By Matt Hertz, founder of Second Marathon, an ecommerce supply chain consulting business.
Despite the headlines—robots roaming around warehouses, drones flying in the air, robotic arms moving product from location to location—much of logistics, and the ecommerce fulfillment space in particular, remains non-automated and human-intensive.
In a world running hard toward commoditization, ecommerce fulfillment and logistics will continue to be a space facilitated and optimized by the human touch. In fact, the human element is becoming a competitive advantage for many 3PLs, providing a unique ability to customize and bring personalization to a world that is quickly becoming overly-commercialized. Partnership, transparency, and human connection are increasingly important matters, particularly in light of this year’s extraordinary events.
Human Capital in Fulfillment
Amazon added 427,300 employees between January and October of 2020 (about 1,500 daily!) pushing its workforce to more than 1.2 million people globally. This was an increase of more than 50% from a year ago. Its number of workers now approaches the entire population of Dallas.
This massive need for labor is in part why Amazon buckled earlier this year and saw Prime delivery times veer from their otherwise two-day (heck, same-day!) service standards. While there were a number of factors that exacerbated these delays such as elongated transits of inbound receipts, the bulk of the concern was a lack of human capital within their four walls to receive, pick, pack, and ship orders.
Surely the industry is studying the rapid acceleration of ecommerce and understanding what ought to change to help facilitate this new norm of volume and growth. But automation and the associated costs and development takes a great deal of time. Not soon will the benefit of automation fully usurp that of the human touch.
Ecommerce is a beast. Fulfillment is very challenging, unpredictable, and very specific. Unlike B2B distribution which carries much of the opposite characteristics (predictable, clean, uniform, orderly), ecommerce brands prefer customization, with particular cartonization or packaging, the unboxing experience with tissue and ribbon or note cards, and the need to pull often small goods out of mixed totes. These aspects are better endured by humans.
It’s the Technology, Duh!
Try thinking of a business that does not utilize technology, in some form. From computers to infrastructure, communications to mobility, technology is everywhere. When it comes to fulfillment, customers desire a certain baseline of technology in their fulfillment partner which may include dashboarding, reporting and real-time visibility. While picking arms utilize technology, that is secondary to some of these fundamentals.
Let us not confuse technology with automation. The most successful 3PLs are those that embrace technology in order to modernize their systems—whether to improve speed, visibility, transparency, or integration. While automation can be a practical solution under certain circumstances, visibility and tooling is integral under every condition. With the acceleration of tech-enabled, modern ecommerce platforms such as Shopify, the logistics stack and particularly ecommerce fulfillment, must continue to innovate and adapt to meet the ever increasing expectations of operational stakeholders.
While the tools of innovation must be embraced, we are a ways away from seeing automation significantly deployed across the fulfillment value stream. The challenge that many experience is the general lack of modularity in heavy automation. That is, typically automation systems work best when designed for a specific use-case.
The business models of many 3PLs would preclude investing capital in such automation when they support dozens or hundreds of clients within a building and have a level of churn that make the payback of these expensive investments challenging. This is why we haven’t seen widespread automation within 3PLs.
The Intangibles Matter
Any competent 3PL will tell you that the big four fundamentals of fulfillment are accuracy, operational service, competitive cost, and visibility of products throughout the supply chain. The less known key variable is the human touch, a true relationship between 3PL and brand, which is becoming more integral to forming a lasting partnership.
Younger operators are less likely to partner with a business that does not express a shared mission. If there is no clear shared value, the relationship is nothing but transactional. As logistics becomes increasingly commoditized, the ability to adapt, serve, and remain flexible is rising in demand. Those who have these rarities are rewarded by distinction in a crowded, fragmented, market.
Show that you care. New prospective partners that make the effort to engrain themselves in the brands’ culture by joining their social channels and email marketing lists, referencing news or recent announcements in dialogue, ordering the product and discussing the unboxing and product experience on calls. Show that you are trying to become a true extension of their team. That’s what brands want. At times your acts may appear cliché but they are always noticed.
What Are You Famous For?
Any business should be famous for something. The onus is on the leaders to develop what that is. What you are famous for ought to be your core competency, and a core competency of a business is what your customers perceive your business to be. Don’t pretend to be something that you are not. Only one 3PL can be the low-cost leader. Only one can have the highest operational standards. Don’t try to fight it if you cannot. Find an area that is your competitive advantage and become the best at that. The human side of fulfillment is ripe for a new leader.
Matt Hertz has spent his career building, scaling and managing complex ecommerce supply chain operations. He started Second Marathon, an ecommerce supply chain consulting business in 2017, as a way to support the next generation of ecommerce brands solve supply chain challenges. Matt began his operations career as part of the founding teams at Rent the Runway and Birchbox. He then joined Shyp in San Francisco, where he oversaw relationships with the broader ecommerce ecosystem.