How Supply Chain Tech Drives Growth and Innovation?

Logistics Tech Outlook | Wednesday, June 15, 2022

Businesses will need to reduce expenditure to enhance margins before improving the final mile.

FREMONT, CA: Supply chain disruptions caused by the COVID-19 pandemic has exposed enterprises to new risks, with a global impact on the economy. As a result, most businesses spent either fighting fires in reaction to growing online orders or taking a financial blow to deploy new services and business models to help retain and acquire new clients. Company leaders understood the importance of their supply chain, notably their lack of visibility into the technology and processes that could accelerate logistics and avert fulfillment challenges as (or before) they occurred. It is crucial to highlight that the supply chain challenges that happened last year were not exclusively the result of changes in customer behavior during the shutdown. 

Changing consumer expectations for free and quick delivery

Consumers are already acclimated to free and fast delivery before COVID due to their experience with services. These expectations have accelerated, with next-day, same-day, and even same-hour solutions available across industries. Firms must reduce the distance between their warehouse(s) and their clients to enable speedier shipment times. Last-mile delivery (carrying items from a local distribution center to a customer's front door) currently accounts for a significant amount of overall logistics expenditures.

Decentralized fulfillment will become the new standard for all businesses

Historically, centralized distribution was preferred over decentralized arrangements due to more substantial bargaining leverage with suppliers and reduced storage costs. However, today's customers expect their purchases to arrive promptly. Hence, the extended shipping periods from a single, central warehouse to a customer's front door are no longer worth the cost savings. The cost of customer churn caused by late delivery may potentially outweigh the benefits of centralized solutions. For these reasons, a decentralized warehouse network is regarded as the best fulfillment solution.

Supply Chain as a Service (SCaaS) will enable SMEs to scale more economically

Businesses around the country are learning that handling their warehousing and fulfillment services is neither productive nor cost-effective. While this is especially true for SMEs, outsourced logistics are becoming increasingly popular among businesses. There will be a greater interest in third-party logistics (3PL) solutions that enable enterprises to convert fixed expenditures into variable costs without incurring significant capital investments or recurring maintenance fees. Due to their potential to help companies scale without all of the upfront cost, 2PL and 3PL providers have seen rising demand from D2C ecommerce sellers.

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