GLOBALIZATION GLOBALIZATION, THE FINAL MILE, FULFILLMENT, AND MORE By John Haber
lobalization, the final mile, and achieving efficiency through fulfillment best practices are all planned as discussion topics for this year’s PARCEL Forum as part of our contribution to the annual event. While this may seem like an odd assortment of topics, the three presentations are interconnected in order to promote successful supply chains in today’s rapidly evolving markets. While doubts of globalization linger, the global economy is estimated to grow at 3.5%, with growth outside of the US growing at a much faster rate. Consider that the International Monetary Fund’s (IMF) 2017 gross domestic product (GDP) forecast for the US is 2.1%, while China’s forecasted GDP is 6.7% and India’s
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is 7.2%. Now consider global population distribution, as Asia accounts for 60% of the world’s population, with China and India combined representing 37%. If you’re wondering about the US, its population only represents 4.4% of the world’s population. Clearly, the greatest opportunities for US businesses are outside of the country; however, there are risks — including political, natural, and financial factors — to consider when expanding overseas. Despite growing global risks, the rise of international commerce has not been constrained. Estimated to reach $2 trillion in sales by 2020, the largest geography in terms of e-commerce sales is Asia, followed by the US. E-commerce has a tremendous impact on small parcel volumes, and both are expected to increase drastically over the next decade. Addressing these rising volumes has resulted in the leading integrators to heavily invest in expanding not only the number of sorting and handling facilities, but also in the automation of new and old facilities to speed up the final-mile process. Meanwhile, to help defray some of their operating expenses, small parcel rates and surcharges have increased, along with the introduction of new surcharges, such as the Peak Season surcharge.
As David Abney, CEO of UPS, said on the company’s recent quarterly analyst call, “Not everything is a Christmas present.” For retailers, the competition is fierce, and the e-commerce behemoths, Alibaba and Amazon, are taking bigger shares of the global retail industry. To compete, retailers must have agile and responsive supply chains. The biggest supply chain components, fulfillment and distribution and shipping, can prove costly if not managed effectively and could result in unnecessarily higher operating costs for retailers; however, there are ways to achieve cost savings and efficiency in both. In terms of fulfillment efficiencies, businesses need to consider such items as: Whether or not to outsource or keep fulfillment requirements in-house Decision points in the evaluation of in-house versus outsourcing If the decision is to outsource, do you outsource to a 3PL or a marketplace? Locations of fulfillment facilities and the optimum number of such facilities Fulfillment feeds into the final mile, and the battle in this supply chain component is being played out by traditional players, such as the integrators, post offices, and regional carriers, and some not-so traditional players, including Amazon, Deliv, Postmates, and others. In fact, Amazon