Back

Shipping Challenges for On-Highway and Off-Highway Vehicle Manufacturers and OEMs

E-commerce has changed the nature of B2B selling. From a delivery perspective, OEMs and makers of on-highway and off-highway vehicles face many of the same challenges as B2C companies. In the latest Precision Report we look at these shipping challenges and how manufacturers can optimize a product’s journey from factory floor to customer.  

When most of us think of e-commerce we think of global marketplaces like Amazon, Alibaba and eBay. Retail e-commerce gets most of the attention, but the truth is business-to-business e-commerce far outstrips retail. Online sales make up 10 percent of all retail sales in the US. This figure, however, depends on how you define retail. When you add small purchases, such as those made at corner shops and gas stations, it’s closer to 6 percent. Compare that with manufacturer sales in the US where e-commerce sales account for 56 percent of the total. For wholesalers, it’s a very respectable 38 percent.

Despite this sizeable difference, online retail is changing the nature of B2B e-commerce. Think about it: almost all us of us have bought goods online. A business buyer in Arizona ordering vehicle components expects to get his or her retail purchases delivered quickly and efficiently. Therefore, a business buyer is not necessary a different animal to a retail customer. We have all grown to expect what we want to delivered to us, when we want it.

Traditional distribution channels have not disappeared. However B2B companies are under increasing pressure to leverage the quick turnaround capabilities that have become standard in B2C. This is particularly true for smaller shipments and emergency orders.

Shifting Market Forces

For many decades makers of on-highway and off-highway vehicles and other original equipment manufacturers — OEMs — relied on large freight shipping to established markets. These days such companies are increasingly global in nature. Heavy equipment, components and parts can be manufactured anywhere and shipped anywhere else. Supply chains have become global — and so have customers. Today, an OEM might send a large shipment of engines to a distributor in New Jersey. Tomorrow, they might ship a single part to New Delhi.

The greater spending power of formerly small markets has been behind much of the growth in many industries. One example is automotive. A report by McKinsey forecasts that global profits for automotive OEMs will rise by almost 50 percent by 2020. This profit will come mainly from growth in emerging markets. The source of profit has shifted from established markets such as Europe, North America, Japan, and South Korea. By 2012, the BRICS countries and RoW (Rest of World) already accounted for nearly 60 percent of global profit for the automotive industry.

Delighting the Customer’s Customer

Just a few short years ago, if you wanted a new exhaust pipe for your car, you went to a local stockist. These days you can buy a variety of parts online — from the manufacturer or a reseller — and often at a lower price. As a result, many such businesses have become increasingly oriented around higher volumes of smaller sales.

One PRECISION customer described their parcel shipping and delivery process as one of their “biggest challenges.” Every day, they needed to ship truck parts to and from a variety of destinations around the world. Some of these would be large, scheduled shipments; others would be in response to specific vehicle off road challenges. These requests had to be dealt with efficiently. Given the size of their operations, visibility into the status and whereabouts of every parcel was also crucial.

To ensure they kept their customers, and their customers’ customers happy, OEMs need to be responsive across multiple modes of transportation, from freight to parcel.

Is F2C the Future?

Most makers of on-highway and off-highway vehicles do not sell directly to end users, but that might change. Factory to consumer (F2C) sales are predicted to grow, facilitated by e-commerce. Some manufacturers are building their own e-commerce platforms. Others are leveraging global marketplaces like Amazon and Alibaba. Amazon has been seeing a 100 to 200 percent growth in F2C merchants every year.

A survey by the Centre for Supply Chain Management at Cranfield University and LCP Consulting found that many manufacturers are preparing for an F2C future. Almost half — 48 percent — of manufacturers surveyed were building direct to consumer channels. Respondents included over 100 manufacturing executives from major global enterprises.

For manufacturers making consumer goods, this makes sense. Shorter supply chains means more profit. F2C channels will not be a good fit for every or all on-highway and off-highway vehicle manufacturers or OEMs. For some, F2C sales would never amount to more than a small percentage of overall sales. Furthermore, for others, such as heavy equipment manufacturers, delivering direct to consumers, often at residential addresses, does not make sense. However, F2C could become part of an omni-channel strategy for certain OEMs, such as those making electronic or smaller vehicle components.

Optimizing Shipping Across Multiple Modes of Transportation

Even without moving into F2C sales, e-commerce has changed the nature of shipping for many companies, including vehicle, truck and equipment manufacturers. These days they are just as likely to send parcels as pallets. From a delivery perspective, OEMs are dealing with many of the same challenges as B2C companies. More when they deal with multiple modes of transport including freight, truckload (TL), less than truckload (LTL) and parcel.

That means manufacturers need to seamlessly facilitate the journey of thousands of parts from the manufacturing plant, to the warehouse floor, and onto the customer — wherever they are.

This is no easy feat. Ideally, manufacturers need a solution that can execute every part of this process. The solution should integrate with the system of record and follow automated business-specific rules. It should also ensure each delivery is properly packaged, has the correct documentation and labelling. If the product is crossing borders, all documentation needs to be in the correct language too. The system should also ensure that each parcel adheres to export controls and regulatory requirements. And all of that is before the parcel leaves the warehouse!

Post dock, manufacturers need to get their shipments to customers quickly, efficiently and  — equally crucially — cost-effectively. That means a global transportation execution strategy with multi carrier shipping options. OEMs that send heavy equipment also need access to carriers able to handle these shipments. In addition, manufacturers should be able to track every parcel, and proactively rectify problem shipments. Plus serialization is a critical requirement in case of a recall.

Now consider doing all of this at scale across parcel, LTL, TL and freight. When you send hundreds or even thousands of products to multiple destinations every day, this interplay of moving parts — literally and metaphorically — needs a comprehensive and robust solution that can keep up.

About Precision Software – Trusted Global Trade and Transportation Execution

Precision Software, a division of QAD Inc., provides industry-leading global trade management, transportation execution and multi carrier shipping software solutions from a single, integrated platform. Preeminent industry leaders in every region of the world rely on Precision’s global support centers to leverage thousands of carriers and manage millions of shipping transactions every day. Our open architecture easily integrates with Enterprise Resource Planning, Warehouse Management Systems and legacy solutions. An ISO-certified company, Precision Software assists companies to minimize shipping costs, optimize first mile and last mile deliveries, automate free trade agreement compliance, avoid customs delays and mitigate the risks associated with dynamic trading environments to maximize their competitive advantage. Precision Software’s customers span multiple industries including banking and finance, life sciences, high technology, retail, industrial, automotive, higher education and public sector as well as logistics providers. For more information about Precision Software, visit www.precisionsoftware.com.