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Industry Shift: Prioritize Transportation Management Ahead of Warehouses

Sept. 12, 2023
A focus on transportation management and a willingness to integrate new strategies and technologies will help businesses deliver on expectations and remain competitive in the growing e-commerce marketplace.

Direct-to-consumer (D2C) shopping should have companies reevaluating their supply chain management strategy. Nearly two-thirds of global consumers buy directly from brands, and experts expect D2C e-commerce sales to increase by double digits next year. At the same time, many retailers are shrinking warehouse space due to changing consumer buying habits. With these factors in mind, brands must shift their focus from warehouse management to transportation management.

While warehouse management (receiving, storing and distributing goods in a warehouse) becomes increasingly automated, transportation management (handling the movement of goods from one location to another) grows increasingly complex, partly due to the rise of D2C. Online shoppers expect fast delivery—more than 90% view two to three-day delivery as a baseline, and the same percentage actively tracks their packages.

The last mile—the “out for delivery” stage—is crucial to customers, but getting products from the fulfillment center to customers’ doors is the most challenging and expensive step. This leg accounts for 53% of total shipping costs and involves countless logistics, including negotiating shipping rates, creating labels, building driver routes and ensuring timely delivery.

Retailers must streamline that last mile to meet customer demands by collaborating with partners and integrating systems.

Owning the Supply Chain

To meet D2C consumer expectations, brands need to own the product journey. This means having visibility at each step in the supply chain. In reality, brands can lose sight of a package’s progress once it moves into a third-party logistics (3PL) or fourth-party logistics (4PL) partner’s court. But if something goes wrong, the seller feels the consequences.

Collaborative visibility helps brands own their supply chain. In this model, retailers, brands, 3PLs and 4PLs share real-time data and insights. Brands can check the status of shipments at any time and communicate critical information to build transparency and efficiency.

Companies that build an integrated supply chain create a competitive advantage. Visibility enables brands to increase flexibility, reduce operating costs and improve productivity across the entire supply chain, not just last-mile shipping.

Shipping APIs

APIs (Application Program Interfaces) are one way to gain supply chain visibility and bolster shipping times. Businesses can integrate shipping APIs across their software solutions, including order management systems (OMS), warehouse management systems (WMS) and e-commerce websites, allowing the applications to share information and automate workflows. Say a customer buys a pair of shoes online. The website sends the information to the shipping API, which gathers shipping rate data, prints a label and electronically tracks the package.

Shipping APIs provide several benefits, including:

Lower Shipping Costs

Some APIs allow businesses to access discounted, pre-negotiated rates. A robust last-mile API optimizes carrier tracking and enables faster package loading and unloading, reducing overall shipping costs.

Higher Competence

3PLs use shipping APIs to give their team critical information, like which products need to be packaged and the best carrier option, enabling faster fulfillment. A good API system optimizes scheduling and management with a centralized data center and tracks documentation.

Greater Transparency

Manual processes slow shipping speeds and can lead to costly mistakes, such as creating multiple shipment labels. A shipping API automatically integrates with the fulfillment provider, which connects to the label creation application to eliminate manual steps. This capability also benefits customers because they have greater insight into the order status.

Shipping APIs are an effective option for any organization that ships products, regardless of size or shipping volume.

Multi-Client Fulfillment

Many companies use multi-client fulfillment (MCF) strategies to optimize their last mile. In this model, several companies share a common warehousing and fulfillment infrastructure. Businesses can pool resources to streamline their order fulfillment processes, reduce costs and improve efficiency. MCFs allow businesses to be more responsive to market changes and cost-effectively expand to new channels.

MCF benefits include:

Cost Efficiency

Consolidating warehousing and fulfillment facilities reduces infrastructure investments and fixed costs. MCF saves 7-9% over standard dedicated fulfillment services.

Scalability

Brands and retailers can quickly expand or contract operations to meet demand fluctuations, requiring less risk and investment to scale up. MCFs also reduce redundancies for streamlined inventory management and operational efficiency.

Faster Time-to-Market

Shared fulfillment centers expedite order processing, packaging and shipping. The centralized technology and logistics hub optimizes transportation routes and reduces transit times.

Operational Expertise

Companies working with an MCF provider receive access to specialized expertise and best practices in supply chain management, allowing them to leverage industry insights and share ideas.

MCFs present some challenges, such as inventory segmentation, operational complexity and security. A successful MCF strategy requires careful planning, execution and continuous improvement, but it will be a game-changer for logistics businesses.

The Case for Transportation Management

Most D2C buyers chose to buy from the brand because they received a better experience. Fast and reliable shipping plays a key role in that experience. A survey shows 85% of customers said a poor delivery experience would prevent them from shopping with that company again. With so many retail options, brands can’t afford delivery mishaps. A focus on transportation management will help businesses deliver on expectations and remain competitive in the growing e-commerce marketplace.

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About the Author

Padhu Raman

Padhu Raman is the co-founder and chief product officer of Osa Commerce, an innovative supply chain technology provider for brands, retailers, and the third and fourth-party logistics (3PLs and 4PLs) that support them. He has two decades of experience building technology for enterprise retail, including order and warehouse management and unified commerce platforms.