ARTICLE
When every part works better but the network doesn’t: why network orchestration is the next phase of logistics transformation
Every part of a logistics network can look efficient while the network itself isn’t. As customer expectations rise and demand becomes harder to predict, the operators pulling ahead will be those that can orchestrate the network as a whole.
Ten years is a long time in logistics. The past decade has brought robotics, out-of-home delivery, Brexit and a new customs regime, tariffs, a global pandemic, waves of consolidation, accelerating digital transformation and the reinvention of postal operators as increasingly parcel-focused businesses.
And the pace of change is showing no signs of slowing.
“There has been more change in the past ten years than the previous 30 and there will be more change in the next five than in the previous 20,” says Bob Black, Vice President, Industry Strategies at Blue Yonder.
The customer in the driving seat
Historically, each part of the logistics network was largely run and measured on its own. Sortation, warehousing, the middle mile and the last mile each had their own targets and processes. They were connected, but relatively loosely, because demand was predictable and there was slack in the system.
That assumption no longer holds. The growth of marketplaces, social commerce and influencer-driven purchasing has made demand more complex, volatile and immediate. Volumes can swing significantly from one week to the next, parcel sizes are increasing, delivery promises are becoming tighter and margins remain under pressure.
At the same time, consumers have more choice than ever over how and when their purchases are delivered.
“The consumer has more power than ever and their expectations around choice, cost and convenience are higher than ever,” says Black. “Of these, convenience is the biggest driving factor. Operators have to build this into their strategy now.”
For consumers, greater choice is a benefit. For operators, however, every additional choice can introduce another layer of cost and complexity. There are ways to manage this: dynamic pricing at the checkout can guide customers towards delivery options that best suit the logistics network while giving customers the feel of control.
This matters because for carriers there is limited room to compete on price in an industry already characterised by intense competition and significant investment requirements.
“There’s not a lot of elasticity on price,” agrees Black.
That puts greater emphasis on the customer experience. And increasingly, that experience is determined at the point where the digital promise made at checkout becomes a physical interaction: the delivery.
The last mile becomes the battleground
The last mile has consequently become one of the industry’s most important areas of investment – and it’s most price sensitive. Van loading and sortation times, drop density, time spent at each stop, congestion, parking constraints and driver availability all have a direct impact on last-mile economics. At the same time, the delivery is the moment when the customer’s expectations are tested.
As a result, there’s been huge investment in the final mile: real-time tracking, location intelligence and data-driven planning and pricing tools mean this critical touchpoint is increasingly slick. But improving the last mile does not necessarily improve the network.
In fact, it can create trade-offs further upstream. Local distribution centres reduce non-revenue driver time but add sorting complexity. More last-mile locations serviced, equals more middle mile costs and complexity. Success lies in finding the optimal trade-off.
This is why end-to-end logistics network optimisation is becoming increasingly important. The question is no longer simply how to make an individual warehouse, sortation centre or fleet more efficient. It is how a change in one part of the network affects every other part.
“The operators pulling ahead are the ones orchestrating the network as a whole,” says Black.
Postal operators face a transformation of their own
Few businesses illustrate the scale of this change more clearly than postal operators. Royal Mail, for example, has a history stretching back centuries, but the nature of the network it operates today is changing rapidly. Letter volumes have fallen dramatically while parcel volumes are growing. As a result, acceptance times for injecting parcels into the network, vehicle configuration, sortation requirements, delivery routes and the digital tools used to communicate with customers all have to evolve. This makes parcel network planning and execution increasingly dependent on having visibility across the entire operation rather than optimising individual stages in isolation.
The human factor
Technology is an important part of this transformation, but logistics and postal networks remain people businesses, particularly at the point of delivery. Drivers, warehouse workers and operational teams have to make the network work in the real world, often in conditions that cannot be fully anticipated by a model. At the same time, the sector faces a continuing challenge in attracting and retaining talent.
“Companies that invest in the right digital tools to support drivers and deliveries will have an edge,” says Black.
Technology has to work for the people using it. That means involving frontline employees in the development of digital solutions to find quick wins to real problems.
“Your frontline people know the pain points and the small changes that make a significant difference,” he says. “Your small wins are people driven.”
A connected, collaborative – and consolidated – network
Increasingly, the next stage of transformation will require a more connected logistics network which can rapidly flex and adapt to changes across the system, and help operators understand the trade-offs involved at every stage. That could mean understanding how a change in consumer demand affects warehouse capacity, transportation requirements and last-mile delivery. It could mean using data and AI to identify where additional capacity is needed before a bottleneck develops. Or it could mean balancing the cost of a larger delivery footprint against the customer convenience it creates.
The same principle extends beyond the operator itself. Logistics networks increasingly depend on collaboration between retailers, carriers, postal operators, technology providers and other partners. Better collaboration can help create more seamless returns processes, for example, while consolidation can generate economies of scale and provide a much-needed boost in fleet, warehouse and workforce capacity.
Black describes the industry as moving through successive stages of change.
“We’ve been through evolution, development, acquisition and consolidation, integration and now we’re into the transformation and optimisation phase.”
The distinction is important. Integration connected previously separate parts of the operation. Optimisation now has to determine how those connected parts should work together.
Orchestrating the whole network
The logistics industry has spent years improving individual components of the supply chain: sortation is faster; routing is more sophisticated; warehouses are increasingly automated; last-mile visibility has improved dramatically and even problematic returns are increasingly slick.
The challenge now is to understand the trade-offs between these parts – and to make decisions based on the performance of the network as a whole. The next competitive advantage may therefore not come from having the best last mile or fastest sortation operation -but from connecting and orchestrating them as one.
Blue Yonder are proud to be sponsoring Leaders in Logistics Autumn on 6th & 7th October, at the Business Design Centre in London. If you’re attending the event, come and chat with us – our team would welcome the opportunity to discuss how we’re helping postal operators, around the world, to optimise and orchestrate their end-to-end logistics network. We’re on booth #15 – hope to see you there!
Bob Black, Vice President, Industry Strategies, Blue Yonder
Bob Black is a highly experienced logistics and supply chain executive with more than four decades in the transport, parcels, mail, and ecommerce sectors. He spent 30 years with TNT in a range of leadership roles spanning strategy, operations, business development, sales, mergers and acquisitions, and international distribution, before joining Australia Post in 2014. As Group Chief Operations Officer and Executive General Manager, eCommerce Delivery, he led Australia Post’s end-to-end parcels and mail operations and played a key role in the organisation’s ecommerce transformation. Throughout his career, Bob has built a strong reputation for driving large-scale operational excellence, strategic infrastructure investments, and supply chain innovation, helping connect businesses and consumers to domestic and global markets.
Blue Yonder is the world leader in digital supply chain transformation. Retailers, manufacturers and logistics service providers worldwide rely on Blue Yonder to optimize and accelerate their supply chain from planning through fulfillment, delivery, and returns. Blue Yonder’s AI-driven supply chain platform and multi-enterprise, multi-tier network enable more accurate forecasting and dynamic management of capacity, inventory and transport. Blue Yonder helps businesses navigate modern supply chain complexity and volatility with more resilient, sustainable supply chains to delight customers, scale profitably, and run flawlessly. blueyonder.com
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