How empowered consumers are forcing supply chains to adapt

To seize the opportunities created by the boom in eCommerce, retailers, manufacturers, and logistics providers alike have all taken steps to make their supply chains more customer-centric.

The moves make sense. As globalization made it easier for companies to tap into new markets – and conversely, enable consumers to shop the world through online channels – supply chains had to become more flexible. Years ago, efficiency and cost savings formed the foundation of “good” supply chain practices at many companies. Today, more companies focus on creating supply chains that enable better customer service.

Making the investment

It takes a tremendous amount of money and effort to create flexible supply chains that can improve customer service. Perhaps that is why so many companies focus on the front end of their supply chains.

By focusing on manufacturing and suppliers, companies may get the most bang for their buck. That is, investments in manufacturing and supply lines – and the transportation surrounding these activities – can typically drive significant improvements in the shopping experience for the majority of their customer base. (Think of this as more of a “macro view” of supply chain economics).

Certainly, supply chains can be re-engineered to support better customer service – near-shoring can decrease lead times, and fulfilling online orders from brick-and-mortar stores can improve SKU optimization. But many companies underestimate the value of the primary customer touch point for eCommerce orders – the final-mile delivery experience. This experience drives customer perception of the retailer, the supplier and the final-mile delivery company.

Control of the final-mile delivery experience is already beginning to shift to the consignee, and this shift is not new by any means. However, consumers will expect even more control over the delivery experience going forward – and not just in terms of “when” and “where.” Companies will have to focus more on “how” and “why.” Why is this consumer ordering this good, and how do they plan to use it?

For the most part, retailers and logistics companies try to pass control of the final-mile delivery experience to consumers via local couriers and same-day delivery. Although widespread courier integration may be on the horizon and could help drive down costs, courier models are clunky at best and typically only work in urban settings.

Tapping into new models

Logistics providers have also tried to tap into the local courier model. However, for this model to have long-term viability, this process will have to be adapted to allow real-time integration of new information – from both the consumer and the logistics company.

Many of these “local” options address needs in same-day delivery and grocery orders, while others go after niche offerings such aslate-night delivery and alcohol purchases. There have also been attempts to integratepackage courier services with taxi services.

At UPS, our initial response to the evolving needs of consumers included the launch of UPS My Choice and the rollout of the UPS Access Point Network. These services were designed in part for consumers that like to shop online but have a difficult time receiving their packages (think condos with street-facing entries or multi-tenant buildings without front desk staff). There are other solutions too, of course, and alternative delivery locations and lockers are being tested throughout the world.

While still small in scale, these solutions are not being driven without need. Today’s consumer demands control over their experiences (and products to a certain extent).

This shift towards customization is beginning to impact logistics as well, as the modern consumer wants options that meet their ever-changing set of criteria for delivery of online purchases. Companies must respond accordingly and prepare for the future of logistics, which by most estimations will have significant implications to supply chains across the world.

Internet of Things and custom logistics

What will the final-mile delivery experience of the future look like once the dust settles and the Internet of Things has taken over our lives? No one is sure, but it’s certain that final-mile deliveries in the future will differ from the standard model of years past.

Putting aside changes in eCommerce and the dominance of omni-channel shopping, the delivery experience will focus much more on the consumer and their unique needs for each individual package. No longer will third-party logistics providers be able to dictate when and where every package is delivered.

Supplement the final-mile delivery equation with factors that include mode of transportation and preferred method of acceptance, and you have a delivery model that the customer controls. Mix the Internet of Things into the equation, and the possibilities grow exponentially.

Imagine a world in which a fitness tracker knows its owner is reaching the end of a long run and needs to hydrate. After pinging the runner’s smart fridge, the fitness tracker determines that the runner is out of their favorite sports drink and places an order for a case of the beverage from either the retailer of choice or the low cost provider (based on preference, of course).

Before placing the order, the fitness tracker connects to the runner’s daily calendar in their smartphone and knows that there is a small gap in-between the projected end of the run and the next planned activity. The order is placed, and the runner has their beverage with plenty of time to consume the drink and get ready for their next event.

The consumer is happy – and the retailer just benefited from a non-traditional selling opportunity enabled by the Internet of Things and custom logistics.

This article is published in collaboration with Longitudes. Publication does not imply endorsement of views by the World Economic Forum.

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Author: Brandon Johnson is the UPS Access Point Network Manager for the United States.

Image: A shipyard is silhouetted against the rising sun in Dalian, Liaoning province. REUTERS/China Daily