and increase their investment in transportation technology, their expectations are likely to assume the characteristics and expectations of a more mature market.”
When asked the No. 1 requirement when choosing a 3PL, respondents cited the ability to “manage multiple transportation solutions that solve all my ground transportation needs” as most important. Also high on the list of priorities, was the ability to implement ground transportation solutions globally.
“This shows that the new complexity in ground transportation and the ability to manage it, if taken in combination, has created a strong need in the marketplace,” DHL said. “Shippers recognize that a transportation solution that represents true value balances multiple requirements–a fair price and the ability to solve a wide range of transportation issues and requirements. In particular, the complex issues created by an e-commerce-driven business environment and a global reach.”
In that vein, DHL said, “The extraordinarily high service expectations born of e-commerce are impacting B2C and B2B business nearly equally. B2B, unlike five years ago, no longer lags B2C in its e-commerce service requirements or transport solution needs.”
Service expectations include offerings like same or next-day delivery service, variable last-mile delivery options, “white glove” value service offerings, end-to-end order fulfillment and in-transit visibility, flexible and/or free return policies, always in-stock inventory and rapid or immediate problem resolution.
Technology will be increasingly paramount for logistics in the coming years, DHL said. Sixty-three percent of respondents believe AI and big data, in particular, will have a significant impact on their ground transportation decisions. However, only 23 percent stated they have so far fully incorporated these technologies into their business.
“One of the most frequently requested analytics is network optimization–the ability to collect transportation cost and service data, integrate it into a distribution model and optimize the network based on total cost to serve across the entire network,” Jim Monkmeyer, president of transportation at DHL Supply Chain North America. “This is essential in e-commerce. Because of its complex order profile and shipping patterns, costs can easily get out of control. This kind of powerful optimization helps rein in those costs, and, at the same time, improve service. It’s a win-win for a company.”