Supply Chain Trends
Trends That Will Shape the Industry in 2017
By Andrea Obston
The escalating growth of e-commerce, rising consumer expectations, the emergence of same-day distribution and verticals that will grow and shrink. All of these will shape the way people in the customized logistics and delivery industry do business in 2017.
CLDA Magazine culled these forecasts from the sessions at the PARCEL Forum in September and through interviews with top industry insiders.
Here’s a peak at the factors that we expect will impact our business in the coming year.
The rapid growth of e-commerce and m-commerce
Not surprisingly, two of the key trends mentioned at the conference and by industry insiders were are the continued expansion of e-commerce and the rise of m-commerce (mobile commerce).
PARCEL Forum speaker Gerry Mercure of Dynamex told the overflow crowd at his session that e-commerce has been growing at 14 percent per year. He expects that trend to accelerate in 2017. “This segment is here to stay and it promises to be a bigger component of what we do,” he said. “It will cause a shift in the landscape of final mile.”
He pointed out that final mile was stable for many years because historically it was B2B. E-commerce has changed that. “E-commerce has shifted things. As a result, B2C is becoming a bigger component of what we do and that changes things,” he said. “In B2B it’s easy to identify who your customer is: the shipper. But, with B2C you have two customers: the shipper and the end user. It’s the consumers’ expectations that are dictating shippers’ requirements. Consumers expect fast and free. With B2B, it’s relationship-focused. With B2C, it’s more about execution. To meet consumers’ expectations you have to execute consistently. With B2B, it’s more planned and logical. With B2C, the consumer’s decision is more emotional. It’s based on what they want. We think of this as consumer-driven logistics.”
He also talked about m-commerce, the mobile device version of e-commerce. “Mobile devices will be raising consumer expectations even higher,” he said. “M-commerce is what Millennials, especially, want to be able to do. They want to order something on their phones, get it from anywhere in the world and have it delivered wherever they are. Millennials value their time differently. They aren’t content to wait for a package at the office when they want to leave to make it to their son’s softball game. They expect to be able to change the destination of that package while it’s in transit so it meets them at the softball field. And they think they should be able to make that change in destination from their mobile devices.”
Rising consumer expectations in the final mile
The rise of e-commerce has shifted the power to the consumer. Players like Amazon and Wayfair have raised consumers’ expectations of the final mile and given them that power.
“Today’s final-mile distribution model looks like this: line-haul and shuttles come from the distribution center into cross dock and from there to the consumer. And those destinations are largely residential,” said Mercure. “Or it could involve picking up at multiple retail locations and shuttling it to cross dock distribution centers and then going out on distribution routes to the end consumer.”
Today’s final mile is designed to meet consumers’ rising expectations. “And once expectations have been created we can’t go back,” he said. He pointed out the most obvious consumer expectation that carriers must respond to: end-to-end visibility of the shipment. “The big online retailers and the big delivery providers have set that expectation high. And when it’s met, it’s a more positive experience for the customer.” LSO’s Moyer agrees: “Full supply chain visibly is a key expectation from the customer. They expect to know when the package is in transit; when it hits their city and when it’s at their door.”
Industry experts, such as Jason Burns, Sr, of QCS Logistics look to the continuing trend toward providing retail home delivery at cost effective rates as another key consumer expectation that must be met. “Retail home delivery will continue to explode in 2017 and carriers need to find a viable solution to fully service this vertical or completely stay away from it. There's really no in-between,” he said.
Reverse logistics is another process that delivery companies have to master in 2017. “Zappos kick started this one,” pointed out Moyer. “Their customers order several pairs of shoes; figure out which pair fits and then send the other two back. The cost of handling this reverse logistics process is significant for manufacturers and retailers and we’re going to have to figure out how to make this work cost-effectively all around.”
Emergence of same-day distribution
Shippers are offering same-day in response to consumer demands according to Gerry Mercure. “They are insisting upon faster delivery options and they still expect a consistent delivery experience. Amazon, Google, Jet.com and others have utilized same-day distribution to reduce order-to-delivery time, gaining them a strategic and competitive advantage.”
He offered these staggering statistics:
- 40 percent of online shoppers indicate they have abandoned their shopping cart because of an issue with the estimated delivery date.
- Four in 10 US shoppers said they would use same-day delivery if they didn't have time to go to the store
- One in four shoppers said they would consider abandoning an online shopping cart if same-day delivery was not an option.
“The consumer’s mantra is, ‘I need it now. I want it now.’ That lends itself to a more on-demand distribution model,” pointed out Mercure.
“We used to have the push model for delivery,” said Moyer. “You ordered something and you got it in four to five days because the supply chain was telling you that’s when it would get it to you. Now, consumers are pulling. Their demands are shaping the delivery options we have to provide. We must adjust our business models to the way the consumer is acting.”
Verticals to grow, verticals to shrink
Rounding out our look into the trends that will shape 2017, we asked our industry experts what verticals they expected to grow in 2017. Here are some of their responses:
- Healthcare, including the delivery of healthcare supplies to the home. This will continue to be fueled by the aging of the population, according to three of our experts: Jason Burns, Chuck Moyer and Mark Cossack of Priority Courier Experts. They expect its impact to last way beyond 2017 as the Baby Boomers live longer lives.
- Food – Jason Burns forecasted significant growth for this sector which includes deliveries of any type of food products, especially perishables that need to stay fresh and require temperature controlled transportation to retailers, convenience stores, grocery stores, schools and restaurants.
And what verticals do our experts expect to shrink in 2017?
- Moving paper and banking, according to Ben Kaplan of Rightaway Delivery
- On-demand, according to CLDA President John Benko of Pace Runners.
- Auto parts, according to Chuck Moyer. He explains it this way: “Over the last eight to 10 years vehicles are being made better with longer warranties and can only be serviced by a dealer or professional mechanic. This reduces the need for individuals needing auto parts. The large dealers and/ parts houses use their own fleets.”
Advice for 2017 success
As we look toward 2017, we asked our experts to conclude their look at the coming year with advice for those in the industry. Here is what they shared with us:
- “Know your strengths and focus your resources where they will provide your best opportunity for success,” Jason Burns.
- “Don't have all your eggs in one basket! Diversify!!!” Ben Kaplan.
- “Don't get caught thinking about what worked yesterday. Things are changing faster than ever and everyone must adjust to remain relevant,” Chuck Moyer
- “Make sure that you advocate both politically and legally for your industry. Do not be afraid to speak up and support the business and labor model of your choosing,” Mark Cossack.
- “Keep your ear to the ground to best understand how and where to position yourself to take advantage of changes in our industry. Engage with the CLDA!” John Benko.
About the Author
Andrea Obston is the Director of Public Relations at the Customize Logistics and Delivery Association (CLDA).