The world has become used to the advantages of globalisation, though trade disputes and other disruptions prompted smarter companies to examine their vulnerability to the rapid imposition of sanctions and the likely impact on supplier relationships. Suppliers were themselves placed under greater scrutiny, due to the increasing demands for sustainable production and fair treatment of the workforce. Covid-19 accelerated these issues and triggered many more.
Commercial activity has largely been able to continue thanks to the following technologies:
- Ubiquity of Broadband networks
- Cellular mobile networks supporting 4G
- Basic communication services accessible across the Internet e.g. email, VoIP calling
- Cloud services providing computing power ‘on-demand’ at economic cost
- Low-cost end user computing and communication devices
If this pandemic had occurred before 2010, it is likely that economic activity would have collapsed in many countries. Back then, evolving communications and systems technologies were expensive, inflexible in-house platforms and relied on fixed locations for production and administration. This also meant that manufacturing companies, feeding extended supply chains were inherently fragile to any extended periods of disruption to supply or demand. Fortunately, since then, the situation has advanced into a digital stream of information and can be controlled from almost anywhere. Nonetheless, Covid-19 has accelerated the impact of several trends that were likely to transform how we live and work, compressing years into months. And this transformation shows no sign of stopping.
In many developed markets, the physical retail sector and many of their underlying business models have been all but destroyed; though it had been underway. Inherently high-cost structures related to physical stores, reliable yet rigid operating plans and the expectations of customers for rapid direct delivery, exposed those retailers unable to adapt and accelerated their demise. It is worth noting that for every retail operation that fails, the associated network of service suppliers also suffers.
The logistics services required for the emerging e-commerce business models now depend on technology driven agility and information. Information sharing will be the norm, along with trusted networks of partners. This is something Ti has long championed, as we have seen in many of the more advanced supply chain operating models, open, agile collaboration between service providers and partners, always results in superior returns for themselves and their customers.
Pure, asset-light freight forwarders have always been able to adapt to their client’s needs, giving them an advantageous flexibility. Modern information systems allied to advanced communications technology are the central nervous systems of supply chains. The explosion in e-commerce vendors will require the capacity of these technology services to grow rapidly. Thanks to the general availability of Cloud based information systems, this is no longer an onerous (and expensive) proposition. Many of the functional applications (e.g. OMS, IMS, TMS, etc.) that operated within discrete silos are now being viewed as not fit for purpose and are being replaced by the systems that can model and monitor operational process flows across a logistics operating network.
Companies using e-commerce to sell physical products to customers across the globe have become dependent on the reliable and low-cost transportation service providers. The advantage now lies with the established integrators, national postal and parcel services and those companies that have developed their own delivery services.
This transition to e-commerce and delivery to home or local store, will be the norm in many countries from now on. Platforms such as Shopify, enable e-commerce businesses to establish themselves online very quickly. As these platforms grow, they will evolve to provide whatever support services their customers require. They will have huge buying power for services related to inventory management and distribution and delivery. It is no surprise that they are being studied very closely by the established delivery giants, as they may become a tempting acquisition target, or more likely, a serious competitor.
It therefore makes sense for these platforms to explore partnerships with local or regional logistics service providers, to enable the broadest geographic footprint. At the same time, the LSP’s themselves, need to invest in appropriate technology platforms that can support the rapid integration with any partner that wants to include them into their operating networks. But pricing will be important, as most last mile deliveries are done at a loss. Delivery density is key, and consumer residential deliveries are very expensive unless the volumes handled are huge. So robust, very low-cost business models are required.
Author: Transport Intelligence
Source: Transport Intelligence, January 21, 2021