As we enter the new normal and the world slowly begins to shake off the shackles of COVID-19, let’s take stock of what we have learned.
For many corporate leaders, the events of the past few months highlight the importance of their global logistics operation’s ability to react in real time to problems, and develop and scale new service solutions for a rapidly changing market.
This applied to many industries. Consider retail, with the sudden shift to online shopping and home delivery, and healthcare, where companies had to find non-traditional means to deliver life-saving equipment to patients and frontline workers at warp speed. Look at high-tech, where companies needed to start supplying laptops, headsets and webcams to the armies of people working from home. The logistics function was called on time and time again to react, but as so many organizations found out, they did not possess the fundamental capabilities to perform at scale.
My role as a Gartner analyst offers a unique point-of-view during times of disruption. I hear so many perspectives from a range of companies, listening to the challenges they experience and the solutions they deploy to deal with them. One thing that always surprises me is the amount of commonality in these areas. Over and over during the pandemic I have heard logistics leaders raise the same issues: lack of cohesive data, lack of end-to-end supply chain integration and a lack of proactive solutions from service partners.
As global operations ramp up and we begin to move away from response and recovery toward full restoration of logistics services, CEOs will look to claw back the revenue and market share lost during the disruption. With the lessons learned during the crisis, expect a sharp focus on cost reduction and improved service levels, as well as proactive risk mitigation within the logistics function.
Three key areas logistics leaders should focus on to drive cost optimization and to improve service levels while also building in resilience and agility to combat future disruptions:
- Data Standardization & Harmonization: Many companies I worked with during the pandemic struggled to obtain meaningful operational data. They needed such data to make fast, accurate decisions around how to best use their networks, adjust capacity, reposition stock, shift modes or drive third-party logistics providers (3PLs) to perform. From my experiences, this was not due to insufficient data. It was due to a lack of harmonization across service providers, operational modes and/or geographies. Moving forward, organizations should look to define functional data standards across all areas of their operations and introduce integrated governance structures to harmonize their analytics. For many, this will require exploring centers of excellence, control towers, cloud visibility offerings and/or 4PL solutions.
- Cross-functional Integration: The hundreds of logistics maturity assessments we have performed at Gartner over the years show that 65% of organizations still have logistics functions operating independently of the internal supply chain organization. This lack of internal integration meant that many heads of logistics struggled to work effectively with key internal partners like planning, commercial or manufacturing to make responsive trade-off decisions as suppliers shut down, warehouses closed and carrier capacity became constrained. CEOs will focus on developing more resilient and integrated supply chain capabilities in the wake of COVID-19. Therefore, this is the perfect time for heads of logistics to begin building their business case for systems integration, goal alignment and process optimization in conjunction with the rest of the supply chain.
- Outsourcing Policies: One thing that became clear to me during the pandemic was the total reliance of many organizations on their 3PLs’ abilities to develop solutions to the mounting challenges they were experiencing. With so much riding on their service partners, many companies found them to be as unprepared for disruption as they were. Again and again I listened to customers frustrated with the lack of proactivity they were experiencing from their 3PLs and their inability to drive them to react. As day-to-day operations resume, look closely at your outsourcing policies. Begin to build in contingencies to cover areas such as securing dedicated space on core carriers, proactive mode shifting (ocean to rail, for example), overflow warehousing capacity and flexible use of alternate subcontractors (less-than-truckload to courier services). Build in the contractual requirements for them to perform across these areas when required.
As we continue the march toward defining the new normal in these uncertain times, these core capabilities will be called upon again and again. While the ramifications of the last few months are still fresh in the minds of corporate leaders, now is the time to gain their support for developing the logistics function.
Senior Director Analyst,
Gartner Supply Chain