By Dipti Gupta, Chief Operating Officer, Logistyx Technologies.
In recent years, manufacturers have been profoundly impacted by increased customer demand for delivery speed and precision, increased competition, and the growth of ecommerce platforms.
Many have begun to explore a direct-to-consumer sales approach to better navigate an increasingly complex environment. Indeed, research from Barclays Corporate Banking last year found that 73% of UK manufacturers now sell at least some of their products direct to end-user consumers, with 16% of all manufacturing sales in the UK being direct-to-consumer.
In creating a more dynamic supply chain, with the potential to widen the customer base, grow turnover and speed up the time it takes to get goods to market, manufacturers-turned-retailers should consider taking advantage of seven key logistics trends to support their transition to direct-to-consumer sales.
1. Focus on brand experience not just productivity and costs
Whereas manufacturers traditionally focused on increasing productivity and reducing costs, they now need to increase brand value and improve the customer experience. With customers buying directly from a brand’s website, manufacturers should leverage their greatest advantage: brand experience. By providing personalisation, service level choices and an outstanding delivery experience, manufacturers can differentiate their brand from the competition, fostering brand loyalty and increasing sales.
2. Compete with the rise of omnichannel
Today’s consumers are likely to blend online and offline channels to research and purchase goods, with coronavirus driving an exponential increase in online purchasing: the Office of National Statistics reports UK online sales comprised 27.5% of total retail sales in September compared to 20% in February. To accommodate customers’ desire for anytime, anywhere delivery, omnichannel retailers are offering a range of fulfilment options, including click and collect.
Manufacturers looking to implement a direct-to-consumer sales channel must find a way to compete with this omnichannel flexibility. They need excellent logistics, including visibility in all incoming order channels, logistics service provider data, and real-time access to shipment status and pre-emptive alerts when anything related to customers’ orders changes.
3. Take advantage of the growth of multi-carrier shipping
Many ecommerce retailers are enjoying the advantages of a multi-carrier shipping strategy, rather than signing a long-term agreement with just one or two of carriers and direct-to-consumer manufacturers must do the same. A multi-carrier approach makes it easier to meet consumer demand for flexible deliveries, and secure lower prices.
To do this successfully the manufacturers will need multi-carrier shipping software which automatically compares carrier service levels and costs and selects the right carrier/service for each order according to the point of origin, destination carrier contracts and specific business rules, e.g. free shipping for orders of £50. At the same time, this software automatically creates the labels and documents required by different carriers and provides standardised tracking information and real-time status updates about every delivery journey.
4. Embrace sustainable logistics
Consumers increasingly select brands with sustainable business models. For manufacturers, being ‘green’ has become an essential requirement in an era when product origin is more transparent than ever. Green logistics starts with eco-friendlier packaging - both the material of the packaging itself and the amount of ‘air’ in the shipment have become critical factors. Consider replacing plastic packaging and filling materials with recyclable alternatives. Reducing package sizes means more orders can be placed in vans as well helping to cut carrier costs (in addition to weight, carriers charge based on the size of consignments).
Beyond the packaging, shipping mode and method have a major influence on carbon footprints. While rapid delivery may be increasingly important, the use of planes or poorly filled vans for shipping hurts sustainability. Eco-conscious consumers often prefer slower logistics services with minimal environmental impact.
5. Consider re-shoring/near-shoring
Rapidly increasing labour costs in Asia combined with 3D printing of parts and the use of robotics in production has already led to a clear trend towards near-shoring or re-shoring of production sites. It is too early to tell whether Covid-19 will accelerate this trend, but a poll conducted by The Engineer in May found 59% of respondents felt Covid-19 should trigger a UK-wide reshoring strategy. The main advantage is a considerable decrease in delivery times, which when combined with smaller, localised warehouses can allow manufacturers to achieve the ultimate goal of near-instant delivery of consumer purchases.
6. Look into the emerging Internet of Transparency
Just as the Internet of Things makes machines ‘smart’, enabling precise calculations regarding when machines need maintenance or replacement, the same applies to logistics: wireless sensors are paving the way in logistics transparency. Already popular in container transport, as solution costs decrease, parcel transport will also benefit from the technology, including temperature tracking of refrigerated shipments or measuring the movement of fragile shipments. The greater the transparency, the greater the capacity to avoid or correct potential issues in shipping and keep customers happy.
7. Reap the reward of Big Data and analytics
In the Barclays’ research, 32% of survey respondents identified the increased responsibility for every touchpoint within the supply chain - rather than relying on supply chain partners, for example, for inventory management - resulting from a direct-to-consumer strategy as a key challenge for their business. However, the shift from making bulk shipments to retailers, to sending individual parcels to consumers, creates a rapidly growing volume of logistics data, which manufacturers must learn to use to improve the customer experience.
By analysing the intervals between shipment tracking statuses shippers can see whether carriers are meeting their contracted service levels, for example. By using this data to proactively send updates when a promised delivery time won’t be met, the manufacturer can control the customer experience, even if carrier partners are underperforming.
This level of data analysis also significantly strengthens the manufacturer’s position during contract negotiations. It allows invoices to be compared with source data for delivered shipments flagging any discrepancies, and potentially revealing a significant source of savings where carriers impose a separate surcharge for each exception or non-standard package.
After decades of relatively quiet global trade, turbulent international relations, trade wars, Brexit, Covid-19 and climate change are shaking up the role of the manufacturer in the supply chain, as many explore transitioning into direct-to-consumer sales. By understanding and preparing for the seven logistics trends outlined above, manufacturers can more effectively ease the transition and meet customer expectations.
Dipti Gupta is Chief Operating Officer at Logistyx Technologies. Dipti has more than 20 years of experience as a visionary leader in the global management of SaaS products, supply chain transformation and technology.