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A recent halt in market growth for retail leader Adidas, reminds organizations about the importance to assess their supply chain excellence strategies.

According to Supply Chain DiveSupply Chain DiveSupply Chain Dive, Adidas will see a stunt in market growth this year for their North American. They’re facing ‘supply chain shortages’ as a result of unanticipated demand. This hurdle is reportedly due to the organizations complete reliance on outsourced manufacturing. However, it asks us to question whether a the right supply chain excellence model is being followed.

To grow in an ever changing global market, organizations must strive to implement a long term supply chain excellence strategy. The concept of supply chain excellence, has been re-examined  many times over the years. The need for continuous re-examination is in response to a variety of factors such as technology, globalization and consumer demand. Some experts believe that achieving supply chain excellence is an ongoing journey rather than a final destination. Instead of presenting a single definition to explain supply chain excellence, let’s discuss how supply chains help organizations, like Adidas, succeed.

The impact of global markets

According to global statistics, ‘1.8 billion people purchased goods online’ in 2018’; this valued at 2.8 trillion U.S dollars. Market forecasts predict to see this grow over the next couple of years, with projections of ‘up to 4.8 trillion U.S. dollars by 2021’. These statistics show an increase in consumer demand, an outcome that is commonly linked to ecommerce and anywhere, anytime platforms.

However, what happens when retailers remove the ability for consumers to physically shop in a store? There is an increase in expectation for fast delivery services. ForbesForbesForbes states that

The constant demands for faster and more efficient delivery put a strain on even the mightiest of supply chains.

This means that organizations must continue to meet consumer expectations. In February, Morai Logistics discussed the emergence of a demand-chain model and the benefits it provides supply chains. It helps meet consumers need for instant gratification by localizing production to create opportunity for efficient and immediacy. Therefore, it improves customer experience and optimizes order fulfillment in order to keep up with demand.

When an organizations supply chain is not fully optimized, there are a variety of challenges that can impact growth. And, as evident from the above example with Adidas, it can also impact organizations of many different sizes. Why do supply chains have such an impact on the success of an organization?

Recommendations for supply chain growth

In response to an increase in consumer demand, on both production and delivery, supply chains are integral to a company’s success. In fact, half of businesses whos have ‘poor supply chain performance’ are found to ‘fail or close down’. This usually happens within the first 5 years of the business opening. How do companies prevent this risk from happening?

According to ForbesForbesForbes, there is no denying the need for companies to ensure their supply chains are ready to meet consumer demand. They provide the following recommendations to help ‘optimize supply chains’:

  • Look at the end-to-end experience
  • Improve visibility by creating cross-functional teams
  • Learn how to take the right data and turn it into insightful information
  • Integrated supply chain excellence  throughout the entire organization

The above recommendations will help ensure organizations are focusing on the right areas to improve their supply chain. To compete with the increase in consumer demand, organizations must ensure their supply chains strategies consider all of the above mentioned factors.

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When it comes to driving business growth, research reveals that private equity executives struggle to understand supply chain managers’ value.

Across North America, organizations and companies depend on supply chains for a wide range of core functions. However, the Global Supply Chain Institute (GSCI) found that private equity executives had a different opinion. In a 2018 survey that included the opinions of 50 executives, supply chain functions were ranked as ‘relatively unimportant’. In addition, only 16% stated that they implemented a ‘multi-year strategies for achieving supply chain excellence’.

According to Investopedia, a supply chain is defined as,

Network between a company and its suppliers to produce and distribute a specific product to the final buyer.

In addition to transporting goods from point A to point B, supply chains also help companies ‘reduce cost’ and ‘remain competitive’. Therefore, why would a company consider a supply chain to be unimportant?

This article by Morai Logistics reinforces the critical role supply chains play in the growth of an organization. It also discusses the implications that may occur when an optimized supply chain isn’t integrated.

Supply Chains and Business Growth

When we make a purchase on a digital platform for instance, we usually can expect our item to arrive within 3 to 5 business days. However, there are many moving pieces that occur behind the scenes of an organization’s efforts to deliver products efficiently and on-time. The ability for customers to receive products is reliant on supply chains. This network delivers an end-to-end experience built on collaborative efforts between suppliers, manufacturers and third party logistics (3PL) providers.

According to Logistics Bureau,

The success of your business links inextricably to the performance of your supply chain.

In an article on supply chain management leadership, Forbes states that traditionally a supply chain would be used as a ‘reactive tool’. However, as they have evolved, they are now an important strategic initiative that spreads ‘value throughout the organization’.

The integration of a robust supply chain can benefit an organization in many ways, including the following:

  • Greater visibility
  • Enable an organization to cut costs
  • Influence ‘shareholder value
  • Increase customer satisfaction

There is no denying that a supply chain is an important vehicle when it comes to driving an organizations success. Let’s look at the hardships that may occur if a supply chain management strategy isn’t implemented.

Failure to Implement Supply Chains

As mentioned earlier, a survey conducted by Global Supply Chain Institute (GSCI), indicated an interesting disconnect. There were a considerable amount of companies that didn’t understand the function, purpose and benefit of a supply chain. A lack of awareness and failure to implement supply chain strategy, was also found to lead to poor performance. This ultimately resulted in a ‘performance gap’, which would impact the organization’s bottom line. In addition, it would also cause the organization to lack competitive advantage against other players in the industry.

The importance of implementing a supply chain goes beyond transporting product. It enables organizations to place their customers and bottom line, as a top priority. It also introduces efficiencies into the selling and exchange of goods. This reduces costs, keeps customers satisfied and generates revenue. It’s important that employees in leadership roles and across an entire organization, recognize the significant role a supply chain has in growing their organization.

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Organizations within the retail industry should implement mitigation strategies into their supply chain to offset potential risks such as supply shortages.

In a press release published by Air Cargo News, global retail leader, Adidas, ‘turns to airfreight to mitigate supply chain shortages’. Reports from the first quarter showed that product shortages had impacted revenue. This caused the company to seek alternatives to their supply chain. In the case of Adidas, their chief financial officer stated that using airfreight will help ensure supply in the second quarter.

Omni-channel solutions are implemented by supply chains to help improve efficiencies and lower cost. By using a tactic that involves support from a variety of modes of transportation, supply chains are able to offer optimized solutions. However, the switch to airfreight made by Adidas is a mitigation strategy used to offset supply shortages. In addition to such shortages, there is a myriad of other consequences that may result from a lack of proper planning.

To combat an ever-changing global market place, research from the Global Journal of Flexible Systems Management, consider mitigation strategies to be highly important. When a retail company fails to set appropriate strategies to mitigate upstream barriers, there can be significant consequences to the bottom line. This article by Morai Logistics aims to identify four important components to an effective mitigation strategy.

Risk of Supply Shortage

The retail industry contributes significantly to the overall profit of the global economy. According to Statista, by 2020,  the global retail market will reach ‘28 trillion U.S. dollars’. Mitigation strategies become important when supply shortages begin to impact generated revenue. Research identifies a variety of barriers that can implicate the supply of a product, including:

  • Poor infrastructure
  • Shortage of skilled labour
  • Lower productivity of workers
  • Relationship management issues
  • Supply material defects

All of these barriers can cause major consequences to the bottom line. Therefore, creating appropriate mitigation strategies should be a top priority. They may not always be consistent depending on the risk(s) that directly impact a business or organization. Let’s explore two strategies that help mitigate risks within the retail and apparel industry.

Planning Efficiency

Research conducted on the impact of ‘supply-side’ barriers in global apparel supply chain’, identify planning to be an important strategy. This strategy specifically targets impacts from problems association with product planning.

Technology is playing a helpful role in enabling organizations and supply chains to design and create predictive tools. Morai Logistics has discussed the benefits of predictive analytics in foreseeing possible patterns in barriers that may arise. This is helpful when tactfully looking at dips in supply. In order to maintain transparency with customers and avoid harmful impacts from poor customer service, planning efficiency is important.

On-time delivery

Customer satisfaction should be a main focus when identifying and creating mitigation strategies. Customers are the main contributor to revenue into the business. Today’s global retail marketplace is reliant on both bricks and mortar and online shopping customers. On-time delivery has become an important focus for organizations looking for a competitive advantage. Therefore, making a commitment to meet lead-times will help maintain and improve customer satisfaction.

Supply chains must consider risk in order to take a proactive approach to avoiding consequences that may arise due to supply barriers. By outlining and implementing mitigation strategies, an organization can improve efficiencies, commit to on-time delivery and ensure complete customer satisfaction.

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Supply chains and third party logistics (3PLs) must offer optimized solutions to meet consumer demand throughout the Easter holiday.

In 2018, Easter was celebrated by 84% of Americans. This fun and festive April holiday, is a time for children, family and friends, to enjoy traditional gatherings and exciting Easter egg hunts.

This holiday is also a ‘time of generosity’. The most popular gift of 2018 was chocolate, sweets and candy. Statistics on planned consumer spending shows that last year, USD$2.6 billion was spent on candy. Food generated the most revenue at USD$5.7 billion, followed by gifts at $2.9 billion. That’s a large output of candy, food and gifts to deliver for such a short holiday season.

However, consumers want more than on-time delivery. They want something personal. More and more consumers notice stores providing the same options. Therefore, what differentiates these companies? Customer experience (CX).

While consumer demand is at an all-time high all year round, holiday seasons usually generates an incredible peak. To deliver positive CX, retail companies rely on their supply chains.

Customer Experience (CX)

The definition of a great customer experience has changed over the years in response to technology. It’s so easy for customers to buy what they want, as much as they want and whenever they want. According to Hubspot, good customer experience is,

The impression you leave with your customer, resulting in how they think of your brand, across every stage of the customer journey.

They further recognize that ‘multiple touchpoints’ impact the overall CX for a customer. From a supply chain standpoint, CX focuses not only on direct customers, but the customers they serve as well. That’s why consumer demand across any industry impacts the supply chain.

Retail companies, who serve the Easter market in particular, are recognizing how important personalization services are. Rather than send a generic bunny bear to your eight year old niece, wouldn’t it be more meaningful to personalize it with their name?

According to findings on customer experience (CX),

This requires digital supply chain capabilities — from the e-commerce site on the front end to supplier coordination for fulfilling orders to real-time logistics for tracking the goods.

In addition to personalization, other factors such as speed, on-time delivery, and visibility also create positive CX.

Impact on Supply Chains

Consumer demand is an ongoing barrier that retail companies and their supply chains face throughout the year. For any holiday season, the window to retain and capture new and loyal customers is shorter. Yet, customer expectation is high.

Retail companies face their own set of barriers, which impact their supply chains. When it comes to delivering CX to their customers during peak seasons, such as holidays, FedEx notes the following challenges:

  • Increased product variation with multiple vendors
  • Quality control
  • Fraud prevention
  • Inventory visibility
  • Customer expectation

Supply chains and third party logistics (3PLs) providers play an important role in delivering positive customer experience. They enable their customers to deliver product with speed, agility and efficiency. When large outputs are required during high seasons, such as holidays, 3PLs can be the difference between loss and retention. They host a network of omni-channel services that include air, ground, rail and ocean shipping. Large product loads are also transported in a safe, efficient and time sensitive manner.

Innovative technologies are integrating into processes and operations within manufacturing, warehousing and on-the-road deployment. Machine learning, artificial intelligence, and robotics help create streamlined and automated processes. In addition, this also shows a reduction in errors, delays, while ensuring on-time delivery and safe handling. This helps improve transparency, inventory control and traceability, which enables their customers to deliver a positive customer experience.

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Research on technology in supply chains shows a positive relationship between virtual reality and enhanced efficiency and visibility.

By 2020, virtual reality (VR) is estimated to be valued at USD $70 million. VR has enabled many industries to take an innovative approach to engaging customers. Since the e-commerce boom, retailers have found engaging customers both in-store and online very challenging. From an e-commerce perspective, VR helps companies create realistic shopping experiences. However, v-commerce also provides both the ‘interactive experience of bricks and mortar’ and the ‘convenience of e-commerce’.

While this technology has received a lot of recognition in the retail industry, it has also gained considerable attention in supply chain and logistics. For many years visibility and efficiency have been top challenges for supply chains. Also, the customer expectations on transparency and fast-delivery is at an ultimate high. How could an interactive technology tool like VR, add value to warehousing, shippers or suppliers?

This article by Morai Logistics looks at the ways VR is shaping the way supply chain operate to address current challenges faced in the industry.

Supply Chain Challenges

Moving goods from point A to point B sounds like a straightforward transaction. When a customer buys product and requests it to be shipped online or in-store, it’s processed through a warehouse and is then delivered directly to the customer. Although the shipment life cycle should be this simple, the end to end process is far more complex.

The ‘king consumer’ was listed as the number four top challenge facing supply chains this year. According to supplychain247,

High consumer expectations about delivery and shipping of packages will continue to challenge retailers, carriers and logistics service providers, forcing fundamental changes to warehouse design and location and driving up wages and competition for all types of supply chain labor.

This increase in consumer expectations has indeed caused considerable pressure on the supply chain and logistics industry. E-commerce has provided customers with easy click-and-go purchasing, and has also increased their expectation for faster product delivery. Furthermore, customers want greater transparency on when and where their orders are throughout the shipment life cycle. There is an incredible emphasis on ‘ever-faster delivery’ services as well.

Imagine exceeding customer expectations better than a competitor? That would give businesses incredible competitive advantage. Utilizing technology to create engaging customer-facing experiences has been consistent over the years. However, integrating VR into supply chains is different.

Virtual Supply Chains

To understand how technology can optimize a supply chain, it’s important to understand the basic concept behind the technology. Virtual reality is ‘an artificial, computer-generated, three-dimensional environment’. There are a variety of electronic equipment that work together to create this ‘sensory stimuli’. These items may include specialized:

  • Goggles
  • Head-mounted displays
  • 3-D images

The adoption of VR equipment is on the rise, with ‘mid- to high-end headset sales forecasted to reach USD $52.3 million by 2020. Using this sensory equipment takes the user on a journey outside of their physical space. However, how can this help supply chains achieve greater efficiency and agility?

Research on the benefits of VR in supply chains focuses on delivery, predictive modeling and performance. For instance, according to Forbes, using VR can also provide managers with real time insight into ‘any site at any time’. Below is a list of more benefits that VR provides supply chains.

  • Access on-site facilities at any time in the event of natural disasters or unexpected occurrences
  • Optimize delivery management and package inventory
  • Offer enhanced safety throughout the delivery journey
  • Ensure accuracy when delivering products to customers

Therefore, implementing virtual reality into supply chains is effective in improving efficiency, transparency and speed. It not only enables companies to execute seamless delivery processes, but it also shifts the focus toward the customer.

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In response to growing demands, experts consider cloud logistics as an optmization tool for the transportation supply chain industry in 2019.

Technology is the source of continuous global economic and social change. In addition to improving our every day lives, it also enables industries to advance and optimize communications, operations, production and servicing. For the supply chain and logistics industry, technology continues to shape the way products are distributed across the globe. It has also pushed leaders to explore digital maturity and leverage different platforms to help compete with demanding markets.

According to PwC, cloud technology addresses setbacks associated with scalability, flexibility and efficiency across an organization.  As with any new internet based technology, uncertainties include ‘unclear development costs and data security’. Regardless of these risks, Cloud logistics is expected to make a significant impact on the transportation supply chain industry in 2019.

This article by Morai Logistics looks into the way cloud logistics is shaping the supply chain and logistics industry. A specific focus will discuss the role of transportation management systems in advancing operations.

Cloud Logistics in Supply Chains

There are a few reasons why cloud logistics has become an innovative move for supply chains. Connected logistics not only drives revenue, but it also improves the way processes are managed. Cloud technology has experienced incredible growth across a variety of industries. Forbes found that,

The Worldwide Public Cloud Services Market is projected to grow by 17.3 3% in 2019 to total $206.2 billion”.

Furthermore, by 2023, the ‘global connected logistics market’ will reach ‘$73,846.1 million. In response to increased consumer demand, leveraging cloud technology helps organizations do business better. Oracle, a global leader in computer technology, creates cloud logistics solutions to help logistics organizations achieve the following:

  • Streamline transportation networks
  • Optimize warehouse operations
  • Push out efficient fulfillment strategies
  • Simplify business

The advancement of cloud technology also enables transportation supply chains to remove manual and inefficient steps throughout the end-to-end experience. Therefore, the end goal is to optimize the supply chain to create solutions that help meet increased consumer demand. In addition, cloud logistics also helps organizations automate processes, which improves productivity.

Current Barriers to Cloud Integration

According to a global survey on enterprise risk, there are a variety of reasons shaping the way organizations feel about cloud computing. Six risks were found to be “somewhat of a challenge” to over 50% of respondents.

  • 54% reported Governance
  • 51% reported Lack of resources/expertise
  • 53% reported managing cloud spend
  • 51% reported security
  • 52% reported compliance

The above risks are quite common when integrating new technology into supply chain operations and processes. In past articles, Morai Logistics has discussed the importance of developing a labour force with the advanced skills to support technological advancements. Cost is also a factor many supply chain organizations look at when implementing new solutions. Thus, integrating cloud logistics is also an optimal cost savings tools. Its core function is to help streamline transportation, operations and production processes.

Forward Thinking

In response to an increase in consumer demand and expectation, the supply chain and logistics industry must seek innovative solutions to remain competitive. Technology shapes the way organizations do business and interact with customers. Therefore, it’s beneficial to implement optimization tools that are aligned with consumer behaviour. Despite the raised challenges, cloud logistics is an optimization tool that can help supply chains achieve efficiency, visibility and scalability.

5 Ways RPA Optimizes Supply Chain Management

Robotic Process Automation (RPA) is an effective solution that helps improve efficiencies, reduce costs and optimize productivity.

Findings on the global RPA market, project a ‘Compound Annual Growth Rate (CAGR) of over 27%’ throughout 2013 to 2024. By 2024, this would amount to over 7, 000 Million (USD).

In a recent survey on RPA adoption, 17% of supply chain professionals believe RPA will be implemented in their organization’s by 2020. Furthermore, two thirds of respondents stated that their organization currently uses or are exploring this technology.

According to McKinsey & Company, RPA is defined as,

A type of software that mimics the activity of a human being in carrying out a task within a process.

Integrating this technology into any organization helps reduce human error and cost, while improving ROI and productivity. However, although skepticism exists in matters of replacing human jobs with automation, RPA actually provides many benefits to supply chains. Therefore, RPA is emerging as an effective technology for many industries, including supply chain and logistics.

This infographic by Morai Logistics outlines the top 5 ways RPA help improve supply chain management processes.

Robotic Process Automation: Supply Chain Optimization

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That’s it for us this week! If you liked this blog post, why not subscribe to our blog? Interested in what we do as a 3rd party logistics provider? Then don’t hesitate to check out our services (as expressed above, we are very pro finding you the lowest total cost!). We’re also in the twittersphere, so give us a follow to get the latest logistics and supply chain news.

From Adoption to Digital Transformation
Experts say that supply chains must move from adoption to digital transformation if they want to improve efficiencies, operations and take their businesses to scale.

For the North American transportation supply chain and logistics industry, last year saw a widespread adoption of digital technologies. Predictive analytics proved beneficial to providing end-to-end visibility of supply chains, and ensuring efficiency with on-demand deliveries. When applied to operations, cloud-based technologies helped businesses scale, improved workflow productivity and created opportunities for competitive differentiation. Furthermore, robotic and automation armed warehouses with optimized levels of productivity and improved customer service.

Although the adoption of emerging technologies created solutions for transportation supply chains, the industry still faces many significant challenges. The increase in consumer demand for immediacy and personalization, in conjunction with pressures of the nationwide labour shortage, requires more than digital adoption. To further improve operational efficiencies, reduce costs and create opportunity for bottom line profits, supply chains must move from adoption to digital transformation.

According to Supply Chain Management Review,

Digital transformation is perhaps best explained as the implementation of new technologies to accelerate operations, sales and customer service, back office productivity and, ultimately, the growth of the business from end-to-end.

Whether the customer is a shipper, retail wholesaler or vendors, the goal of digital transformation is to ultimately improve the customer experience.

This week Morai Logistics provides an overview of what digital transformation looks like in transportation supply chains. The benefits moving from evolving from simply adopting digital technology to a comprehensive and whole-scale transformation will also be reinforced.

Digital Transformation of Supply Chains

There are many industries across the world recognizing the need to digitally transform. North America ranks at the top of the global market. By 2022, global statistics forecasts that spending on ‘the technologies and service that enable digital transformation’ will reach USD 1.97 trillion. However, in a study on the adoption of digital transformation within five major sectors, supply chains reported the ‘lowest level of digitization’.

Although digital transformation is considered to be a main focus for many, the truth is, this process fails more than it succeeds. According to the found of Supply Chain Insights, there are four common mistakes businesses make:

  • Disconnect with vision and strategy on implementing digital transformation
  • Transformation process does not include ownership from the business
  • Focus is not on meeting the needs of the customer market
  • Lack of partnership with innovative technology companies

Let’s address mistake number one: disconnect with vision and strategy. Before a supply chain executes digital transformation, they must understand the trends shaping the need to transform.

Universal Need for Digital Transformation

There are many reasons why digital transformation can improve the end to end profits of an organization. They may change depending on the industry. For supply chain and logistics, the following three reasons why adoption should move to transformation.

Customer Experience

Today, customer experience is at the top of the board when it comes to strategic priority. From social media to online buying, to smartphones, consumers have the power to connect anywhere at any time. This has changed the buyer’s journey significantly. Consumers expect a heightened level of transparency and personalized and engaging experiences.

Employee Support

The current capacity crunch and nationwide driver shortage, also requires organizations to look at employee fulfillment. Integrating digital tools throughout the supply chain, will promote efficient methods of productivity and communication. This can have an incredible impact on performance and empowerment, while also giving more time to focus on ‘streamlined decision-making’.

Strategic Insights

The implementation of technologies throughout all facets of a supply chain can help generate large data sets, known as Big Data. Online interactions between shipper and supplier can generate unceasing amounts of data. However, without appropriate tools to translate these numbers into valuable insight, meeting the needs of either party becomes challenging. Therefore, digital transformation ensures that innovative technology solutions are in place to provide strategic data that will ultimately achieve success.

3PLs Offer Optimized Solutions to Nationwide Capacity Crunch

As the nationwide capacity crunch drives into the New Year, third party logistics (3PL) providers offer shippers reliable and cost-effective solutions.

Last year the ‘nationwide truck shortage’, also referred to as the capacity crunch, was a significant challenge for the transportation industry. Carrying over into the New Year, the increase in freight rates and subsequent decrease in drivers continues to impact shippers tremendously. In December it was reported that the ELD mandate was effecting not only trucking, but other modes of transportation. This movement also impacted ‘ocean shipping, intermodal and air freight’. With consumer demands at an all-time high, the outcome of implementing this type of directive has caused a variety of issues. Experts identify increased rates, shipment delays and bottlenecks amongst the most common setbacks shippers face.

In March of 2018, Morai Logistics presented some of the optimized solutions third party logistics (3PL) providers offer shippers. According to Supply Chain Dive,

3PLs can step in and usually save money for the shipper while helping the shipper get a faster route.

While the capacity crunch isn’t expected to go away anytime soon, 3PLs continue to develop optimized solutions to help shippers become proactive to industry demands. This includes a combination of technology integration, networking and Omni-channel opportunities.

This article outlines the various obstacles the transportation industry faces caused by the capacity crunch. Furthermore, it defines why 3PLs remain the prime method to ensure an efficient and cost-effective shipment life cycle.

Impact of Capacity Crunch

The capacity crunch has placed a heavy burden on the transportation supply chain and logistics industry. The Electronic Logging Devices (ELD) mandate that was strongly enforced last year has deterred many drivers from the industry. This creates additional setback for shippers, as a decrease in drivers means an increase in freight rates and inefficient delivery. While strategies to improve driver retention and job satisfaction should be a high priority, the obstacles shippers face is also important.

According to the 2018 Inbound Logistics Annual Survey:

  • 81% of shippers felt their biggest challenge was ‘finding capacity’
  • 78% of shippers experienced rate hikes
  • 94% of shippers stated that ‘driver-related costs’ was important

The capacity crunch forces shippers to seek reliable, alternative transportation methods at cheaper rates. This can be very challenging as competition and a lack of drivers continue to increase costs. However, third party logistics (3PL) provider’s offer optimized solutions to both carriers and shippers that can help alleviate some of this burden.

3PL Solutions

In addition to price and capacity, a nationwide truck shortage can significantly impact the reliability of deliveries and the quality of customer service. Research on the preferences of shippers who choose ‘motor carriers’ found that:

  • 84% say reliability
  • 62% say customer service
  • 73% say price
  • 45% say capacity

3PLs must develop solutions that enable shippers to execute orders efficiently and cost-effectively to meet the increase in consumer demands. The widespread integration of advanced technology has made considerable contributions to the way 3PLs service shippers and carriers. However, below are the most relevant ways these transportation partners can help shippers impact by a capacity crunch.

Cost-Effective Rates Due to their large-scale industry presence, 3PLs are able to offer better rates. They can also negotiate better than small companies or independent drivers, which help offer shippers affordable options.

Network of Carriers Shippers benefit from the substantial relationships that 3PLs have built. This provides access to Omni-channel and intermodal modes of transportation that offer multiple avenues to transport products efficiently.

Digital Maturity The integration of technology will continue to shape the way warehouses operate and communicate. It will also provide companies with the ability to extract data to create insight on forecasts and patterns. 3PLs continue to integrate digital processes to improve the visibility of shipments. In addition, emerging platforms such as predictive analytics also enable shippers to take a proactive, rather than reactive approach, to operations and delivery.

There is no denying that the impact of the ELD mandate and driver shortage has created obstacles for both shippers and carriers. While the capacity crunch remains a top concern to the transportation industry in 2019, 3PLs continue to provide effective solutions.

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Businesses within the retail industry are rolling out vertical integration supply chain models to keep up with fast fashion.

Research on the global fashion industry predicts an increase from ‘$481.2 billion in 2018 to $712.9 billion by 2022’. Innovative technologies are a direct contributor to this progression, as they help companies create ‘experiential eCommerce’ for shoppers. For many industries, digitization is enabling companies to offer customers Omni-channels of shopping touch points. Thus, increasing purchasing power and an even greater expectation to deliver orders in an immediate and timely fashion.

Despite positive growth, one of the most influential challenges in the fashion industry is the ability to keep up with ‘fast fashion’. Fast fashion is an industry buzzword, that is defined as,

An approach to the design, creation, and marketing of clothing fashions that emphasizes making fashion trends quickly and cheaply available to consumers.

The New York Times states that ‘faster fulfillment’ is becoming increasingly important to ensure customers remain happy. The idea of getting product from the manufacturer or store-front to consumer in a timely and speedy process is integral. To help roll this forward, brand name organizations, such as Zara and H&M, are implementing a vertical integration (VI) supply chain model. Their hope is to ‘enable faster decision-making’, while also improving the overall customer experience.

This week, Morai Logistics looks at the benefits of a VI supply chain model, and why it’s becoming increasingly adopted by companies within the retail space.

The Fashion Industry Today

The fashion sector faces three main challenges today, which include an increase in consumerism, the need for creating unique customer experiences and inventory management. Finding one solution to meet every need is unlikely, which is causing retailers to consider shortening their supply chains.

According to Logistics Bureau, the conception of ‘fast fashion’ was influenced by Zara, a leading European clothing brand. Fast fashion is a category management concept that helps this global retailer meet the demands of their customers looking for ‘high-fashion style articles of clothing at a low price’. It enables fashion companies the opportunity to consistently roll out new products into their stores. This helps support seasonal and trending lines that are constantly changing throughout the year. However, if the wrong integration model is implemented, it can be challenging for companies to meet these demands.

Vertical Integration Supply Chain Model

Traditionally, horizontal integration has been the ‘go-to value chain strategy’. Companies looking to grow their business ‘at the same point within the supply chain’ follow this model. However, the fashion industry requires a highly agile supply chain that takes into consideration both speed and cost. In this case, vertical integration supply chains are the most effective.

By definition,

Vertical integration occurs through the merger or acquisition of companies at different stages of production or distribution within the same industry.

To accommodate and support the demands of fast fashion, this integration model helps to strengthen the supply chain. In addition, it addresses the above challenges by giving retailers a competitive advantage over other companies that haven’t adopted an integration model. It also enables them to offer ‘lower costs, high-quality and personalized products’, which ultimately positions their company as a top choice to consumers.

In addition to the differentiation, this model also benefits companies in the following ways:

  • Control of value chain
  • Reduction of distribution costs
  • Increases ‘access to more production inputs, distribution resources and process and retail channels’
  • Alignment of pace with changing fashion trends

As retail companies continue to roll out new products, they must develop processes that execute both speed and cost. Therefore, vertical integration can help companies create strong, agile and proactive supply chains that will meet changing consumer demands.