Logistics in the manufacturing industry: the shift from efficiency to customer experience
Business purchases are rapidly moving from offline to e-commerce. But is the logistics focus of the manufacturing industry shifting along? Discover why efficiency in logistics is now secondary to the online experience of your customers.
As a consumer, I can order a laptop today and have it delivered tomorrow night, right between dinner and my visit to the gym. From the moment I order I get constant Track & Trace updates, so I know exactly when to expect my parcel. And if the laptop is not entirely to my liking, it will be collected and returned free of charge, wherever and whenever this suits me.
Black box for business buyers
This scenario is the norm in B2C commerce. But for business buyers, it is still far from reality. The delivery of business orders is still often a black box in which the receiver enjoys little to no control or transparency. The question is for how long will this remain?
E-commerce becomes the standard in B2B
E-commerce is rapidly replacing the physical order forms and product catalogs that have dominated B2B sales for decades. According to Gartner (2018), 75% of all business procurement within five years takes place via online marketplaces and sales platforms. This creates a huge opportunity for manufacturers, but it also brings challenges.
The new generation of decision makers effortlessly projects the service they receive at Amazon, Zalando or Zappos onto their expectations towards business suppliers.
According to research among 6723 business buyers, 69% now expect an Amazon-like buying experience from their B2B suppliers (Salesforce Research, 2018). 67% already switched vendors because they offer an experience that is more alike the one in consumer retail. Both percentages are even higher among the new generation of decision makers born between ’81 and ’99.
What does this mean for the delivery of goods?
This consumerization of the business purchasing process is leaving its marks on suppliers. No fewer than 84% of B2B providers now consider it their top external threat (Episerver, 2019). This also translates to the delivery of goods. Shipments become more fragmented and smaller, which increases your dependence on parcel carriers.
Although cutting transport costs continues to lead the list of shipping challenges, we see that the rise of e-commerce has become the number two challenge for today’s shippers. Closely followed by improving customer service. With the knowledge gained from B2C e-commerce, we are likely to see the following delivery services become increasingly important in the B2B space:
Choice of multiple delivery options
In a business environment there is usually someone available to receive a shipment during business hours. However, this does not mean that one-size-fits-all shipping is sufficient. One customer might be willing to wait longer, at lower delivery costs. Another might need his delivery today. To meet this varying demand, offering a wide range of delivery options and delivery speeds is crucial; from same-day delivery for the most time-critical shipments to Economy-options for slower deliveries. You might be able to offer these via a single delivery partner, but due to ongoing carrier specialization, a mix of carriers is becoming more common and preferable.
Full transparency of shipping costs
Just like consumers, business buyers do not like to be surprised. By offering maximum transparency about delivery costs, including any handling fees and costs for customs clearance, you prevent uncertainty and significantly improve customer experience.
Real-time Track & Trace Insight & Updates
The need for transparency remains once the shipment is in the hands of the carrier. By proactively informing receivers about the status of their shipments, especially in the event of any delays or exceptions, you will optimally meet this need. Moreover, you keep control over the customer experience and prevent customers from contacting you or your carriers in frustration.
Localization of delivery options
With e-commerce, you can theoretically sell anywhere in the world, provided you can also deliver. In B2C e-commerce, we are currently seeing that retailers localize their delivery offerings, combining major carriers such as DHL, FedEx and UPS with local specialists. This isn’t just for cost saving reasons. Local carriers typically meet the demand of end customers in a particular geography better.
More shipping locations
Affordable, but fast, delivery is definitely at the top of the customer wish list. As a result, the distance between shippers and end customers is reducing. It shows in the opening of several, smaller shipping locations as a replacement or extension of traditional mega warehouses. Ship-from-store is the ultimate example of this trend. Omnichannel retailers use their store locations for the fulfillment of online orders, making even same-hour deliveries feasible. But this trend is also visible in the manufacturing space. Aided by the rise of 3D printing and robotics, production is shifting to decentralized locations, increasing the number of shipping locations in manufacturing.
How do you respond to this as a manufacturer?
The major logistical change that successful e-commerce parties, both B2C and B2B, bring about is the shift from push to pull. Where previously the supplier dictated delivery conditions, it is now the customer who determines where, when and by whom goods are delivered.
Partly due to this development, successful manufacturers are now saying goodbye to their efficient, but very rigid, supply chains. To meet the needs of the new generation of business buyers, flexibility is the new adage. By building in flexibility at tactical places in your supply chain, you prepare yourself for the rapidly changing and the wide array of wishes of all your customers. Take look at your supply chain through the eyes of customer experience and ask yourself – what would I think of this as a consumer? The answer might hold the future of your manufacturing business.
Want to know more about logistics trends in manufacturing?
Download the white paper “The 7 logistics trends that will radically change the manufacturing industry in 2020”. In this white paper, we cover the logistical trends that every manufacturer must know to remain competitive in our dynamic market.