Put simply, the logistics industry faces the same high level challenges as any other sector – the need to cut costs, increase efficiencies and attract the right talent, amongst others. But, where industries such as music, public transport and the hotel market are amongst those that have been significantly disrupted by new technology platforms.
What all the above industries have in common is that traditional ways of consuming their services have been overthrown by a complete outsider – in some cases a pure start up. These disruptors have also not been specialists in the industry itself, but have simply been technology experts, with the market being the secondary aspect. What they also have in common is that they use ‘sharing economy’ business models where there is no one owner of a physical product and service, but that an existing asset is made available to multiple customers.
For the logistics industry this is the greatest challenge they face. As a ‘technology’ company market entry costs can often be low, but the small margins and cumbersome nature of moving goods from one place to another, makes disruptive change very difficult. Legacy systems and incumbent processes naturally make it difficult to make anything other than incremental changes to service levels or internal processes. In addition, the growing expectations from consumers for flexible delivery options, clear communication and greater reliability continue to increase the pressure on margins for companies with high fixed costs. This pressure is unlikely to let up and creating an opportunity for new entrants to steal a march.
But, as we see companies such as Uber make moves to digitise this space, is it possible they could bring the end of the broad delivery times, the missing parcels and damaged goods. Could we see a disruptor introduce a way to communicate easily with their logistics company, to feel as though the customer experience is easy and adds value, and most importantly, fits seamlessly within their own life?
For now, existing logistics companies need to decide whether they are going to be the disruptors, focus on their point of differentiation and make that happen. If they are looking to react when a new disruption arrives they will need to have the ability to react quickly to retain their market share. Either way, and put simply, this is one industry that is soon to change.