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Outsource magazine: thought-leadership and outsourcing strategy | September 22, 2017

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Bridging the IT gap: contract logistics providers turn to voice technology for competitive advantage

Bridging the IT gap: contract logistics providers turn to voice technology for competitive advantage
Outsource Magazine

Changes in our buying patterns have stirred up fierce competition in the logistics industry. The rise in online and multi-channel shopping has made fast delivery a brand differentiator while bricks-and-mortar stores must balance their stock levels carefully to remain profitable.

At the same time, the trend for internet browsing and buying on our mobile phones means we are shopping ever later in the day, making next-day delivery even more of a tough demand. New ‘click and collect’ services now emerging add a further layer of complexity as online orders need to be integrated with in-store deliveries.

It’s not surprising that an increasing number of retailers are outsourcing their logistics operations to a third-party business. However, this means the pressure on third-party logistics (3PLs) firms to continuously find new ways to be better and faster is intense. Retailers are increasingly looking for their 3PL to bring game-changing solutions to their contract. While they know the retail business, they turn to a 3PL for their warehousing and logistics expertise to, in turn, provide a better service to their own end-customers.

However, there is evidence to show that some of these 3PL companies are struggling to keep pace and live up to these demands. According to a recent study “The State of Logistics and Outsourcing” by Capgemini and Penn State University, 40 per cent of 3PL customers still see an ‘IT gap’ between their actual expectations and their 3PL’s capacity to deliver.

However, the report does comment that: “In the last 12 months, we have seen a concerted effort by 3PLs to modernise their contract logistics offerings, upgrade or replace legacy warehouse management (WMS) systems and invest in technology.”

So, why does a customer develop a long- term relationship with their 3PL rather than taking its business back in-house or switching to a cheaper provider? Hitting KPIs? SLA compliance? Accuracy and/or cost reduction? While these are necessary goals, they can all be matched by the competition or the end customer themselves. Today’s 3PLs must find new ways to demonstrate their own unique value if they are going to renew and win new contracts.

To meet these requirements, 3PLs need to innovate and find new ways of providing sustainable and cost- effective solutions.  However, this level of innovation takes time and money.  With contract lengths remaining short and cost pressure constantly increasing, 3PLs need to ensure that any investment is based on a solid, risk -adverse business case, where they can be sure to see their investment protected and returned within the life of the contract.

So any new IT project needs to be relatively fast and simple to implement. As such, many 3PLs are now looking to voice-directed systems to deliver the disruptive technology change their customers are demanding. Moving from paper-based or RF scanning to voice technology has been shown to improve operational productivity by an average of 25 per cent with the investment being returned comfortably within a year. Voice solutions allow staff to work hands- and eyes-free and are ideally suited to the highly paced piece pick environments synonymous with e-commerce, allowing 3PLs to maximise the efficiency of each pick ensuring the ever-tighter SLAs and delivery deadlines are met.

While technologies such as pick-by-light or full warehouse automation work well where there is consistent demand and only minor fluctuations in picking patterns, voice-directed picking undoubtedly presents a more flexible and scalable alternative for 3PLs with multi-channel retail contracts where a high degree of fluctuation in order profiles is the norm.

A voice solution can easily be scaled up or down, according to the changing requirements of the supply chain, and seasonal peaks can be addressed without having to build in spare capacity. While new systems may offer more functionality, in many cases, legacy systems and devices can be reconfigured or extended.

In an industry characterised by the need to carry out often physically demanding tasks and work unsocial hours, skill shortages are still a worrying issue. Because of this, one of the main challenges of introducing voice technologies is convincing employees that the new way of working won’t impact morale or stress levels. Increased staff turnover will cause further problems and expense – according to the Aberdeen Group best practice labour management report, labour costs already account for around 45 per cent of total warehouse operating overheads.

However a recent Redshift Research survey showed that once trained, most employees prefer this way of working. A decisive 90 per cent of those using voice technology said they were satisfied with their daily work compared with 68 per cent among non-voice users

With the best voice-directed systems, it takes around 25 minutes for new workers to programme or ‘train’ the system to understand their particular voice footprint for two-way communication. Rather than being limited to a specific task, users also have the tools and additional flexibility they need to work across multiple workflows. Shift managers get a real-time view of a worker’s progress through their workload. This gives them the information they need to plan upcoming shifts and to make well-informed decisions on moving staff to other tasks or bringing in additional labour.

Yet, the real value of voice-directed working lies not just in its ability to improve isolated tasks, but in its capacity to transform the overall operating efficiency of the warehouse. Despite the unpredictability of business, some warehouses still find themselves constrained by work patterns. In other words, picking is done by pickers, receiving by receivers and loading by loaders. But more and more are using the technology beyond picking to include cycle-counting, receiving, loading, put-away, replenishment and put-to-store.

Because voice is intuitive and training time is minimal, workers can easily carry out different tasks during the course of a working day, depending on business volumes and requirements. As a result, voice-enabled employees could be receiving in the early morning, picking for much of the day before finishing with replenishment or loading, all supported with the same simple voice-directed link to the host system.

Ultimately, the determining factor in the success of a 3PL to meet and exceed the demands of their customers will depend on many factors. But investment in new technologies on the market will help proactive 3PLs add value to ever more complex supply chains – and set themselves apart from the competition.

About the Author

Matt_Gregory 150Matt Gregory recently assumed the newly-created role of Business Development Manager for Third Party Logistics, where he will focus on growing Vocollect’s 3PL business across EMEA. Matt joined Vocollect in 2010 as Business Development Manager for Vocollect in the UK and Ireland, prior to which he was European Partnership and Alliances Manager for leading field services company Cognito. Matt has extensive knowledge of the logistics sector and understanding of the importance of delivering business solutions.

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