Amazon is Disrupting the Logistics Industry
NEWS – Logistics is about to get disrupted by Amazon, reports Freightos CEO Dr. Zvi Schreiber in Supply Chain 24/7. The e-commerce giant, already known for its free two-day shipping and same-day shipping options, looks poised to unleash its own logistics-as-a-service platform, supported by a logistics infrastructure that now includes a Beijing-based ocean shipping provider in addition to Amazon’s existing air transportation and trucking networks. Logistics suppliers may soon find themselves competing with Amazon, Schreiber anticipates.
For the manufacturing industry, this forthcoming logistics disruption adds increasing urgency to the imperative for achieving logistics efficiency, already vital as a competitive differentiator. Here are a few reasons why logistics efficiency needs to be a top priority for manufacturers, along with a few ways to improve their logistics management.
The Growing Importance of Logistics
Amazon’s entry into the logistics arena is driven by costs. For Amazon, as for manufacturers, warehousing and shipping represents one of the major operating expenses required to do business. By developing its own in-house logistics capability, Amazon aims to improve its efficiency and lower its costs. Likewise, manufacturers who improve their logistics efficiency can lower their operating costs.
The logistics cost factor is tied to a number of other variables that make logistics crucial for gaining a manufacturing competitive advantage. With companies such as Amazon offering overnight and same-day shipping at low costs, customer expectations for speedy delivery are higher than ever. This makes offering fast shipping at affordable prices an increasingly necessary marketing selling point for manufacturers to stay competitive. At the same time, fast shipping is increasingly essential to delivering customer satisfaction.
Internally, logistics efficiency also contributes to overall performance efficiency. With advances in computers and robotics making logistics increasingly automated, manufacturers who lag behind in logistics efficiency will also start lagging behind the competition in general.
Integrating Logistics With Primary Business Processes
Supply Chain Visions chief researcher Steve Murray says one of the best strategies for improving logistics effectiveness is integrating logistics into sales and operations planning (S&OP). S&OP includes everything from financing, product management, procurement and manufacturing to sales, marketing, warehousing and transportation. When logistics are approached in this context, it becomes part of a team effort that supports every phase of business from product conception to product delivery. Improvements in S&OP integration can have a bigger impact on logistics than any other adjustment, says Murray. For example, o-ring manufacturer Apple Rubber has been able to go from being a local distributor to a global manufacturing and research leader in its field by improving its overall business infrastructure, including its logistics, in order to support international customers.
Adopting Demand-driven Logistics
Inbound Logistics Magazine says another essential strategy for improving logistics is adopting demand-driven logistics. Demand-driven logistics, one of the secrets to the success of chains such as Walmart, relies on accurate marketing intelligence to streamline shipping in accord with peak demand times. The most successful demand-driven models not only forecast market demand, but actively shape market demand through integrated sales and marketing campaigns. Coordinating shipping schedules with demand cycles enables companies to cut shipping costs, improve warehousing efficiency by replacing inventory with information and improve customer service.
Successfully implementing a demand-driven logistics model in today’s market requires an effective logistics automation strategy. The best way to accurately forecast demand is by deploying integrated logistics and business intelligence (BI) software that uses big data to analyze and forecast demand trends.
Along with BI, a few other automation technologies are emerging as central to logistics in 2016, reports Cerasis marketing strategist Andy Robinson. Transportation management system (TMS) software that automates the coordination between customer orders, inventory management and shipping is becoming more widely available thanks to cloud-based apps. Meanwhile, robots are being increasingly used in warehouses while autonomous vehicles and drones are automating the physical shipping process. Together these technologies are taking logistics to an unprecedented level of efficiency.