In his economic theory magnum opus, Wealth of Nations, Adam Smith says, “Wherever there is great property, there is great inequality.” That advice may be 240 years old, but it is good counsel for today’s logistics providers. The U.S. Commerce department estimates the spending in the U.S. logistics industry to be over $1.33 trillion. With fast changing demands on the industry, logistics providers are making moves to differentiate them selves from competition, create inequality in the market place, and gain maximum share of this large market.
In support of these efforts, technology is being leveraged as a potent weapon. As we talk to CEOs, CFOs, CTOs, and CIOs at our logistics clients, a number of developments appear to be at the top of their minds. Here are the key issues in Logistics, based on PwC’s experience and analysis:
1. Customer Expectations: The E-commerce revolution has forever raised customer expectations. Customers have come to expect free and fast shipping as standard. Rightly or not, this has affected the perceived value of logistics in the end consumers’ mind.
Logistics players are responding in interesting ways to establish technology as a competitive weapon
2. Transformation in Retail: The demands from the Retail sector have increased significantly - frequent status and shipping updates, constant improvement to systems to serve customers better, and the ability to buy goods online and pick them up in-store. These combine to exert great pressure on logistics providers and their IT departments.
3. Direct to Consumer Models: Manufacturers are beginning to tip-toe towards direct-to-consumer (D2C) business models. They do not want to commit to long term investments in building out their D2C supply chains, leading them to outsource logistics to 3PLs and other providers. They are pushing for faster on/off boarding times thereby creating pressure on IT departments.
4. Industry Consolidation: There has been significant consolidation in the industry as traditional logistics providers seek to combine Truck load, Less Than Truckload, and Last Mile services. According to PwC’s fourth-quarter 2015 analysis of global mergers and acquisitions, transportation and logistics deal size nearly doubled in 2015.
5. New Business Disruptors: A number of new players have entered the logistics sector with disruptive business models. These disruptors have heavily leveraged technology to change the landscape of the logistics sector. Some of these disruptive models include:
a. Mobile / cloud based platform that connects shippers with nearby carriers
b. Web-based, end-to-end freight forwarding with intermodal transit offerings
c. Neighbor-to-neighbor network of shippers (carpooling for cargo)
d. On-demand service that picks up, packages and ships small items
e. Short and long-distance logistics that includes packaging, documentation and shipping
As a result of these sector issues and challenges, logistics players are responding in interesting ways to establish technology as a competitive weapon.