It’s very rare to experience magic in everyday life, but a small portion of that might be coming our way very soon. Let me explain. Last week I was to receive new coffee capsules after I made an online order. Unfortunately, the delivery time turned out to be longer than expected and left me without coffee. In addition, I couldn’t get an answer as to where the package was, other than that it had left the vendor’s premises. I’m sure you’ve had a similar experience with missing deliveries at some point, probably for less trivial things than coffee.
Online shopping has boomed in the past decade by more than 150 percent between 2014 to 2019 . Of course, with the arrival of Covid-19, online sales have accelerated further. Although I’m not a die-hard Amazon Prime customer, and accustomed to same day delivery, I have, what I think, is a fairly reasonable demand on logistics deliveries, like being able to understand where my package is, and the day and time frame in which it will arrive.
An industry where digitalization is overdue
On the contrary to the average consumer, I’ve had the luxury of understanding why logistics companies fail to give me these simple answers. Recently, I had the privilege of studying the logistics industry, and I have come to understand some of its fundamental problems, which I, together with my colleague Anders Erlandsson, captured in the Pre-Emptive Logistics report. It includes things like the plethora of players involved in logistics, combined with the lack of poor collaboration incentives.
Consider that the International Road Transport Union (IRU) has a staggering one million members, with fierce competition among them. On top of that, they’re all at different stages of technological advancement. There are old and silo-based technology approaches in combination with the use of paper, pen and phone calls. This all results in a lack of transparency across the whole value chain. I could mention more problems like the complexity of ‘nested items’, meaning, which package is located on what pallet, on what truck, on what ship – but I think you have got the broad picture of the chaos already.
Logistics is central to many value chains
What’s so unfortunate with this picture is that logistics is such a central piece of the flow in many value chains, regardless of whether we’re talking about a single consumer’s coffee supply (and their subsequent loss of work concentration), or the logistics that surround a large hospital.
Consider the latter – how building material must arrive on site in the right order to enable progress, limit storage, avoid deterioration and avoid eventually becoming scrap. Knowing when things will arrive or understanding if unplanned incidents occur could cater for so much more efficiency, cost avoidance, better customer experience and even incur higher revenues for anyone offering certainty. The costs and savings multiply as the effects ripple downstream along the value chain – and the end user will often be affected too.
How logistics is set to change
How can such a situation be reversed? How could logistics companies get better control over their own fleets, their outgoing goods, and even incoming goods from suppliers? Surely, one way to go about it is to integrate vertically in the way Amazon is doing, by leasing their own planes (at least 80 now) and procuring their own trucks . If you’re handling every step of the process, you have control. The world could end up with a couple of competing A-Z logistic silos like Amazon’s. But with increasing digitalization, improved data analysis methods, experience, and increased knowledge in how to benefit from AI, there will be ways to collaborate and coordinate between the different roles and all the players…