Digital Transformation is no longer a trend, it is a must in the market today. This process must be applied in every aspect of the company. Let's see 5 trends driving digital transformation in distribution and 3PL companies.
1. Digital transformation in manufacturing and retailing
Digital transformation has been around for a long time. Still, it has only really grown strongly after the pandemic, prompting businesses to change how they currently operate to adapt to the "new normal.”
Mainly dependent on consumer demand and purchasing power, the manufacturing, and retail sectors have experienced substantial transformations after COVID-19.
Manufacturers are increasingly investing in technology and machinery to forecast consumer demand, improve production efficiency and optimize output. Besides, retailers also constantly update new trends based on data analysis, ensuring that they always provide the right and good products.
However, distributors and third-party logistics service providers (3PLs) must organize a convenient ordering and delivery process, acting as a bridge between the manufacturer and the retailer with consumers.
At the 2018 BG Strategic Advisors Supply Chain Conference, CEOs agreed that as manufacturers and retailers scale, logistics providers must also become an extension of manufacturing and retail brands, providing logistics services at faster speeds and with higher quality.
2. The emergence of new consumption trends
The change in consumption trends has accelerated the digital transformation of distributors and 3PL businesses. Besides changes in the shopping cart, they also change in the shopping channels.
According to Vietnam E-commerce and Digital Economy Agency, Vietnam's e-commerce had an impressive growth in 2020 with an increase of 18%, a market size of 11.8 billion USD, estimated to account for 5.5% of total retail sales of consumer goods and services nationwide.
The strong growth of e-commerce has stimulated an increase in transportation and logistics services across the country. More than an item, consumers also want to buy the whole experience, from choosing, delivering, to using the product.
Therefore, distribution and 3PL businesses are increasingly applying technology to their operations to manage distribution and delivery systems more effectively and integrate many new features to help optimize the user experience.
For example, 3PL companies use logistics optimization software to automatically create optimal transportation plans, satisfying more than 30 constraints such as customer's delivery time, multi-temperature orders, forbidden roads, etc. Therefore, businesses can shorten the delivery time, ensure the quality of goods before reaching customers.
3. The importance of data
Data is the foundation that builds systems, as well as operates and manages technologies effectively.
The more data available, the more 3PLs and distributors can gain insights into customers, suppliers, products, prices, costs, services, etc., to predict and act on unexpected risks.
Data also gives businesses the ability to manage the entire supply chain, order levels, and inventory and provide insights to improve service quality.
According to McKinsey, data-driven organizations are 23 times more likely to attract customers, six times more likely to retain customers, and 19 times more profitable.
Given such importance, distributors and 3PL companies can create more value for customers, partners, and businesses themselves when implementing digital transformation.
Read more about the four steps to prepare data for digital transformation here.
4. The development of technology
Technology is at the core of the digital transformation, helping optimize business processes and increase productivity and operational efficiency.
Digital transformation in distributors and 3PL businesses has witnessed the emergence of many new technology trends such as:
Use smartphones to increase transparency in the process
Synchronize the workflow in a cloud-based system
Connect physical devices to the cloud using the Internet of Things
These types of technologies have the potential to significantly reshape operations in distribution and logistics companies while creating new value for customers.
For example, cloud-based software like Abivin vRoute can help distributors and 3PLs manage fleets and track the delivery status in real-time. As a result, the manager will not have to call often to check on the driver or wait too long before knowing the delivery results. In addition, they can also detect and respond to issues immediately, shortening decision-making time, improving existing services, and increasing customer satisfaction.
5. People development
No matter how important technology is, digital transformation cannot be without the role of people.
One of the biggest challenges facing companies when embarking on transformation is changing corporate culture. Everyone in the organization needs to understand what digital transformation means to contribute to a common goal.
In addition, skillset gaps are also an issue when it comes to transforming businesses. Considering the continuous development of technology, people need to constantly learn and hone new skills to keep up with the changes.
According to Red Hat's survey on Global Customer Tech Outlook 2020, one of the five critical areas of enterprise digital transformation is developing information technology (IT) skills.
Specifically, the survey shows that companies recognize the importance of building these skills. Technical/technology skills training (16%) and digital transformation strategy (16%) are the top two priorities that they choose to invest.
Digital transformation is one of the critical goals of businesses. However, the digital transformation process cannot be completed quickly in just one or two days. Capturing market trends, customers will help distributors and 3PLs prepare for risks and change when embarking on digital transformation.