Pressure on supply chains to balance cost and customer expectations

In an age of massively increased e-commerce, expectations for speedy delivery and widespread disruption, the pressure is on supply chain executives in 2020 to balance the books and deliver

According to the Retail Supply Chain & Logistics Planning Report 2021 there is an ongoing battle within the logistics space to keep costs down, whilst service requirements from anxious consumers rise in an era of widespread disruption.

Over half of the retailers, manufacturers and brands (56%) represented in the survey said that their number one business goal is to reduce logistics costs and Logistics Service Providers (LSPs) said that the number one requirement from their customers was the cost of service (28%).

However, there is a need to invest into supply chains in order to meet rising service requirements, particularly as e-commerce continues to surge.

When asked ‘What are the biggest logistics planning challenges that you foresee in the near future?’ the top answer from retailers, manufacturers and brands was service requirements, at 48%, followed by automated warehouses (35%) and infrastructure problems (35%). Sixty-five percent of LSPs also stated that their largest concern going forward would be the increased service requirements from their customers.

A need for investment

The investment gaps were highlighted by numerous findings in the survey that underline a tension between the need to invest in order to future proof businesses against the need to control cost.

First and foremost, a third of retailers, brands and manufacturers said that ‘There is a significant gap between plan and execution and this is a very costly gap’, underlining costliness of not having capable planning systems.

The primary issues uncovered in the survey around planning systems are that 43% find that their systems are not well integrated with other systems and 41% note that their system is lacking automatic planning/optimisation

This is why retailers and manufacturers find that their biggest logistics planning challenge is the lack of integration between inbound and outbound fleets (23%), which has obvious knock-on effects in terms of meeting service requirements and avoiding unnecessary cost penalties.

Furthermore, LSPs noted in the survey that the top challenges faced by their customers were forecasting (23%) and visibility (18%), illustrating that there are significant capability shortfalls when it comes to the kind of oversight that would help make supply chains more efficient and responsive.

Consumers expecting the best from e-commerce

The environment is not about to become any easier, either, with time sensitivity increasing as a competitive advantage in the age of e-commerce.

Shoppers are looking to continue to shop online post-pandemic. A recent survey of US consumers found that 67% are planning to do more online shopping in 2021 than 2020, with nearly half of Americans (46%) planning to order more food online.

This has been noted among retailers and manufacturers, with 48% expecting the rise of home delivery to be a major trend in the coming year, with market leaders like Amazon putting pressure on others to move to their pace and quality of service. Therefore, solutions providers anticipate customers committing to offering faster delivery options, including same-day (21%).

This will push major changes across the retail space and the supporting logistics capacity. A major expected result is consolidation, with 59% of solutions providers expecting their customers to increase consolidation across their supply chains where possible.

As part of this, just 4% of LSPs anticipate that that their customers would opt for fewer but larger scale stores.

The cost pressures will also mean automation becomes a necessity with providers expecting their customers to downsize their workforce as they move to higher levels of automation (45%)

Brands will need to invest in back-end technology, in a period where cost containment is even more important than usual. This will particularly be necessary regarding inventory and order fulfilment strategies, with the intense rise of ecommerce.

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