Global Trends in Modern Logistics and Warehousing

Warehousing is the intermediate process in the logistics value chain which involves storage of goods during a product’s journey from the factory to the end-consumer. From fulfillment centers, distribution centers to return centers and retail stores acting as fulfillment hubs, warehousing takes different forms. The article below covers some of the best practices of modern logistics and warehousing processes globally. Most of these practices have just started to gain ground in the context of Indian logistics.

• Omni-Channel Logistics: According to Forrester, Research, 53% of purchases are digitally influenced. As a result, companies are investing heavily in integration of online and offline channels. Initiatives like order-online pick-up in store to stores acting as last-mile delivery hubs are no longer a novelty. Thus, flexibility and convenience of customers is leading to the growth of omni-channel logistics. For example, IKEA has converted their warehouses into showrooms that serve as experience centers for their customers, while final orders are placed online and delivered to customers’ doorsteps. Walmart allows shoppers to order products online and pick them up in store.
• Third Party and Fourth Party Logistics: Globally, an estimated 86% of Fortune 500 companies outsource logistics activities to 3PLPs and they are now moving to a supergrid logistics structure where global supply chains are arranged in a grid like structure such that different logistics components spanning borders, sectors and services are integrated. A logistics supergrid assimilates multiple supply chains, smoothly and flexibly with cloud computing as one of the enablers. For eg: Amazon connects numerous sellers and logistics providers with buyers across the world by integrating supply chain networks world over into one supergrid to increase cost and time efficiencies. Comparatively, India’s penetration to 3PL adoption is lower than 6% according to Tata Strategic Management Group.
• Shared Economy Services: There’s a clear trend of sharing logistics assets instead of owning them. Assets like warehouses, trucks, MHE are shared between entities for increasing utilization and decreasing costs of ownership enabled by peer to peer sharing platforms. For eg: PepsiCo and Nestle share warehousing, co–packing and outbound distribution to retail stores of their respective fresh and frozen products.
• Data Driven Anticipatory Shipping: Dispatching of products to a particular cluster or distribution center based on anticipation of its demand has always been around. However, with the help of big data based predictive and forecasting algorithms based on previous demand patterns and current markers, logistics providers can predict demand with much higher accuracy even before an order for the product is placed. This helps in reducing lead times, increasing delivery efficiency and higher customer service levels. Amazon pioneered this concept with innovations such as same-day delivery with Prime and one-hour deliveries for groceries.
• Hyperlocal Logistics: The concept leverages existing local retail network to meet the demands of consumers, especially in semi-rural and rural areas where distribution networks aren’t as strong. Partnering with local retailers and integrating their inventories with online platforms allow for fulfilment by local retailers when an order is placed online. For eg: Reliance’s new online to offline commerce platform venture shall leverage a network of local retail stores as omni-channel fulfilment touchpoints, especially in semi-rural and rural areas. Amazon Prime Now also offers deliveries in under an hour.
• Localized Speed Factories: Speed factories are a growing trend among consumer goods businesses. Earlier, manufacturing would be predominantly set-up off-shore for labor arbitrage with longer lead-times as a trade-off. However, with rapidly changing consumption scenarios, companies prefer building localized micro-production sites for products with a smaller shelf life. These sites are hi-tech facilities leveraging technologies like 3D printing for rapid production of on-demand goods. For eg: Adidas launched Adidas Made for New York City Shoe (AN4NYC) from a speed factory in USA to quickly pump out products with shorter life cycles and less predictable demand while reducing the lead time and logistics costs.
• Cold Chain Logistics: Products like fresh and perishable agricultural produce, frozen foods, chemicals, pharmaceuticals and photographic films are sensitive to temperature change due to smaller shelf-life or sensitive chemical composition. To protect the products from damage and keep the inventory fresh and intact all through, cold chain logistics networks create temperature controlled environments right from storage to delivery. Lately, innovations such as smart packaging solutions such as reusable thermos boxes that report and control oxygen, humidity, temperature and pressure allow the use of standard transport networks instead of expensive climate controlled vehicles. For eg: DHL offers end to end cold chain logistics services in Europe.
• Multi Purpose Networks: Leveraging existing logistics networks and public transportation infrastructure for corporate logistics is slowly gaining ground. Companies now to look to integrate their supply networks with public infrastructure instead of investing in dedicated infrastructure to save costs, augment capacity utilization, increase reach to far-flung delivery touch points and thereby enhance customer satisfaction. A cold storage network can be used for frozen foods as well as pharmaceuticals thereby alleviating the need to build sector specific transport. For example: India Post has started a logistics arm providing B2B services like distribution, warehousing and return logistics to a wide array of businesses including the E-commerce industry.
• Relay Trucking: This popular practice facilitates optmization by ensuring round-the-clock movement of freight trucks. Under this model, a driver sets out with a designated truck load on a particular route. At the same time, another driver sets out with a different truck load on the same route from the opposite direction. They meet en–route and exchange trucks and then drive back to their respective origin destinations carrying freight designated for that location. As a result, the truck keeps moving to its destination without a halt and the drivers don’t over–work or stay away from their hometowns. This helps increase time and cost efficiency. For eg: Rivigo in India is introducing this service with success.

The next article shall cover Global technology trends in Modern Warehousing. Do share your feedback, perspectives and ideas. Drop in a word or just say hi at siddharth@cleanslatetechnologies.com

References: Knight and Frank, DHL Logistics Trends Radar, Tata Strategic Management, Forrester Research