Green supply chain history:

The origin of Supply Chain Management and modern supply chain history dates back to the early 20th century with Henry Ford, who vertically integrated the automotive supply chain and organizational practices. The approach of “Just in time” and “supply chain management” focused on optimizing efficiency and reducing waste- including water pollution, noise pollution, air pollution, and more. The impact these waste products have on human health, as well as the environment, is becoming increasingly important for consumers.

Nowadays, many factors are increasing the urgency for emerging economies to become sustainable. The shifting consumer focus and changing market demands mean more and more high paying logistics jobs are available and these niche services are increasingly needed. Digitization and automation go hand in hand with increased productivity and sustainability today.

A great example would be climate change and how that has affected the overall shift in supply chain operations from improved fuel conservation to stronger 3PL partnerships and the increasing popularity of google warehouse and third-party options. The struggle to contend with environmental pollution concerns is becoming more vital than ever before among businesses of all sizes and across all industries and markets.

Why Go Green- What 3PL Reports Show

Due to climate change, firms are rethinking their strategies to guarantee environmental initiatives to start ecological actions. Furthermore, the notion of Sustainable Supply Chain Management is often linked with social responsibility or environmental management (Ali Esfahbodi, 2016).

Green Supply Chain Management (GSCM) emerged as a new environmental approach in logistics and has been increasingly used by forward-thinking organizations. Many companies today are looking for ways to save time and money, which is why services such as  google warehouse operations and other 3PL relationships are becoming more popular than ever. 

Different reasons to turn to GSCM include strong benefits of sustainable, profitable, and cost reducing operations. Customers usually say that they would instead buy products that are environmentally friendly and with a minimum of environmental impact. 

Business practices ought to become increasingly transparent; therefore, the green policy can generate profits, provide a positive social impact, and reduce environmental impacts. Shifting away from fossil fuels to more sustainable options is a key part of modern supply chain engineering and logistical management. 

Any steps taken to become greener within e-commerce solutions will favor companies in visibility, and credibility, and develop a leadership reputation (Bhattacharjee, 2015). Implementing more sustainable practices, shifting to greener modes of transport, and improving fuel consumption and truck routing processes can have a significant impact on the supply chain today.

Sustainable Supply Chains and Google Warehouse Management

The original model of Supply Chain Management follows a linear production that hypothesizes the constant input of natural resources and an unlimited capacity to assimilate waste. Unlike the traditional supply chain, being sustainable considers the environmental impact of a product through its entire process cycle and reduces maximum environmental damages. 

The idea of being sustainable is done by closing the loop and including the reduction, reuse, and recycling processes. This will alter the environmental impact of e-commerce lines from acquiring raw materials to the final use and disposal of the product (Ali Esfahbodi, 2016).

The purpose of going green is shown in the table.

Sustainable supply chain management:

The original model of Supply Chain Management follows a linear production that hypothesizes the constant input of natural resources and an unlimited capacity to assimilate waste. Unlike the traditional supply chain, being sustainable considers the environmental impact of a product through its entire process cycle and reduces maximum environmental damages. The idea of being sustainable is done by closing the loop and including the reuse, recycle step. This will aim at reducing environmental impact from the acquisition of raw materials to the final use and disposal of the product (Ali Esfahbodi, 2016).

Based on (Ali Esfahbodi, 2016), the main activities in a typical sustainable supply chain management (SSCM) are illustrated above. When the product has a defect after its production, it is sent back to the inventory to reuse or recycle it. When the product comes to its end, it goes to the plant where the product is reused, recycled, or refurbish before heading back to the supplier.

Four fundamental practices:

Understanding the way traditional vs e-business models impact sustainability is a vital step to the optimization of the supply chain. Based on (Ali Esfahbodi, 2016) research, Chinese and Iranian governments have focused their fight for GSCM based on four fundamental practices: sustainable procurement, sustainable production, sustainable distribution, accurate 3PL reporting, and reverse logistics.

These practices represent how each country engages itself toward Sustainable Supply Chain Management. In addition, these initiatives are not just used in China and Iran but also in many other emerging economies. These innovations represent a substantial commitment through strategic environmental plans toward sustainable Supply Chain Management.

Sustainable Procurement

consists of environmentally friendly purchasing that carries reduction, reuse, and recycling options. Furthermore, it is a solution to achieve a selection of products and services that reduce the negative impact of the life cycle. 

Sustainable purchases become easier throughout the year with fewer barriers as customers increase their demands for environmentally friendly goods (Vishal Gupta, 2013). Ikea is a good example as it has sourced close to 50 percent of its wood from sustainable foresters and a hundred percent of its cotton from farms that meet better cotton standards (Ikea, n.d.).

Sustainable Production

Is the production process that uses inputs with low environmental impact, is greatly influential, and causes no waste pollution. Green production can improve the corporate image and lower the raw material cost. 

Companies are starting to take action and produce materials that intend to be reliable, and energy-efficient with no or lesser waste. This benefits companies in many ways as it will impact customers, shareholders, and the company’s recognition in the e-commerce marketplace. (Vishal Gupta, 2013).

Sustainable Distribution

The distribution of goods usually generates a lot of waste and it can damage the environment, but green distribution consists of green packaging including size, shape, and materials that have an impact on the transportation of the goods. 

Better packaging can reduce material usage, increase space utilization in the warehouse and trailer, and lower the quantity of handling required (Vishal Gupta, 2013). Logistrap does it in Mexico, they reduced their space within the warehouses and container ships to transport more within the same number of trips (Logistrap, 2020).

Reverse Logistics

According to (Vishal Gupta, 2013) the concept of Reverse Logistics (RL) means the returns from not only the customers but also the management of E-waste. RL is a process where a manufacturer accepts previously shipped products from the customer’s point of view for potential recycling and/or re-manufacturing.

Partnerships such as  google warehouses and 3PL service providers can improve reverse logistics and keep the supply chain flowing smoothly with enhanced supply chain tools and tech. Backward integration and monitoring are necessary, especially during peak seasons when purchases, as well as returns, can be higher than normal.

Improve 3PLS Reports and Logistics Management With ModusLink

Do you need help figuring out how to become more sustainable within your management and logistics operations?  Mastering the flow of 3PL reports,  google warehouse management, and other supply chain management operations is a vital part of modern business operations today. Contact one of ModusLink’s leading supply chain management and logistics experts.

Bibliography:

12 Million Bottles Used in Patagonia Recycled Clothes. (1995, April 12). Los Angeles Times. Ali Esfahbodi, Y. Z. (2016). International journal of production economics (Vol. 181 part B). (S.Minner, Ed.) Birmingham , UK: Elsevier.

Avittathur, A. A. (2016). Green Retailing: A New Paradigm in Supply Chain Management.

Calcutta, India: IGI Global.

Bhattacharjee, K. (2015). Green Supply Chain Management- Challenges and Opportunities.

Research scholar, Patna University, Applied economics & Commerce, Patna. Cardwell, D. (2014, July 30).

At Patagonia, the bottom line includes the earth. The New York Times(section B), 1.
CHAPPELOW, J. (2016, March 16). Emerging market economy. Retrieved from Investopedia. consulting, T. E. (n.d.). reverse logistics in a circular economy. Retrieved from Triple EFF

consulting.

EM Ojo, C. M. (n.d.). GREEN SUPPLY CHAIN MANAGEMENT IN DEVELOPING COUNTRIES. In C.

M. EM Ojo. Johannesburg, South Africa : Department of Mechanical Engineering Science, University Of Johannesburg, Johannesburg, South Africa. Ikea. (n.d.). Corporate news. Retrieved from Ikea.com.
Kobo360. (n.d.). Kobo. Retrieved from Kobo360.com.

Logistrap. (2020). Logistrap packing services. Retrieved from Logistrap.com. 15

Mohsin Malik, S. A. (2019). Sustainability Initiatives in Emerging Economies: A Socio-Cultural Perspective . Swinburne University of Technology. / Abu Dhabi University., Department of Business Technology and Entrepreneurship / College of Business Administration. Abu Dhabi, UAE.: MDPI.

O. Zhu, J. S. (2005). Green supply chain management in china: pressures, practices and performance (Vol. 5).

Queiroz, M. M. (2019). Environmental Quality Management (Vol. 3). (Wiley, Ed.) Wiley.
Rama K. Jayanti, M. R. (2014). Sustainability dilemmas in emergingeconomies. (I. M. review, Ed.)

Bangalore, India: Elsevier Ltd.8).

Vishal Gupta, N. A. (2013, January). Green Supply Chain Management Initiatives by IT

Companies in India. The IUP Journal of Operation Management , 12(2), 6-24.

The Circular Economy

Taking the fastest route towards your destination is often the most effective one as you will use the least time possible. However, is it also the most efficient? This is a completely different question. Your efficiency depends on how you determine your efficiency factor. Is your idea of efficiency to spend the least amount of money on fuel? To take the route in the most sustainable way possible? To see the most beautiful scenery along the way? If your idea of efficiency is one of these mentioned, your strategy of taking the fastest route is probably not a good idea. This concept of efficiency is crucial for businesses to understand as it allows them to optimize their operational activities and business model.

Businesses often conduct their operations as streamlined as possible with the integration of supply chain tools, omni logistics, e-commerce practices, and sustainable processes. To improve payment processing, customer service, logistics management, and  to have a strong supply chain, it will take strong commitment and focus. Let’s take an average supply chain from a start-up. 

Supply Chain Processes and the Circular Economy 

Understanding the processes used by businesses of all sizes is critical for supply chain operations today. Everything from logistics company names to reputation and internal processes need to be considered.

First, the sought-after raw materials are procured. Then, the business uses these raw materials and labor to convert them into their final product. Lastly, this product is sold, and any waste material is disposed of. 

This Linear way of conducting business is often how many start-ups begin their journey as it seems practical and straightforward. Depending on your business model/goals, there might be an alternative way to conduct business that yields benefits such as increased resource utilization, labor force efficiency, and sustainability within your business model.

The circular economy is a term used within Business practices that primarily aims to reinforce sustainability within business elements (Ministerie van Infrastructuur en Waterstaat, 2019). It is a great piece of the subscription management solution and customer subscription management. It is a foundational process.

The fundamental pillars of a circular economy are made of the term reusability. Instead of disposing of waste, waste materials are used through methods such as recycling, aiming to give purpose to waste. 

During the end-to-end creation of glass but can be utilized more effectively. This residue is melted in a circular economy to create new glass. It is a circular process that feeds from one into the other and saves time, money, resources, and labor..

Integration of Subscription Management Solutions and Omni Logistics

There are many Supply Chain elements where the Circular Economy concept can be integrated. These elements include the following.

• Product design

Fundamentally altering product design can yield strong sustainability benefits. This is often best done when releasing/starting a new product, as big changes could take time to implement on scale. Sustainable packaging and product labelling is a way to integrate the Circular Supply Chain concept. The razor blade company ‘Boldking’ for instance gives their customers discounts on future products when sending back their packaging. The used packaging is later converted into new razor blade packages.

• Procurement

Raw materials that are technically restorative or intrinsically reusable have a low negative environmental impact thus increasing sustainability within Supply Chains. The concept of acquiring such materials is often called ‘Green Procurement’. 

These materials increase the utilization rate and decrease waste generation. Examples are glass and paper as mentioned earlier and there are many other examples of subscription management solutions and sustainable processes that are in high demand today.

• Production

Sustainable manufacturing practices are a great way to maintain a Circular Supply Chain. Although green production hasn’t been widely used (mostly due to cost-benefit compared to cheap labor), it certainly yields strong benefits when implemented correctly. 

Producing using renewable energy sources such as Solar Power reinforces an autonomous production process. It is also a key component of  omni logistics and supply chain operations. 

• Logistics

Sustainably distributing products can be achieved through route optimization and avoiding concepts such as same-day delivery. It is important to be aware of your current logistical process. Consulting experts on the best way to distribute your products or manage your internal logistical process can be extremely beneficial as professional expertise can guide (in)experienced businesses in the right direction.

• Consumption

Consumption is an interesting way to apply Circular Supply Chain Management as it has not been used until recently. It is predominantly gaining traction within the mobile phone industry where unwanted phones are returned to the respective company in return for discounts on newer models. Since new phones are often released on an annual basis, this is a great way for companies to regain their resources.

• Waste Management

Waste management is essentially reusing waste material for your production process. To take the prior example, the unwanted and returned phones (waste) are not disposed of but instead taken apart carefully. Individual elements such as the processing unit, battery, Glass, metal frame, are all given a new purpose by reusing them in the new production process.

• Supply Chain Technology

The newest addition to integrating a Circular Supply Chain into a business is done through Sustainable Technology. This concept hasn’t been adopted on a wide scale as much technology is relatively new, however, some companies see the benefits gained from certain technology.

TTechniques and concepts such as IoT (Internet of Things) and omni logistics can yield substantial benefits when adopted correctly. If there is no inside knowledge on these concepts, it is strongly advised to seek professional expertise.

Bringing Circulate Economy Trends Together With Supply Chain Management

Circular Supply Chain Management (CSCM), integrates the philosophy of the circular economy into supply chain management. This creates a new and compelling perspective on the supply chain sustainability domain (Farooque et al., 2019).

Need professional advice on the right way to integrate circular supply chain management and sustainable subscription management solutions? Contact one of ModusLink’s Industry experts to get started!

Bibliography:

Angelis, D. R. (2018). [PDF] Supply chain management and the circular economy: towards the circular supply chain | Semantic Scholar. Semanticscholar.Org. https://www.semanticscholar.org/paper/Supply-chain-management-and-the-circular-economy%3A-Angelis-Howard/68c441507594095a7f07af8018c844194b88fa84

Farooque, M., Zhang, A., Thurer, M., Qu, T., & Huisingh, D. (2019, April 1). Circular supply chain management: A definition and structured literature review. ResearchGate. https://www.researchgate.net/publication/332690616_Circular_supply_chain_management_A_definition_and_structured_literature_review

Ministerie van Infrastructuur en Waterstaat. (2019, March 26). From a linear to a circular economy. Circular Economy | Government.Nl. https://www.government.nl/topics/circular-economy/from-a-linear-to-a-circular-economy

Supply chain management in the era of circular economy: the moderating effect of big data | Emerald Insight. (2020, September 3). Emerald.Com. https://www.emerald.com/insight/content/doi/10.1108/IJLM-03-2020-0119/full/html

Understanding the concept

According to ModusLin e-business and CRM leader, Johannes van den Berg, “Having your manufacturing strategy align with your customer’s needs and wishes creates synergy within a business. This results in increased production efficiency and growth as well as improved risk management and end-to-end improvements.” 

There are many different manufacturing strategies that use aftermarket support and warehousing technology to improve distribution, customer experience,  lead times, and warehouse operation. 

At the core of successful supply chain management is warehouse and distribution management processes A report published by Comparative European Research titled ‘The growing importance of the synergy effect in a business environment perfectly explains the synergy concept. Synergy is a core element present in many successful manufacturing strategies and helps with meeting customer needs and demands.

It is a connection/interaction between different elements within a specific environment, creating or subtracting the additional value in the process. Improved tools and technology, such as digitization and automation, along with machine learning and AI processes, are all part of improving synergy within the supply chain network.

How does this relate to businesses today and improved supply chain and direct distribution services? Let’s find out!

Warehouse and Distribution Strategies Explained

The importance of a proper manufacturing strategy and  aftermarket support approach are indisputable. The three main Supply Chain priorities reported by U.S. health services providers and pharma/life sciences executives for 2021 are the improvement of Supply Chain transparency, improving Supply Chain security, and finding suitable suppliers (Statista, 2021). 

The three elements relate to manufacturing strategy. Close contact with your supplier of raw materials is necessary when implementing the above manufacturing strategies. Reinforcement of supplier relations plays a crucial part in direct distribution, route management, and supply production processes. 

Managing inventory properly using principles as JIT reinforces security within your Supply Chain and consequently can increase transparency when closely involving your suppliers.

Figure 1. (Top Supply Chain Priorities 2021) Statista. (2021, January 26). Supply chain priorities of U.S. provider and pharma/life sciences executives 2021. https://www.statista.com/statistics/1196032/supply-chain-priorities-health-services-provider-and-pharma-executives/

Different Strategies for Improved Aftermarket Support and Direct Distribution

Managing  warehouse and distribution, supply chain logistics, supply lines, and shopping modes and trends are essential to improving distribution and support. It is easier to avoid issues such as supply chain attacks and weaknesses with the right strategy in place.

Here are three key strategies omnichannel supply chain management teams can use to improve aftermarket trends and demand forecasting methods today:

• Make to Stock (MTS)

This strategy is prominent in many businesses as it utilizes traditional production based on demand forecasting. Companies choose this manufacturing strategy because of the predictable demand forecasting that comes with certain products. For instance, winter coats are known to be purchased during winter, increasing the demand predictability.

 Companies can thus safely create and stock winter coats before they are purchased. Unpredictable demand does not incentivize this strategy, as excess inventory can accumulate significant problems.  Aftermarket support becomes easier and more straightforward and benefits customers and managers alike.   

• Make to Order (MTO)

Some companies that use this strategy put manufacturing on hold until an order is received, minimizing stock levels. This strategy provides strong inventory and market control and aids managers in trend projection and the protection of sensitive data from clients and third parties. 

A constant and minimal stream of orders must be present to maintain the production facility in question. Customer waiting times are also significantly longer (TheBusinessProfessor, n.d.) and can be impacted by warehouse and distribution and supply chain tools and tech.

• Make to Assemble (MTA)

This strategy involves the making of product parts before orders are received. The MTA strategy is a combination of MTO and MTS manufacturing strategies. Here product parts are stocked, yet the final product is assembled only when an order is placed and processed. 

This strategy is often seen in restaurants as ingredients get prepared beforehand. Yet, the final dishes are assembled only when an order comes in to keep the dish fresh and flavorful.

No matter the inner workings, these three strategies play an integral role in supply chain management and direct distribution today.

Improve Warehouse and Distribution Performance With Help From ModusLink

The MTS, MTO, and MTA manufacturing strategies form the core strategies used by most businesses. These strategies are built upon principles such as the Just-In-Time (JIT) approach that focuses on eliminating waste by ensuring minimal stock levels are held through (party) automated product reordering systems. 

John Heffernan, Chief Supply Chain Officer at ModusLink believes, “maximizing the efficiency of your manufacturing strategy is of high importance as it will yield waste reduction and a more streamlined production process, optimizing your supply chain.” And, it’s true; improving warehouse management, manufacturing strategies, direct distribution, and aftermarket customer support are critical to ongoing growth and recovery today.

Need professional advice on the right manufacturing strategy/optimization? Looking for ways to improve aftermarket support and internal distribution and management processes? Contact one of ModusLink’s Industry experts today.

Bibliography:

Comparative European Research. (2016, October). The growing importance of synergy effect in business environment(No. 1). Sciemcee Publishing. https://www.researchgate.net/publication/315657493_The_growing_importance_of_synergy_effect_in_business_environment

Manufacturing Production. (n.d.). Investopedia. Retrieved August 27, 2021, from https://www.investopedia.com/terms/m/manufacturing-production.asp

TheBusinessProfessor. (n.d.). Manufacturing Production (Strategy) – Definition. The Business Professor, LLC. Retrieved August 27, 2021, from https://thebusinessprofessor.com/en_US/business-management-amp-operations-strategy-entrepreneurship-amp-innovation/manufacturing-production-strategy-definition

Statista. (2021, January 26). Supply chain priorities of U.S. provider and pharma/life sciences executives 2021. https://www.statista.com/statistics/1196032/supply-chain-priorities-health-services-provider-and-pharma-executives/

The Same-Day Delivery concept

The internet allows people to achieve instant gratification for things that they want. All you have to do is open a search engine such as Google and request the information you need. For most parts, you can get what you want within seconds thanks to advances in supply chain operations, delivery logistics, and supply chain digitization and automation.

This drive for instant gratification has been introduced in today’s fulfillment practices as the concept of ‘same-day delivery. Understanding the answer to “what is the omnichannel supply chain” often focuses on operations. These processes are essential to mastering modern supply chain and e-commerce.

What Are Omnichannel Supply Chains and Same Day Delivery Services?

Same-day delivery is used chiefly for online companies to increase their sales. Customers are willing to pay an extra fee to get their products as fast as possible. The main reason is that it narrows the gap between instant gratification and brick-and-mortar store shopping. 

Embracing omnichannel supply chains can improve overall customer satisfaction, business performance, and profitability.

Effectively implementing this concept does, however, require a vast number of resources which results in large companies adopting this practice for the most part and leaving smaller companies behind as they gain a competitive advantage. 

Leveraging advanced supply chain tools, advanced smart technology, and  XPO Logistics freight tracking options can help improve end-to-end e-commerce performances.

With the rise in popularity of online shopping, e-commerce shipping, and M-commerce business, the need for reliable delivery services is more important than ever. As more people begin looking at online platforms and using eBay, Etsy, Amazon, and  Shopify plus B2B features, the more these digital tools and processes are needed. 

According to Marlin W Ulmer (Ulmer, 2017) and the EconoCourier website (EconoCourier, 2016), the same-day delivery concept comes with both advantages and disadvantages, which are listed and further clarified below.

Disadvantages of Same-Day Delivery for Supply Chains

A recent article published by Fulfillmentworks (Fulfillment Works, 2020) focused on the question of what is omnichannel supply chain operations and how they impact the network today? The study shows that there are three main disadvantages for both companies and consumers that correspond with the same-day delivery concept.

Same-day delivery can limit companies’ flexibility due to planning and order prioritization disruptions. Companies that don’t utilize the same-day delivery concept can adjust more efficiently in their fulfillment operations, such as re-routing, altering contents, canceling, and holding orders, to optimize their fulfillment strategy. 

Companies that utilize same-day delivery do not have this flexibility, as changes within the fulfillment process will result in delays, which can upset consumers who paid for the same-day delivery option (Fulfillment Works, 2020).

Efficiency is a critically important factor within all fulfillment operations. A powerful way to improve the efficiency in shipping is to group or batch orders, also known as consolidated shipping, as this can reduce travel times. 

Same-day delivery limits the possibility of grouping orders as there is less time available to accumulate charges in your picking queue before the rankings get processed.

Some M-commerce companies avoid a same-day delivery concept as the inherent nature of the concept offsets their sustainability practices. 92% of consumers are more likely to trust companies that support social or environmental issues (Fulfillment Works, 2020). This means that your brand’s perception may improve its reputation more than same-day shipping.

Advantages of Same-Day Delivery for Supply Chains

Utilizing the same-day delivery concept allows companies to gain a competitive advantage over other companies that do not use this concept. Research shows that consumers want to get their products as fast as possible. This reinforces the statement of gaining a competitive advantage using the same-day delivery concept.

Companies that utilize same-day delivery see a reduction in their inventory costs. This is because they can reduce the stock warehouses held for retail stores and also improve cross-border logistics.

According to EconoCourier (2016), companies that offer same-day delivery also require their customers to pay an extra fee to realize this concept. This is mainly due to the additional costs associated with the abrupt same-day delivery request. Consumers that need a specific product fast can use the idea of same-day delivery and reduce the time it takes before they acquire their product. 

This means they can reduce the time spent before they receive gratification by obtaining their product (EconoCourier, 2016). There are plenty of indications that same-day delivery will become an even stronger standard in today’s fulfillment practices since companies that do not apply this concept lose their competitive advantage.

Understand Same-Day Delivery and Omnichannel Services With ModusLink

ModusLink is ready to help you understand what it would take for you to be able to implement same-day delivery.  We can analyze where you do business and want to do business and give you proposals as to the best approach, whether it’s a “universal” same-day offering, a geographic dependent same-day offering, or some other fulfillment as service criteria.  

Bibliography:

Umer, M. (2018). Dynamic pricing and routing in Same day delivery. Informs, 1-2.

Ulmer, M. (2017). Delivery-deadlines in same day delivery. Logistics research, September. From inventoryops: https://www.inventoryops.com/articles/same_day_shipping.htm

EconoCourier  (2016, December 22). The advantage of same-day delivery to businesses and shops. From Econo courier blogpage: https://econo-courier.com/advantage-day-delivery-businesses-shops/

Fulfillmentworks. (2020, June 10). The disadvantages of same-day delivery. From Fulfillmentworks home: https://www.fulfillmentworks.com/blog/post/disadvantages-of-same-day-shipping/

Clarkec, I. D.-P. (2020). Same-day delivery with drone resupply. Informs, 1-2.

DHL, T. R. (2019, May 16). DHL . From DHL launches its first regular fully-automated and intelligent urban drone delivery service: https://www.dpdhl.com/en/media-relations/press-releases/2019/dhl-launches-its-first-regular-fully-automated-and-intelligent-urban-drone-delivery-service.html

EHang. (2021, January 29). EHang home page. From EHang: https://www.ehang.com/ehangaav

CNBC. (2019, July 15). How Amazon delivers on one-Day shipping .

Geekwire. (2016, December 22). How does amazon prime now deliver packages in under two hours?

Introduction

It is no secret that transport costs have been rising across all different modalities. Carriers must enforce measures such as peak surcharges, and records are being broken regarding transport costs throughput. Inflation puts immense pressure on many businesses and forces them to reevaluate their current transport operations. Keeping up with the latest trends in management, logistics, digitization, and automation is vital for supply chain growth and recovery. 

Many people today are looking at the growing supply chain and market trends and eyeing job and career opportunities. This is why high-paying logistics jobs are increasingly in demand and why the need for skilled and experienced personnel is higher than ever before. Continued growth and recovery of the industry depend on it!

The reasoning for the increase in costs is multivariate and can trace back to several causes. These include the increase in fuel prices, demand for transport services, or the rise of COVID-19. Another contributing factor is the online share of global retail trade, continuing to rise across most countries as omni carrier 360 services gain popularity (Statista, 2020).  It is all about improving supply chain management processes and key supply chain operations.

Understanding Omni 360 Carrier Logistics and Costs Management

Whether you are a smaller business or a large multinational corporation, any company would do well to keep a firm grip on its transport activities and understand how omni 360 carrier logistics and management impacts transport costs. Depending on the type of business, not managing your transport activities effectively could lead to unwanted consequences such as overpaying, decreased customer satisfaction, and inventory management problems.

Overcoming the rising e-commerce challenges related to costs and transport expenses is a critical area of focus for supply chain managers. Inflation and rising costs seen by transport service providers and fleet managers are not expected to become less prevalent anytime soon (Bloomberg, 2021). As you can see in Figure 1, ground transportation prices alone have and are predicted to outpace the Producer Price Index for the foreseeable future (TransportationInsight, 2021). 

Figure 1. PPI v Parcel, LTL and Truckload Price Indices June 2016 – May 2021

The Importance of Supply Chain Visibility – Filling High-Paying Logistics Jobs 

According to Hofman et al. (2019), lacking information and awareness on your current Supply Chain stakeholders and activities causes unnecessary delays and disruption amongst your business activities. If you are an SME that is growing, you understand the struggle of scaling effectively with your growth. Acquiring and allocating the right resources to the right business activities can be a challenge. Reducing transport costs starts with Supply Chain Visibility.

The concept of Supply Chain Visibility essentially means awareness of and control over end-to-end supply chain information. As often said, knowledge is power. Zooming in on the transport/logistics area of the Supply Chain, it is vital for a business to first understand its Shipping profile and current transport activities before aiming to enforce measures that lead to reducing transport costs. This can be done by applying the 2 key steps below.

• Request and analyse your current shipping profile.

Do you currently hold a one-carrier approach, or are you using multiple carriers? Which modalities are you making use of? How much are you shipping, and where to? Are your transport carriers the same for import and export? What is your average weight per shipment? These are all questions to be asked when analysing your shipment profile. A business must first know the exact ins and outs of its Shipping profile before attempting to reduce transport costs. Request the corresponding data/documents from the purchase department or transport stakeholders.

• Maintain a structured and detailed overview of currently incurred costs

Once the Shipping profile has been analysed and the transport activities are clear, you must strive to create a clear overview of all incurred transport costs. This optimizes your awareness of currently spent resources and allows a business to evaluate their current activity by reviewing the performance/resources spent ratio.

Reduce Transport Costs and Utilize Third-Party Services

Now that your current shipping profile and costs are clear, you can start implementing measures to reduce transport costs. There are many ways to achieve transport cost reduction. One important strategic decision concerns the choice of whether to insource or outsource your transport activities.

Insourcing your transport has many benefits such as reducing third-party liability, clear transport activity overview, and eliminating unwanted waste processes. However, keep in mind that transport tariffs are rising and are expected to continue to rise. This essentially minimizes and complicates the benefits gained from insourcing nowadays. 

Companies that are unsure of their current transport activities do well by considering outsourcing to a professional and competent third party that has a deep talent pool to pull from for high-paying logistics jobs. Even as companies look to outsource supply chain operations the need for skilled workers continues to rise.

Transport tariffs are often more expensive the lower your shipment profile. The more shipments you send, the lower the price per shipment, as tariffs are usually charged depending on the number of items or overall volume shipped. 

This means that third-party companies and omni carrier 360 proficiently in handling transport activities maintain and combine high-usage shipping profiles to get surprisingly low rates and reduce transport costs for many participating parties.

Motor and Control Transport Costs With Help From ModusLink

Expert companies such as Moduslink allow businesses to reduce transport costs effectively by providing businesses the opportunity to outsource their end-to-end Supply Chain and transport activities. Get a personalized offer, contact Moduslink today.

Bibliography:

Bloomberg. (2021, April). Higher Shipping Costs Are Here to Stay, Sparking Price Increases. https://www.bloomberg.com/news/articles/2021-04-12/higher-shipping-costs-are-here-to-stay-sparking-price-increases

Campbell, S., Phillips, D., & Campbell-phillips, S. (2020, July). Lack of Communication between Management and Employees. Researchgate. https://www.researchgate.net/publication/342796387_Lack_of_Communication_between_Management_and_Employees

Hofman, W., Dalmolen, S., & TNO, The Hague, The Netherlands. (2019, August). Supply Chain visibility ledger. Researchgate. https://www.researchgate.net/publication/334883753_Supply_Chain_Visibility_Ledger

Statista. (2021, July 7). Online share of retail trade in selected countries 2014–2021. https://www.statista.com/statistics/281241/online-share-of-retail-trade-in-european-countries/

A little over a year has passed and Brexit is still causing many disruptions amongst industries. Virtually any company that must maintain a streamlined Supply Chain cannot deny the strong effects Brexit has had within the industry. Companies must deal with rising issues such as changing Import/Export regulations, restrictions concerning the free movement of people and managing supplier relations. One of the most predominant effects faced by companies concerns the increase in complexity in cross border customs/tax regulation. This is especially relevant in the Transport and Logistics sector.

The new customs/tax regulations force companies that conduct trade between the UK/EU to reassess their strategic decision-making regarding the clearance of goods and paying VAT (this includes any additional tariffs when selling to EU customers). Doing so is necessary, but will result in increased transport costs, extensive paperwork, and prolonged delivery times. Companies can also choose to regain control by acquiring warehouse space within the EU to function as a fulfillment center and vice versa. This decision will, however, implicate high opportunity costs (Williams, 2021).

In addition to the increase in complexity concerning customs/tax regulations, UK regulatory compliance now exists separate from EU regulatory compliance. The most essential requirements in terms of environmental issues, safety, and health will not change substantially. However, there are most certainly some major changes applicable to UK/EU product compliance regime (Grist & Erasmus, 2021). Two of the most significantly changing instances are:

• The introduction of a UKCA mark and a UK Declaration of conformity for market entering products.
• A shift in obligations and duties between ‘manufacturers’, ‘importers’, and ‘distributors’

Brexit has caused many Supply Chains to have their weaknesses exposed as a result from the above stated effects. This does not mean, however, that there are no opportunities for the sector. Experienced businesses know that problems create opportunities for improvements.  Organizations are adapting by reassessing their current Supply Chain operational processes. This is vital for improving post Brexit. Companies must reevaluate their current transport activities and adjust their strategies in accordance with the Brexit effects and regulations. One of the ways of doing so is Outsourcing.

According to Investopedia (2021), the definition of outsourcing is defined as: ‘the business practice of hiring a party outside a company to perform services and create goods that traditionally were performed in-house by the company’s own employees and staff.’.

In essence, companies that outsource elements of their Supply Chain can achieve benefits such as:

• Reducing Operational Costs
• Increasing Flexibility
• Mitigating risks
• Creating opportunity for innovation
• Streamlining operational processess

Working with experienced professionals that deal with outsourcing daily is an effective way to quickly increase your company’s efficiency. Some organizations outsource their entire Supply Chain to expert companies that are up to date with the latest knowledge. This allows them to tackle the complex issues concerning customs/tax changes resulting from Brexit. Others merely outsource elements of their Supply Chain to increase their proficiency in that specific area. For both cases, Moduslink is  your partner of choice and can provide you with customized solutions that fit to your needs, increasing your needs and allowing you to anticipate growth, streamlining your costs, increasing your revenue, and building brand loyalty.

If you are a company that is struggling to effectively resume your business between the UK and EU, allow Moduslink to relieve you of your worry by offering a wide variety of outsourcing solutions backed by industry experts. Our solutions allow you to improve your Supply Chain by implementing:

• Packaging, Kitting & Assembly
• B2B and B2C Fulfillment
• Reverse Logistics
• Warehousing and Distribution
• Delivery and Logistics
• Location optimization

Gain control over your Supply Chain and experience the benefits from Outsourcing through Industry experts.

Sources:

Supply Chain Statistics – 18 Key Figures of 2022, Accessed 25 October 2022 From

https://procurementtactics.com/supply-chain-statistics/

KPMG International. (2017, February). Brexit: The impact on sectors. https://assets.kpmg/content/dam/kpmg/uk/pdf/2017/03/brexit-the-sector-impact.pdf

Investopedia. (2021, May 2). Why Companies Use Outsourcing. https://www.investopedia.com/terms/o/outsourcing.asp

SchoenHerr, T. S. (2010, January). Outsourcing Decisions in Global Supply Chains: An Exploratory Multi-Country Survey. International Journal of Production Research. https://www.researchgate.net/publication/247162714_Outsourcing_Decisions_in_Global_Supply_Chains_An_Exploratory_Multi-Country_Survey

Williams, C. W. (2021, March 26). How is cross-border e-commerce and distribution adapting to Brexit? KnightFrank. https://www.knightfrank.com/research/article/2021-03-26-how-is-crossborder-ecommerce-and-distribution-adapting-to-brexit

Grist, E. G., & Erasmus, P. E. (2021, January 1). Brexit: Product Compliance and Liability implications. Bird & Bird. https://www.twobirds.com/en/news/articles/2016/uk/brexit-product-compliance-and-liability-implications

The European Union (EU) has established new rules for all EU imports in 2021 and those have continued to be tweaked and updated this past year.  

The new rules, collectively called Import One-Stop Shop (IOSS) are an attempt to both simplify Import VAT collection and level the playing field between EU and non-EU players.  

The newest updates to VATs on imports further extend regulations and provisions, something all shippers, carriers, brokers, forwarders, and anyone dealing with cross-border transport needs to understand. Everything from VAt collection to VAT returns can complicate cross-border logistics and imports significantly.

Until recently, EU and non-EU sellers selling goods online to EU consumers can import the goods into the EU, directly to the consumer, and import VAT-free if the consignment of good(s) is valued at or below €150. This can have a significant impact on M-commerce and online businesses.

This ends on 1 July 2021 and all imports will be subject to EU Import VAT. Sellers and facilitating marketplaces can collect import VAT on import consignments valued up to €150.

The new regulation regarding  cross border logistics allows for a low-value consignment   Import VAT exemption, known as the “low-value consignment stock relief”, and was intended to relieve EU member countries’ customs from the burden of checking large volumes of packages for small amounts of potential tax revenues. 

An unintended consequence of this exemption left EU-based sellers at a major price disadvantage since they must charge VAT on goods that are dispatched from within the EU. The exemption has also encouraged large-scale fraud by sellers deliberately under-declaring the values of goods to escape the EU imports bill.

How Does This Impact B2B Fulfillment in the EU?

There are a number of considerations to keep in mind, especially as these regulations continue to be updated. In 2021, Michel da Silva, an e-business and B2B fulfillment expert at ModusLink was asked to help explain the new VAT on imports and similarly related regulations. His responses are below and later we will dive into the very latest updates that you need to know about B2B e-commerce fulfillment and imports.

Q: What does this supply chain change mean for a typical non-EU seller?

A: Non-EU sellers, including those from the UK, will have to appoint a VAT Intermediary to act as their agent. This is similar to a Fiscal Representative or to use a Merchant of Record, who will take care of payments, taxes, and compliance. It will significantly impact how importers handle fulfillment solutions, and customer service, and protect bottom-line profits.

Q: Can you give us an example to better understand the effect of the new  Import VAT rate regulations on an average non-EU company?

A: Let us consider the EU imports VAT obligations today and post-2021 reforms for an example non-EU seller, Client ABC from China:

Today:  Client ABC can sell and ship consignments under €22 to EU consumers VAT free. Over that limit, then either the customer or Client ABC has to pay the  VAT on imports at the rate of the country of import. To provide a good seller experience, Client ABC pays the import VAT on behalf of its customers.

After July 1^st, 2021: Client ABC will charge VAT at the point-of-sale and declare it in a  cross border logistics return if not exceeding €150. They are then exempted from paying import VAT at customs. Client ABC may also declare sales to customers around the EU via its IOSS return, as discussed in the above section.

Q: What about transactions for items greater than €150 for non-EU sellers or those dealing with B2B and B2C orders?

For consignments exceeding the €150 IOSS threshold, the  Import VAT must still be paid to customs. This could still trigger a regular VAT registration in the country of importation for Client ABC from the above example if they wish to sell the goods locally or to consumers in the rest of the EU.

Q: What is a Merchant of Record (MOR) and why would companies or big box retailers dealing with VAT on imports use them?

A: A Merchant of Record is a legal entity selling goods or services to a cardholder on a company’s behalf and to whom the cardholder owes payment for such goods and services. The MOR is the responsible party for meeting all of the  cross border logistics and regulations in the EU.  The MOR processes all payments and takes on those transactions. Using a MOR is a very good way to ensure VAT-registered companies are in compliance with the law as these payment service providers can manage the entire process for you.

EU Import VAT and Regulations for 2022 and Beyond

There are a number of considerations to keep in mind, especially as these regulations continue to be updated. In 2021, Michel da Silva, an e-business and B2B fulfillment expert at ModusLink was asked to help explain the new VAT on imports and similarly related regulations. His responses are below and later we will dive into the very latest updates that you need to know about B2B e-commerce fulfillment and imports.

Q: What does this supply chain change mean for a typical non-EU seller?

A: Non-EU sellers, including those from the UK, will have to appoint a VAT Intermediary to act as their agent. This is similar to a Fiscal Representative or to use a Merchant of Record, who will take care of payments, taxes, and compliance. It will significantly impact how importers handle fulfillment solutions, and customer service, and protect bottom-line profits.

Q: Can you give us an example to better understand the effect of the new  Import VAT rate regulations on an average non-EU company?

A: Let us consider the EU imports VAT obligations today and post-2021 reforms for an example non-EU seller, Client ABC from China:

Today:  Client ABC can sell and ship consignments under €22 to EU consumers VAT free. Over that limit, then either the customer or Client ABC has to pay the  VAT on imports at the rate of the country of import. To provide a good seller experience, Client ABC pays the import VAT on behalf of its customers.

After July 1^st, 2021: Client ABC will charge VAT at the point-of-sale and declare it in a  cross border logistics return if not exceeding €150. They are then exempted from paying import VAT at customs. Client ABC may also declare sales to customers around the EU via its IOSS return, as discussed in the above section.

Q: What about transactions for items greater than €150 for non-EU sellers or those dealing with B2B and B2C orders?

For consignments exceeding the €150 IOSS threshold, the  Import VAT must still be paid to customs. This could still trigger a regular VAT registration in the country of importation for Client ABC from the above example if they wish to sell the goods locally or to consumers in the rest of the EU.

Q: What is a Merchant of Record (MOR) and why would companies or big box retailers dealing with VAT on imports use them?

A: A Merchant of Record is a legal entity selling goods or services to a cardholder on a company’s behalf and to whom the cardholder owes payment for such goods and services. The MOR is the responsible party for meeting all of the  cross border logistics and regulations in the EU.  The MOR processes all payments and takes on those transactions. Using a MOR is a very good way to ensure VAT-registered companies are in compliance with the law as these payment service providers can manage the entire process for you.

EU Import VAT and Regulations for 2022 and Beyond

Like many things in life and global business, the only thing that stays the same is that everything changes.  This is true of the latest  Import VAT rulings in the EU as it relates to fulfillment centers, importers, and third-party logistic providers. 

According to a report on  cross border logistics and regulations in the EU from Bloomberg Tax on Oct 21, 2022, “Import VAT is payable by any person or persons designated as liable by the EU member state of importation, according to Article 201 of the EU VAT Directive 2006/112/EC. The indirect representative is generally a payer of import duties to customs and charges those duties from the business it is representing: However, the problem arises if its principal goes bankrupt, disappears, or refuses to pay the import taxes payable.” 

But what does this mean for those who rely on imports and what power does  EU import customs have when it comes to collecting VAT tax payments?

Customs has the power and authority to actually go back several years and request the payment of import taxes on past shipments and imports. They can, in fact, go back many years after the goods have been released and are in free circulation within the EU. 

Waiting until years later to collect payments and chase down VAT on imports can help improve access to goods and materials among retailers and consumers. It is one of the downsides of the digital approach to omnichannel supply chain networks that are growing in popularity today.

However, there are obviously major risks involved for those funding, and dealing with the reimbursement and regulation side of imports into the EU. Therefore, representatives and those willing to take on this level of risk are not easy to find or only come at a very high cost. 

The additional pressure on  cross border logistics only adds to the complexity of managing finances, cash flow, invoices, payments, and overall budgets- something EU importers will have to adjust to and prepare for.

There are many layers to the EU import rules and regulations, including carbon emission monitoring and control, tax and payment constraints, load and product limitations, and many more. Each one brings fees and additional expenses for importers and adds to the cost of shipping and transportation services. 

Many countries and even individual shipping companies are ill-equipped to handle these changes and will likely struggle to adapt and keep up with the ever-changing field that is EU imports. But you don’t have to struggle with ModusLink on your side!

Navigate the Changes Now and Down the Line With Cross Border Logistics Experts From ModusLink

ModusLink is a provider of a multitude of e-business services including Merchant of Record and can assist with a range of b2b fulfillment needs and concerns. Stop wandering around blindly trying to make sense of the latest changes to EU imports and the newest VAT on imports. 

Let the pros handle the complicated work and let you focus on managing your logistics. Contact ModusLink today by clicking here to start the process to get help navigating these newest regulations.

Bibliography:

Council of the European Union. Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax. 11 November 2006. Accessed 26 October 2022. From https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=celex%3A32006L0112.

Europe Daily News, 24 October 2022. 24 October 2022. Accessed 26 October 2022. From https://www.mayerbrown.com/en/perspectives-events/publications/2022/10/europe-daily-news/europe-daily-news-oct2422.

KULDKEPP, AIKI. EU Court Clarifies How VAT Applies to Customs Agents. 21 October 2022. Accessed 26 October 26 2022. From https://news.bloombergtax.com/daily-tax-report-international/eu-court-clarifies-how-vat-applies-to-customs-agents.

Russia/Ukraine Crisis: Update on UK and EU Sanctions on Russia. 17 October 2022. Accessed 26 October 2022. From https://www.ropesgray.com/en/newsroom/alerts/2022/October/Russia-Ukraine-Crisis-Update-on-UK-and-EU-Sanctions-on-Russia.