Importers Insourcing Global Logistics: Reaction, Disruption, or Opportunity?
While attending the latest round of this year's supply chain and logistics conferences, there was the usual mix of panel discussions focused on rates, technology, capacity, geopolitical risks, and outlook for the industry. The technology sector remained well represented on stage and in the exhibit halls, with many software providers and logistics providers showcasing their solutions.
Many of the core ocean freight business challenges continue to dominate conference agendas every year. Will capacity and rates ever be at a point where shippers and carriers are satisfied? Probably not. Geopolitical events posing the greatest risk to reliable trade flows seem to have shifted from the Middle East to Eastern Europe and the South China Sea. And the impacts of the global pandemic continue to be felt.
On the technology front, the innovation landscape continues to mature. There is a LOT of IT designed to help the ocean freight process. The once super-hyped theme of cloud computing has matured into table stakes status and been replaced by emerging technologies such as artificial intelligence and ChatGPT.
As a representative of Slync, I found the discussions about how technology has reached a point where it can transform logistics without the massive implementation and change management overhead to be interesting and often exhilarating. The logistics IT ecosystem is large but also maturing, delivering results in all corners of the industry.
Many of the barriers that have made widespread adoption challenging are coming down. AI can now consume, interpret, and associate data without needing to build extensive and complex integrations between systems; this is potentially game-changing.
And, digital transformation success stories are now common. Countless documented examples show how huge companies have completely re-imagined the way they run logistics. Look no further than what Amazon has done as the north star example of the ultimate possibilities.
Importers Taking Control
The relationship between shippers and their logistics partners has always been one of highs and lows. On one hand, the complexity of global trade is ripe for constant problems. A typhoon in Asia can wreak havoc on the best made plans but ultimately the buck stops with the organization that is in control of the inventory.
The C-suite of a major US retailer does not care why something went wrong; they just expect to have the holiday merchandise ready to hit the shelves in early Fall. One of the perils of outsourcing is being beholden to the performance of other companies, but if seasonal merchandise is constantly late and falling into clearance sales, executives may start wondering if they might be better off taking a more active role in their import operations.
Few companies have the financial horsepower to replicate what Amazon is doing, but supply chain excellence has become a source of strategic advantage and the new class of executive leaders who grew up in the internet age are wondering if there’s a better way.
At this year’s supply chain conferences, I’ve heard from several large companies that I once thought would never consider taking on import logistics themselves exploring that strategy. Technology innovation is leveling the playing field, creating different operational models. In many ways it reminds me of the days when desktop publishing gave in-house marketing teams the ability to develop content that was once the exclusive domain of design agencies, typesetters and printers.
Advanced technology can sit on top of countless partner systems and exchange data without the need to go down a massively expensive, rarely successful integration journey, maybe an importer can get the best of both worlds. They obtain a great degree of visibility and control, while using their partners to run the ships, planes and warehouses.
Logistics Service Providers Need to Evolve
Companies that handle global logistics on behalf of their big, demanding customers are in a tough spot. They are doing everything they can to deliver great services and technology to their customers, but the expectations continue to rise.
There were many 3PLs showcasing their innovation advancements at their conference booths. In the 25 years that I have been in this industry, it’s remarkable to see how IT excellence has moved to the top of the value proposition. It has become the differentiating factor for third-party transportation intermediaries.
Most supply chain partners strive to be at the top of any routing guide servicing a big Fortune 500 importers. Once upon a time, a partner might get elevated to “4PL” status, a level above the rest, serving as the master control tower. Who wouldn’t want to achieve that!
Importers are now rethinking where the logistics control towers of tomorrow should reside and I suspect the preferred strategy will be in-house. The partners that embrace this and provide the operational data and insights into performance and inventory flows will survive and thrive.
The COVID pandemic has been a disaster for the world. The global logistics industry was in the crosshairs of the evening news for far too long. The industry is learning and evolving, which may ultimately result in more winners than losers. Only time will tell, but the opportunity at hand is real and important.
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