What do you think will be in store for the logistics industry as a whole in 2021?
Asset sharing, and sharing in general, of data and information is going to be at the forefront. Traditionally, that’s not something that has been a large part of the plan in the contract logistics world. Non-asset based transportation in particular shares a lot of information, while contract logistics does not. I think we’re going to see customers heavily-focused on solutions that have asset knowledge and capacities sharing between accounts, whether it’s a dedicated fleet, a warehousing operation, or robotics.
Do you think shippers are or should be, pushing to consider a more engineered approach after 2020?
Everybody’s requirements are so different now, customers are dealing with much different scenarios. I think there’s a move away from the old days of public rates and the cost per unit, and more towards conversations with the customer about flexible solutions. Those are good directional figures, but probably not the approach that the market’s going to go down as we start seeing new challenges for 2021, especially with new compliance requirements coming up. That’s a big one on my list for 2021 and beyond. There is going to be new regulations and customer compliance requirements which will require having systems, people, and talent in place, like we have at NFI, to be successful. Some of the smaller regional players won’t have that capability, Electronic Logging Devices (ELD) for example, and electronic bill of lading (eBOL) or electronic proof of delivery (EPOD) may become a standard. We have a pilot active right now with e-bill of lading, and another large consumer packaged goods (CPG) customer with a lot of shipment points already implementing this. I think eBOL will probably be fully required inside the next 24 months. Similarly, there are certain minimum levels of safety compliance that some customers or some competitors just won’t be able to meet.
What advice would you give to shippers as they’re planning for 2021 and beyond?
I think the biggest challenge going forward, that we all could agree on in this industry, is people and labor. Customers are pushing to understand what providers have from a talent management standpoint and how they’re able to drive those types of initiatives. Our team’s conversations comprise of finding the right talent, helping them become successful, keeping our environments safe, making sure our processes are efficient, and ensuring that it’s meaningful work for employees. Those probably have the biggest impact. There’s automation potential in retaining labor, where robotics or automation come in and help employees be more effective and efficient. There are also ways that employees can be safer with automation, whether they are in the trucks or outside of one. That’s going to be a big factor as you look toward the future of enabling people.
In terms of utilization, we are thinking about people on the floor as well as people in the trucks. Our labor management programs target how to make people more successful and productive at their job, and use that capability for coaching development and to celebrate accomplishments. Leading, successful contract logistics companies are driving that type of culture. Ultimately, NFI’s in the forefront there and that’s going to be a distinguishing factor for our company in 2021. It’s not just automating, but also how you engage people and drive incentive programs by really enabling engineering standards on the ground. That’s something else that’s going to be critical.
As we look toward 2021, ‘as-a-service’ models are something else that is a big focus. We often think of Software-as-a-service (SaaS) or Platform-as-a-service that started with cloud services, and that got us thinking about how we could tap into something in a subscription manner. Customers are looking at supply chain-as-a-service as well, so our teams are designing ways we can to tap into fleets and warehousing capabilities to offer a more flexible model versus long-term commitments, and the pace of change is what’s driving those initiatives. An as-a-service model creates an asset knowledge-sharing environment that NFI brings to the table. For example, if you have a fleet of robots or Automatic Guided Vehicles (AGVs) that service Southern California where NFI has many buildings, instead of the fleet being assigned to a building, we can move those bots around where they’re needed most — no different than how we’re able to move trucks and trailers around.
How do you think shippers will adjust their supply chains moving forward?
Number one, shippers have a need for better prediction and forecasting. You’ve probably heard of a term like digital twins. Our customers are asking how to be more data-driven and how to predict and plan their supply chain versus just executing. That’s big. Inventory is all about having the right placement of goods at the right time, and it changes over time. We’re engaging with a lot of customers right now by looking at the assets that they have and helping them understand how to better utilize them for new inventory strategies. Our challenge as a 3PL is creating core competencies around these things and deciding whether we’re going to be doing more order management, value-added packaging, or value-added services. These services are all things that I think you’ll see more of in the future than we have in the past.
Another thing we’ll see customers adjust to on the transportation side is the idea of dedicated fleets versus dedicated capacity. You’re going to see customers that are going to want to have a different approach [to capacity] versus having a dedicated fleet that’s fixed for a specific site. They may be looking more to a dedicated capacity model where maybe it changes by lane, but you’re committed to them in a different way. You’ll see the commercialization of familiar services change and evolve. That’s where that as-a-service model would come forward, dedicated capacity versus dedicated fleet. I think you’re also going to see some commercialization changes that could be positive for both sides.
Do you think those changes are because of consumer behavior or economically-driven?
I think it’s both. There are new expectations to get faster from the end consumer, and that requires flexibility and the ability to have different, moving capacity points that a lot of shippers don’t have the ability to respond to quickly enough. I think on the economic side, we have the capital intensity of renewals, whether it’s IT, warehousing, or retrofitting your last-mile capabilities. A lot of customers are looking to find the right partner that can help and make it less capital intensive. Some of that might be asset sharing, some might be using the assets that we own, and some things they might want to keep in-house. Ultimately I think it’s a blend.
That is one thing that has been interesting over the last five years, a lot of the solutions we have, customers have different preferences. They may want to have systematic ownership, for example, they may have a warehouse management system (WMS) and let us put our labor management system (LMS) on top; or they may want the real estate, but we can bring the material handling equipment (MHE); or they may want to own all the automation, like the AGVs and the robotics, but we can bring the building. There’s a really wide gamut of preferences. A lot of that has to do with each unique scenario that the customers are going through, where they are in their renewal journey, where they are economically, what they’re trying to achieve, and how fast they need to get there. Speed is a big decision factor when it comes to our solutions approach. That’s where things like lead times and what we might already have implemented with partners in our network come into play.
How can NFI help shippers in 2021?
We’re flexible, number one. We don’t have a prescribed solution that is the only way forward, we tend to work with customers in a collaborative way. That’s the way we approach it; very entrepreneurially, very flexible. Our team prides itself on our execution and our ability to implement no matter what. We’re not here to sell assets, but we are asset-based because when it’s about lead time, capacity, or if there’s no knowledge or interest in owning a certain asset, that value proposition comes into play. Our value prop is coming in and helping you know what the right fit is because we’ve implemented these solutions before and can share actual, tangible case studies and project results. We are willing to put skin in the game and make joint investments. So that’s where we’re able to bring that value prop of faster implementation of a more productive solution.
It goes back to the COVID challenges in 2020 where customers needed to flex and readjust. We were able to get warehouse space quickly because we have the in-house real estate teams to collaborate. My team will collaborate with our real estate design group and strategize about creating a unique solution for a customer with real estate automation and all considerations. If you go to some other competitors, their teams are usually siloed and may not be connected and holistic, which will slow you down and create costs.
For NFI, it’s finding the right balance of all those levers you can pull in a solution and knowing where the value points are for that customer’s compelling need. Every time we design a solution with a customer, we’re going to ask them these questions: “What is your compelling need? Do you need to get things done quickly or in a certain timeframe? If you’re trying to become the fastest delivery point, or you’ve got an inventory challenge, here’s another way we can do it.” If they’re really having challenges with their systems and we know the pain points, we can show the customer how to address them. That’s what I really appreciate about NFI. Having a chance to see other competitors over the years, NFI doesn’t try to fit our customers into a template, we’re creating custom contract logistics strategies for their needs right now.
How does your teamwork with our non-asset group and how does that play a role in helping shippers in 2021?
The name of our team is Integrated Design Solutions because the majority of the time, we have more than one service involved in the solution, so it plays a large role. Our non-asset-based transportation team is a huge partner when we get in with large network-sized customers where we are looking at facility locations, trying to understand the transportation implications of decisions, where we’re putting fleets, or where we’re inserting warehouses. A lot of times, a customer may have a labor benefit in one market, or we have automation available faster in another market, and we are able to reconcile that with our non-asset-based transportation group by looking at the reliability of transportation and cost to weigh options for the net result. That is unique in that NFI is able to give the customer the practical operator perspective of a solution. That’s really where I think our non-asset-based team helps us and strategically, when we look at network designs, that’s the go-to place. Our teams are able to bring data in place, we’re able to run different scenarios, and then assess how the holistic solution would be impacted.
What are you most excited about for 2021?
I’m excited about where the industry is going with autonomy, whether it’s physical or it’s digital. I think it’s going to transform the process across the entire supply chain and change the value proposition for what 3PLs can bring. I’m excited for where we are as a company from a standpoint of the investments we’ve made since 2017. NFI is in a good position to lead and we have the right partners in our dugout. A lot of companies are starting from scratch in the middle of this pandemic.
We have fantastic customers, too, that are willing to partner with us in all the conversations we’re having with growth, change, and innovation. I think it’s going to help us and the customers look a lot different in two years which is going to be exciting to be a part of.
Thinking about where we are as a company, 2021 is going to be a year all about adapting. I don’t think that things will slow down. I’m talking to our operators in the field and our conversations involve change management as we go forward.
NFI is going to have to continue to evolve itself to stay a leader in the industry. We talked about that at the Summit, and I think it’s a part of our “Bleed Blue” culture. Whenever I talk to our customers, I point out that innovation is a core element of who we are. If you’re selecting a partner during this transformative time, you really want to see how people experiment. If you look at how we supported customer changes through the challenges of 2020, it shows a good message of what we can do with consideration for the customer, doing it at a rapid pace, and implementing it successfully. I’m excited about evolving ourselves to the next supply chain.
Jimmy Shafer, Senior Vice President of Integrated Design and Solutions at NFI has over 20 years of experience designing supply chain network solutions for customers of all sizes. He leads a team that pushes the envelope in exploring, designing, and implementing new technologies and solutions that provide greater efficiency and cost savings to our customers.