The Uber-ization of the supply chain

The Uber-ization of the supply chain

The typical constraints on the supply chain include shelf space, productive capacity in plants, and finding the right people capable of doing the work when you need them. Yet, as noted in Forbes, Uber overcomes these constraints through reliable supply-demand matching, “Demand need not be created, only sensed. Supply need not be built, only tapped.”

In the sharing economy, companies work strategically to find ways to reduce waste and break free of the typical constraints. This idea isn’t exactly new. In 2015 Fortune Magazine featured Flexe, a company that makes a market of spare warehouse space for companies looking for storage capacity but not wanting to build or hold the typical long-term lease.

In recent years, there has been increasing interest in the benefits offered by Uber-izing the supply chain. SCM World found that between 2014 and 2017 the percentage of supply chain professionals who view the sharing economy as disruptive and important for their industry has grown from 8% to 36%. And 52% of logistics and distribution company respondents call the sharing economy important to their strategies–the highest of any industry group.

The Uber-ization of the supply chain will run on cloud services

From matching volatile and momentary demand for assets and labor with supply to using manufacturing equipment sensors that assure product quality in Uber-ized manufacturing or with blockchain capabilities that guarantee provenance in sources, SCM World suggests that the possibilities for the logistics industry are limitless.

 

Workflow automation

 

Accenture claims that the benefits are too great to ignore. From competitive real-time pricing, increased market transparency through cloud-based applications to the exceptional convenience enabled by rapidly emerging technology that links demand and supply–uberization is the new era of logistics. Results from client pilot projects surveyed by Accenture estimate that Uber-like platforms can reduce rates as much as 10 to 20% and empty miles up to 15%. According to the World Economic Forum 50% of trucks travel empty on their return journey after making a delivery.

The WEF also found that shared transport through vehicle-sharing platforms where logistics companies can share their information on assets, routes and fill rates could save the industry $30 billion in operating costs and help in reducing emissions by 680 million metric tons—while also earning $20 billion in operating profits.

Uber-ization is the shared economy

Shared warehousing among different companies allows firms to benefit from cost synergies and flexibility. It also reduces the risk of having a large fixed cost base–a strategy industry leaders are taking note of. Both Nestle and PepsiCo share warehouse capabilities through an arrangement in which they share the storage, packing operations and distribution of fresh and chilled food products destined for their retail customers in Belgium and Luxembourg.

WEF estimates that companies pursuing these types of shared warehousing agreements could save close to $500 billion in operating costs annually and reduce their logistics costs alone by as much as 12-15%.

 

Cloud services will power some of the big changes in the supply chain industry.

 

The Uber-future is crowdsourcing

As consumers become more used to digital services, including e-commerce or apps such as Uber, they expect to receive the same quality and flexibility of services in other industries. Crowdsourcing in the taxi industry by Uber opened the door to other industries. Consumers know that crowdsourcing offers better rates, convenience and real-time tracking—increased transparency is also high on the list with regard to logistics and shipping organizations.

According to the WEF, this could lead to savings of approximately $800 billion for customers if adopted in the trucking industry. Crowdsourced trucking could also have a benefit of $180 billion for society in the form of reduced emissions and congestion. This is a potential game changer for the industry.

Companies that fail to adopt these strategies risk losing out to competition, including new entrants to the market. WEF suggest that crowdsourcing is going to make the trucking industry more competitive. And major trucking companies could be at a risk of losing $310 billion of operating profits to players using crowdsourcing platforms.

Looking at the entire logistics industry, WEF analysis indicates that there is $1.5 trillion of value at stake for companies, and a further $2.4 trillion worth of societal benefit as a result of digital transformation up until 2025.