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There are trillions up for grabs in the business of delivering things right to you, no matter where you are. A sector reeling from the cumulative effects of digitization is the global logistics business. In what our colleague, Michael Sikorsky, calls “the second half of the chessboard,” we can anticipate some significant inflection points in the business of logistics, involving innovative digitally-enhanced business models, the instrumentation of basically everything and the impact of the experience economy on product-centric business models.

The “Last Mile” problem hasn’t gone away

The “Last Mile” refers to the most expensive part of any supply chain – actually getting the end product or service into the possession of an end customer. That (among other things) is what killed WebVan and a whole lot of other dot.com startups in the first big Internet wave.

Even logistics darling Rent the Runway has found the last mile to be a flummoxing dilemma. As one of their representatives observed, “The customer is at the center of everything we do at Rent the Runway. We can control almost everything we do, but we don’t own the last mile yet.”  When the customer doesn’t do her part, as in returning the garments specifically the way the company requires, the flow of their business breaks down, and the next person in line for the dress can be disappointed. As a result, the company instituted draconian late fees and other charges to enforce cooperation. That, in turn, resulted in a major backlash on social media and in the Daily Beast, eventually causing the company to change its policies after – presumably former – customers derided its “predatory” practices.

The latest wrinkle in the last mile problem involves having to create a flow of activity along multiple channels, such as from the distribution center to the customer (and back); warehouse to customer (and back), supplier to customer (and back) and so on. Increasingly, logistics providers are expected to take all this on. The bottom line? The last mile problem that used to be on the customer is now on the logistics provider. That, in turn, means they are picking up activities that customers used to do for free (selecting items, paying for them, and bringing them home). Unless you have some kind of super-efficiency magic going on, it is going to hurt. That cost has to come from somewhere.

Perils of the Porch Pirates

As more and more money is being made by delivering packages directly to consumers, more and more of those packages are being stolen. So-called “porch pirates” get a lot of attention around the holidays, but the problem is a real one, and it’s on the rise. Some 31% of people recently surveyed experienced such theft.

Traditional solutions, such as requiring a signature from customers who are unlikely to be home, are expensive and a logistical nightmare. And yet, there are few easy answers when a package is delivered to an unattended address. Some retailers are experimenting with ways in which a delivery could be made within your home or car, using IoT technology to provide the delivery person with access. What could possibly go wrong? Yes, you do detect sarcasm here.

Perhaps another Amazon innovation, offering a new service specifically for apartment dwellers would make people a little less uneasy. It’s the Amazon Hub – a secure metal container placed in, say, the lobby of an apartment building. When a delivery is made, the purchaser receives a code from the delivery person. When the purchaser is ready, they enter the code, a door opens, and voila, they can retrieve their package. Unlike Amazon’s Locker service, the Hub is supposed to allow people to accept packages from any vendor. This, in turn, opens up a whole new dimension of access for Amazon.

More on the Amazon Effect – changing customer expectations for how they would like to be served

As one observer notes, “Because of Amazon, consumers not only demand, but now expect, their online shopping experience to feature all of these things at once:

1. Competitive pricing

2. Highly available inventory

3. Lightning-fast fulfillment (and the ability to change an order)

4. Real-time tracking information

5. Mobile support

6. An easy return process

I have long used Amazon as an example of a company that clearly sees a customer’s entire consumption chain. Briefly, the idea is that in their quest to get “jobs to be done” accomplished customers go through a whole chain of experiences. It starts with becoming aware that you might need something, moves to searching for a solution, making a choice, arranging payment, receiving the goods or experiencing the service, making returns, and so on. What you’ll see, if you do business with Amazon at all, is that they have focused on removing frictions at every step along the way.

What Amazon’s logistics prowess has accomplished is that customers now simply take for granted that what they order is what they will receive, that it will be delivered intact in a timely manner and that the price they paid is going to be a good one. For less astute and customer focused companies, living up to this expectation is a formidable challenge.

Post-Product Competition

We are in the midst of a cosmic shift in what “jobs” customers want their goods and services to do for them. Where once upon a time, companies could focus on creating products and selling them, that model is shifting dramatically. Products, increasingly, are commoditized, with rapid imitators able to copy just about any feature that customers signal has value. What is starting to happen now is that experiences are being designed around “customer profiles rather than product catalogs” as my colleague Geoff Moore suggests. The result is that the efficiency prized in traditional ERP and supply chain functions will be superseded by the need to create authentic, trusted, relationships with customers on a highly personal level.

The “as a service” trend highlights how much traditional supply chains are being transformed. Today it is much more about access to assets rather than ownership of assets, and that creates tremendous opportunities for logistics players. If you rent and return the dress, rather than buy it, that’s two round trips back and forth to the provider, with one dress now generating perhaps as many as 30 round trips. As one admiring observer noted, Rent the Runway is a “massive e-commerce company that is designed to have 100% of its inventory returned”.

Everything is being instrumented, and all of these sensors and transmitters are sending data everywhere. The dilemma for logistics providers is making sense of all this. With customers now able to very publicly criticize providers for mishaps anywhere in the chain, the stakes for companies to make sense of the entire customer experience have never been higher.

Transparent, trackable and trace-able

Increasingly, it isn’t enough simply to deliver a product or service. Customers today are expecting to be able to know, in real time, what is going on in every part of the supply chain that serves them. Not only do they want to be able to quickly and easily know the status of every item, every driver and every delivery vehicle, they want to be able to tap into that information from the very start of the chain to its current status. Customers today are concerned about issues such as environmental impact, the treatment of workers, the utilization of poor practices, and a host of other issues that vendors need to be able to respond to. According to a recent study, 45% of customers surveyed abandoned their purchases because they were unhappy with the level of transparency afforded them.

The backlash against companies that get it wrong can be fierce. Apple, Sony and others have experienced this negative brand spillover which has forced them to change their practices.

Trade is Anybody’s Guess

Not that I have answers, but existing trade regimes are being re-negotiated right, left and center, even as a US-initiated trade war is changing profitability considerations across a wide swath of industries. This has thrown businesses from port operators to shippers to shipping container providers into a highly uncertain state. With such a level of uncertainty, maintaining resources to respond quickly is probably a better strategy than trying to plan long-term.

Our robot companions

Humans continue to play a role in parts of the supply chain that have been stubbornly difficult to automate, such as unpacking delivery trucks and moving boxes from place to place on loading docks. Pundits now predict, however, that partial automation and the combination of humans and robots will semi-automate many of these functions. Workers might put on robotic exoskeletons that will allow them to have the strength of superman with the intelligence required for human-dependent tasks. Humans, so equipped, might even start replacing warehouse activities that today require forklift trucks.

In Japan, an aging population and the desire to keep workers productive for longer has proven a powerful incentive to develop advanced exoskeleton products. These, in turn, are re-setting expectations for what older workers are capable of doing and for what productivity will be among that population.

Amazon was an early player in the robot logistics revolution, purchasing robotics firm Kiva in 2012. It was a gutsy bet – $775 million just to acquire the company and major investments to convert the warehousing and supply processes to be able to take advantage of the technology.

Amazon then took the production of the robots entirely in-house, eventually leaving Kiva’s previous customers in a “void,” scrambling to find replacements for the technology which Amazon renamed Amazon robots in 2015. Amazon thus enjoyed the benefits of the productivity lift from the Kiva technology and hampered its competition in one fell swoop.

Google took a page out of that playbook as well, acquiring Industrial Perception Inc. and a number of other robotics companies, leading observers to lament “their technology is no longer visible to the market.”. Unfortunately, it doesn’t seem to have done much for Google, and it did hamper the development of the technology they acquired.

A lot of observers are not fans, claiming that Google made a “mess” of the whole robotics field by acquiring some of the top companies and their leading-edge engineers and scientists and then doing nothing with them. Google’s robotics arm, Replicant, “swallowed promising projects and stifled them, says Jeremy Conrad, a partner at hardware incubator Lemnos Labs. “These were some of the most exciting robotics companies,” he says, “and they’re just gone.”

The bottom line: From Supply Chains to Digitally Instrumented Networks

As a recent survey by logistics giant Geodis makes clear, companies can no longer regard their logistics as an afterthought. As competitive dynamics revolve around direct-to-consumer or direct-to-business interactions, supply chains become an integral part of the attributes customers experience with a product or service. Forging new partnerships, even with former competitors, using digital technologies to ‘see’ the transactions between players in the entire chain all the way to the end customer, and engaging in two-way rather than one-way transactions are all going to be critical for the next generation of logistics and transport. And many incumbent players are not at all prepared.

“8Ps” of StrategyOpportunity
for Disruption
Recommended Leverage Points
Position- The farmers, individual and corporate, that you are targeting.

- The need of the agricultural industry that you seek to fill.
3- What technologies do you control that can help you tap into market
segments that you previously thought unreachable?

- What are the potential business alliances you could think about with key players in the segment to serve your customers with integrated solutions? (Serving customers with more integrated solutions example: serving farmers with fertilizers, crop protection and other).
Product- The products you offer, and the characteristics that affect their value to customers.

- The technology you develop for producing those products.
8- What moves are your organization taking to implement Big Data and analytics to your operations? What IoT and blockchain applications can you use?

- What tools and technology could you utilize or develop to improve food quality, traceability, and

- How can you develop a more sustainable production model to accommodate constraints on arable

- What is the future business model needed to serve new differentiated products to your customers?
Promotion- How you connect with farmers and consumers across a variety of locations and industries.
- How to make consumers, producers, and other stakeholders aware of your products and services.
8- How are you connecting your product with individual and corporate farms who could utilize it?
- How could you anticipate market and customer needs to make customers interested in accessing your differentiated products?
PriceHow consumers and other members of the agricultural supply chain pay for access to agricultural products.7- What elements of value comprise your pricing? How do each of those elements satisfy the varying needs of your customers?
Placement- How food products reach consumers. How the technologies, data, and services reach stakeholders in the supply chain.9- What new paths might exist for helping consumers access the food they desire?
- How are you adapting your operations and supply chain to accommodate consumers’ desire for proximity to the food they eat?
- How could you anticipate customer expectation to make products more
accessible to customers/agile supply chain?
- Have you considered urbanization as a part of your growth strategy?
- How your food satisfies the needs and desires of your customer.
- How the services you provide to agribusiness fulfill their needs.
9- Where does your food rate on a taste, appearance, and freshness
- Could the services you provide to companies and farms in the agriculture industry be expanded to meet more needs?
- What senses does your food affect besides hunger? How does your
customer extract value from your food in addition to consumption?
Processes- Guiding your food production operations in a manner cognizant of social pressure.8- How can you manage the supply chain differently to improve traceability and reduce waste?
- How can you innovate systems in production, processing, storing, shipping, retailing, etc.?
- What are new capabilities to increase sustainability (impact on the environment, or ESG) components?
People- The choices you make regarding hiring, organizing, and incentivizing your people and your culture.- How are you leveraging the agricultural experience of your staff bottom-up to achieve your vision?
- How do you anticipate new organizational capabilities needed to perform your future strategy (innovation, exponential technologies needed, agile customer relationship, innovative supply chain)?
- How do you manage your talents to assure suitable development with exposure in the agrifood main challenges/allowing a more sustainable view of the opportunities/cross-sectors?