Supply is driven by consumer demand, and consumer wants are getting more complex. Logistics in turn requires better planning and efficiency. Here are some pointers to create a logistic strategy that reduces costs, satisfies customers and drives profits.
The Customer as the Centre
By starting with what customers want, we are better able to plan logistics strategies that will maximise customer satisfaction. Efforts must be directed at the end-user, as demand and loyalty for your services will make or break your business.
The UPS Pulse of the Online Shopper™: A Customer Experience Study (Asia and Australia) conducted in 2013 revealed that customers want more choice, flexibility and certainty, and that only about 50 per cent of Asian online shoppers are satisfied with their experiences so far. This study surveyed over 4,000 online shoppers from Australia, China, Hong Kong and Singapore.
Consumers are looking for more choice than what they have now. Among those surveyed, only 54 per cent have the ability to track online purchases, 40 per cent have the certainty of choosing a specific time and day of delivery, and 38 per cent have the flexibility to reroute packages. More delivery and tracking options can be given to suit different needs and lifestyles.
For example, secure lockers with 24-hour access like SingPost’s POP Stations and Yamato’s Ta-Q-Bins have been introduced as alternative pickup locations for Singaporean shoppers, since many work full-time and are not home to receive the package in the daytime; they would rather pick it up at their own convenience.
Consumers also differ in terms of their flexibility. Some 76 per cent are willing to wait up to five days for delivery, but also want the option of using express services while 44 per cent want an easy returns process, so that they can get refunds easily for faulty or unwanted products.
There is a demand for certainty, where customers can anticipate when their shipment is going to arrive. However, only 56 per cent are notified when the shipment will be delivered, while 54 per cent are able to track the shipment on their mobile phone. Firms that do not offer such convenient tracking services are missing out, as 75 per cent of respondents purchase items through their mobile devices. In fact, 65 per cent of them said they would abandon their shopping cart if they were not given a specific delivery time and date.
Logistics strategies can be improved through a customer-centric approach. While many logistics companies may choose to build their strategy around what they do best, it is better in the long run to build it around what the customer wants. Through the use of research and data analysis, companies can easily find out what is in demand, and create a business model that meets it.
“When a company begins practising inbound logistics or demand-driven logistics, transportation costs are reduced but the savings of replacing inventory with information, and providing better customer service to your customers, is even more important,” shares Keith Biondo, publisher of Inbound Logistics Magazine, with Camcode.com.
For example, DPEX Worldwide developed Choizes, which is a customer satisfaction strategy that gives customers more choice in payment options together with the option of changing the drop-off location before delivery. This offers the customer more certainty and choice and saves costs from repeated failed deliveries to their home address.
Regardless of which part of the supply chain a company sits on, planning ahead is key. The demand for online shopping and deliveries peak and lull at specific periods, and firms can incur huge costs without a good logistics plan. For example, during peak periods such as in the run-up to Christmas or Black Friday, there will be a huge surge of orders. In 2013, Amazon hired an additional 15,000 staff to cope with the Christmas season. Warehouses also need to have stable IT systems and enough manpower to fulfill the orders on time, without running added costs of rushed shipping or delivery.
Harnessing big data and analytics can help companies plan ahead to meet appropriate staffing and warehousing requirements. Logistic strategies often start with one main aim of reliability, speed, affordability or quality. There will always be a trade-off in achieving aims. A strategy to keep prices as low as possible will always differ from one that aims for speed.
However, with good planning and research, companies can find creative ways to cut costs and keep customers happy. A.T. Kearney revealed that some Chinese companies have found a way to halve shipping time without extra costs when fulfilment centres are strategically placed. It also found, however, that reliable service still trumps speed of delivery. Thus, balancing express delivery with reliability is another integral part of the logistics strategy.
When developing a logistics strategy, it is paramount to put the customer at the centre of operations. Consumer demands and trends are changing rapidly in the e-commerce landscape, and companies need to constantly stay in tune with consumers or risk falling behind. With the aid of technology, companies can then explore other ways of providing the best customer experience at the lowest cost. Innovation is also required to challenge traditional logistics management and business models.
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