All posts by Kristian Petterson

Why Agile Business Models Help in a Changing Ecosystem

Whether global giant or SME, the supply chain ecosystem provides opportunities for all organisations. Particularly those agile enough to adapt to the changing environment.

ecosystem

In our previous article, we looked at how the future of logistics may look from a technological perspective. Today, we’ll look at the potential changes in business models that will define the industry.

Many believe success relies simply on investing in new tech. However, the reality is that these changes are only the tip of the iceberg. The fluidity of working the online revolution has created means that blindly applying pre-Internet age business models is a recipe for stagnation and, ultimately, failure.

Big Data

By using Big Data, logistics providers can identify where to improve, what to invest in and how to grow. This allows them to improve processes and maximise customer service, through faster, cheaper and error-free supply chains.

With the massive potential for useful data offered by IoT, algorithms can predict customer demand and opportunities with increasing accuracy. Used in conjunction with traditional business modelling, they can enable faster and more effective strategic business decisions.

Using information from past transportation activities, can help develop better scheduling, load sequences and ETA predictions, all enhancing customer experience. Further to this, one can use customer segmentation to provide tailored customer service levels, maximising customer retention.

However, there is increasingly an acceptance that Big Data is no good on its own. The key challenge is in ensuring data is fit for purpose by merging all the information in a meaningful and statistically relevant way.

With Big Data, this has always been the biggest danger. And with the proliferation of data sources promised by IoT and further digital integration, it will only become more challenging.

Furthermore, not everyone in the industry will be able to compete with the global giants. Particularly not in terms of data analysis and process efficiency.

There will always be room for smaller operations. Their success will rely on being able to identify specific needs at an individual level, and respond quickly to them. These players will, increasingly, look to collaborative models to enhance their business propositions.

Collaboration

The existence of middle-men is not a new phenomenon. However, it is fair to say that the internet has provided a platform for an unprecedented growth in businesses that own no assets at all.

As an illustration of this, logistics services that add value through the aggregation of information are proliferating. There have always been brokers or consultants, but the ability to harness Big Data means that companies such as Freightex, Flexe and Zupplychain can accelerate competition by becoming market makers.

These market makers are evident in many verticals. AirB&B, Uber and MoneySupermarket are all aggregators of services that add value for customers by using their platform to leverage value from providers.

It’s this capacity for one stop solutions, facilitated by the immediacy of online communication and comparison, that is at the heart of collaborative models.

As the demands for speed and cost-efficiency grow, transparent and flexible logistics services ensure supply adapts to meet demand through increased variety and competition. Centralised marketplaces allow comparison of services and prices, allowing customers to build a bespoke supply chain. Moreover, they arm customers with the ability to switch elements of their supply chain without compromising the whole.

Streamlining Processes

In addition to driving up competition, this collaborative approach highlights how shared digital systems can lead to streamlining of processes.

With, for example, a website that matches available lorries to shipper needs, based on prices and location coverage, one would expect integration on delivery information. And with the future offering the same level of detail and control across each step in the supply chain, real-time information will be visible from initial supplier right through to customer delivery.

The potential for savings all along the logistics chain is frankly massive. From empty miles and storage capacity underuse/excess, to re-arranged courier delivery scheduling, huge opportunities exist.

This model allows niche companies to continue to compete against full-solution supply chain providers. In addition, with greater transparency, each player can manage their own credibility without being undermined by partners who may under-deliver. Just as end-customers can expect to move more easily, niche providers will be able to change partners with greater flexibility.

The challenges of the collaborative models are bound up in compliance and in consistency of approach across different providers. Trust – whether it’s implicit through brand management or gained explicitly through insurance – is a vital component for these models.

And as with all new technologies, industry standards will need to evolve and become entrenched. While this is already occurring, there may be inter-operability challenges.

Adapting to the Ecosystem

To succeed, logistics companies will need to react quickly (or, indeed, proactively) to ensure service levels and pricing match increasing customer expectations.

The reality is that the drive for greater efficiency cannot be achieved without companies embracing change. Alongside this will be adopting tools required to get there – be they technology, workplace management, planning, systems or mindset.

The bigger companies in the industry will look to achieve greater traction through the diverse data harvesting potential of IoT and the forecasting it can fuel through big data analysis. However, SMEs will always have the advantage of greater agility in the marketplace.

It may well be that the potential of the sharing economy, empowered by the immediacy of online tools, can give a disproportionate strength to smaller providers who act collaboratively to access a wide market whilst maintaining the flexibility inherent in their size.

Furthermore, quick thinking, and quick-acting, organisations can succeed through fresh workplace management (such as in recruitment and training), as well as accurate identification of what technological advances (such as 3D printing, augmented reality tools or automated last mile delivery) will work for them.

Lions will always be at the top of the food chain. But the ecosystem is constantly evolving to ensure every animal, if agile or crafty enough, has its niche.

Zupplychain employs algorithmic matching of customer’s search requirements to warehouse availability to show warehouse pricing, along with an automated and structured process to progress enquiries and a cloud based system to manage customer stock in provider’s warehouses.

Faster, Cheaper, Better – The Future of Logistics

As technology drives change in logistics, companies must meet increasing consumer demand. But what does it mean for traditional labour roles?

logistics

Logistics has never felt more fluid and subject to change. In this article, we’re going to look at the key factors driving all this change and then consider how technology will develop in the next 10-20 years. Then, in our second piece, we’ll consider how new business models will evolve before trying to draw some conclusions.

Faster, Cheaper, Better

Commercial interests have always demanded logistics move stock quickly, cheaply and in large quantities. Historically, transport improvements – from horses through to planes – answered this demand. But in the future, it will be the digital world that provides these answers.

The 21st Century customer is an unforgiving beast. However, while new shopping patterns are placing extra demand on logistics providers, they are also generating fresh opportunity. As end customers become more focused on flexible, fast and cheap solutions, logistics companies that optimise their digital usage are well-set to take advantage of weak competition at every stage of the supply chain, including retailers.

Technological advances, forecasting and new business models all offer glimpses of how these demands can be answered. There is even the possibility that much of the future supply chain will be autonomous and self-organised.

One thing for sure is that it will faster, cheaper and better – the customer won’t accept anything less.

Interconnected World, Interconnected Supply Chain

3D Printing

3D printing makes it possible to print exact working replicas of parts and products using metals, plastic, composite materials, and even human tissue. This can be done quickly, on demand and to a customer’s specification. This makes it a central technology in the development towards “batch size one” production.

It also means it will no longer be necessary to store large amounts of stock. Though it is possible there may be a counter-balancing increase in raw material storage.

In markets in which 3D printing is relevant (for example, spare parts), this has the potential to heavily disrupt logistics. And the best 3PLs will provide 3D printing services at the point of delivery to dovetail with other services.

Internet of Things (IoT)

The IoT is the developing ability for digital devices to communicate directly with each other across the internet. It’s estimated that by 2020, more than 50 billion objects will be “web-enabled”. And, if you consider that they will be able to “talk” to one another, the potential becomes clear.

Immediacy of communication can lead to many direct benefits. Creation of automated orders for domestic resources, lorry sensors informing maintenance schedules – all focused on improved speed, efficiency and cost.

From a customer perspective, the ability to track items through their RFID chips and via GPS will mean 100 per cent visibility across the whole delivery cycle. From a logistics perspective, one can also envisage other variables – such as location, temperature, pressure, humidity, etc. – being monitored throughout the supply chain for improved transportation efficiency.

However, the biggest single opportunity arguably comes from the unrivalled quantities of consumer data that will arise, feeding into forecasting and automated processing. For those who can embrace and take advantage of it, this goldmine of information is a very exciting prospect.

Automated Systems

Whilst the idea of automation can seem like something from science fiction, there’s no denying the groundswell of development this area has seen in the last 2-3 years.

Labour costs are always a critical element in any operating model. In logistics, the trade-off between quality of service and cost is central to success. Automation could re-write this equation by providing a faster and better service for less money.

Relatively simple loading and unloading systems are already available. But these will become more sophisticated as advances in optics and data processing mean forklifts can navigate autonomously in dynamic environments, and with less error than human drivers.

In addition, autonomous delivery is on the horizon. DHL and Amazon both plan to launch drones for last-mile deliveries. And the appetite for them is strong amongst manufacturers, retailers and customers.

Autonomous lorries are also a real possibility using the same optical and AI developments that underpin driverless forklifts.

Not only would driverless vehicles be cheaper – both in labour and fuel costs – they will also be safer and more predictable making them ideal tools for efficient supply chain management. Add to this the fact the whole transport industry is suffering from dramatic driver shortages, and it’s not a surprise this technology is very appealing to most industry segments.

Augmented Reality

Augmented reality (AR), overlays relevant information (such as sound, vision or tactile data) onto a user’s normal sensory input, generally via body suits/gloves, goggles or headphones.

Wearable devices are already available that offer a glimpse into the potential future of this technology. Smart phones, smart watches, and VR goggles all give indications of how additional relevant data can be communicated.

For example, stock control data (SKUs, pallet contents, BBEs, etc.) could be accessed without leaving the warehouse floor, displaying data for on-the-spot planning and organisation. And when incorporated into transport, it could offer intelligent last mile assistance (navigation, traffic information, etc.)

Essentially, AR enables greater collaboration between systems and workers. As such, all logistics companies need to consider how AR can ensure all the elements work well together.

Whither the Worker?

With more automation, traditional labour roles will diminish. As such, redefining the place of the human worker within a more technologically advanced environment, will be vital.

In some areas, we will see happy confluence, such as a diminishing driver workforce being superseded by automated delivery solutions. But elsewhere there will be less need for human skills, and an increased need for other skill sets that, historically, have not been required.

For example, automated pick and pack solutions make warehouse operatives less relevant. However, at the same time air and sea transport are both chronically understaffed, with no expectation that the industry demands will drop.

The onus will be on logistics companies to identify future HR needs and pay close attention to their recruitment. In addition to recruitment, the whole sector will need to become more proactive in training, encouraging transferable and future-proofed skills to ensure an engaged and productive work force.

Central will be the development of technically proficient workers. Low-skilled roles will diminish markedly and ICT-related knowledge will be vital.

Zupplychain employs algorithmic matching of customer’s search requirements to warehouse availability to show warehouse pricing, along with an automated and structured process to progress enquiries and a cloud based system to manage customer stock in provider’s warehouses.

Dynamic Solutions to Dynamic Problems

‘Pop up Warehousing’ and ‘Dynamic Warehousing Networks’ are new terms hoping to provide dynamic solutions to solve an old problem – large fluctuations in stock.

Dynamic Solutions - Dynamic Warehousing

Whether predictable or unexpected, most businesses have had to deal with stock maxing out their facilities from time to time. Moreover, as managing average or normal stock levels has become more sophisticated and accurate, the effect of the pinch points becomes more acute.

Of course, any predicted overflow can be accommodated. However, just because it is predictable (for example, seasonal storage gluts), doesn’t mean its impact, or the challenge of solving it, is reduced. Furthermore, not all stock excess is predictable – far from it! Taking advantage of bulk purchase opportunities or running promotions make good business sense, but often create storage headaches.

Historical Solutions

Historically, the solutions that companies resort to cost money and may adversely affect operations. They may rent additional warehousing to accommodate extra stock, or find themselves involved in costly shuffling of inventory across locations, both existing and new.

Outsourcing – getting a third party provider to pick up the slack – is the obvious course to follow, but has traditionally suffered from a lack of transparency and the sense that a better solution might have been missed. After all, an emergency is not always the moment to run a tender process!

Dynamic Solutions

However, the growth in dynamic solutions such as Pop-up Warehousing (the colloquial term for on-demand storage space) is now set to change the game.

This ability to quickly identify available warehouse space and pricing on the internet, represents a step-change in how to deal with over-spill. It means that solutions can be found locally or in strategically relevant hubs – dependent on the user’s need – and that rates are benchmarked by the market.

On top of the transparent pricing and availability that these dynamic solutions provide, they also facilitate a direct dialogue with providers across the country. This means that users can identify, secure, and make use of available warehouse space immediately.

This level of choice can mean the economic benefits of bulk buying or customer promotions are not diluted further down the P&L, and the added flexibility can also allow companies to be more daring in their development – testing new products, markets or distribution strategies with less inherent cost (and risk) and modelling the impact of more permanent solutions to their business without making significant investments or sweeping changes.

Speed and Flexibility

The ability to quickly react and adapt can be particularly beneficial to fast growing or new e-commerce businesses. These business are often unclear about what mid- or long-term capacity they need, and the resources required to support fixed logistics costs.

Dynamic warehousing allows them to upscale logistics in line with their growth rate, without overwhelming resource and cost implications, nor the distraction and risk of running a fast-growing logistics function.

With end to end logistics costs averaging 12 per cent of sales value, not doing it as efficiently as possible can make a material difference to competitiveness. For a third party logistics provider, that 12 per cent is their 100 per cent, and they have the vertical and horizontal experience of logistics to build skills and capabilities from shared experience. Outsourcing logistics can, therefore, make a lot of sense for younger companies – as long as the most appropriate providers can be found easily.

Whilst outsourcing is not a new concept, the catalyst for the recent upsurge in interest has been the development of interactive online platforms by companies such as Flexe Inc in the US and, more recently Zupplychain in the UK.

These websites provide a degree of aggregation and transparency that means all businesses, whether large or small, mature or a start-up, can benefit from a level of flexibility. This means users can be more responsive and make better decisions for the present and future health of their company.

Zupplychain employs algorithmic matching of customer’s search requirements to warehouse availability to show warehouse pricing, along with an automated and structured process to progress enquiries and a cloud based system to manage customer stock in provider’s warehouses.