I recently visited the world’s biggest logistics and transportation fair, transport logistic in Munich. Despite a constant discussion about digitisation and how important it is for the industry, I was surprised, shocked and puzzled at how few companies are already in the execution phase.
It’s not only dramatic that logistics managers are still at the stage of discussing the potential of digitisation. Even more astonishing is that high-level executives don’t see the need for radical change, despite the striking changes in social behaviours, the market and the logistics industry in particular. On top of that, even consulting companies seem not to understand these changes and miss the true value of digitisation, instead advising their clients not on their needs but on their wishes.
I understand that cost reduction is a hot topic and, of course, it makes sense. However, as the market around you is changing rapidly and new players are entering the market to gain market share, it makes more sense to focus on a growth strategy at these volatile times.
In addition, cost reduction through digitisation isn’t industry 4.0 or logistics 4.0, nor is it apps or hardware technologies. You must interconnect and digitise your processes in order to be prepared for the changes you will face.
Reducing costs, introducing apps or hardware technologies means that you take a bad process and you make a bad digital process out of it. It might be a little bit cheaper, but it won’t make you more competitive or flexible.
Business models are changing
I don’t understand why retailers, e-commerce platforms, suppliers or any other company that is shipping goods are considering logistics only as a major cost factor.
Business models are changing. Consumers, as well as manufacturers, are becoming highly demanding. It’s no longer the sender who chooses the service provider. It’s the consumer who expects outstanding and flexible services. For many years, products were pushed towards consumers as consumers didn’t receive as many packages per day and manufactures were satisfied with just-in-time deliveries. Today, both are getting more demanding as the volume of deliveries and automation of production are drastically increasing.
Customer satisfaction, however, is decreasing as processes are no longer seamless. Furthermore, globalisation enables consumers and manufactures to purchase products anywhere in the world. They have access to a variety of products and suppliers.
Logistics is becoming a commodity, while customer satisfaction is becoming the new service in the supply chain. Nowadays, the consumer defines where and how they want to have the delivery and what they are willing to pay for such a service.
Therefore, while the sender, who still transfers the money, was for many years the client of logistics companies, today’s service providers need to become more focused on end-users. And just to bring something home, they are, and always were, indirectly paying the bills.
It is important to understand the current changes to the market, or the next few years will be impossible to survive. The current changes will also define the need for a sustainable digitisation strategy. Be aware that successful companies understand the changing market and can alter the traditional strategy to take in new opportunities. They also understand that new start-ups are aggressively entering the market to gain massive shares in the market.
They aim to satisfy the consumer, or end-user, which leads to a positive customer experience and binds them to their service. They achieve this by providing flexibility, reliability, convenience and happiness.
Don’t just provide track & trace and ETAs — use them
In a few years, logistics processes will be fully automated. Service providers that have interconnected and digitised all of their processes will offer efficient, sustainable and profitable supply chain solutions. They will deliver the satisfaction that clients are already expecting today.
If you understand that you must focus on the end-user, you can revise your business model accordingly and begin the process of digitisation.
To do this you really need to understand your new target group and identify their real needs. Because what they want isn’t always what they need.
Most of our clients are asking for ETAs and track & trace — despite the fact that we mainly developed these features to automate processes along value chains. They are requesting these features from us because their clients are expecting them. This means that your processes and supply chain are simply not suitable for your clients’ needs. Instead of just providing ETAs to your clients, you should instead start using them to satisfy your customers.
If you have an appointment with your boss or a friend, you also make sure that you’re at the agreed spot at the agreed time. If you are delayed it is not usually a big deal. If this pattern continues, however, the person you are meeting won’t ask you to send them an ETA, they simply want you to be on time. You would therefore usually start by making sure that you leave earlier or rearrange other meetings to meet their expectations. This adds flexibility to your service as a friend or employee. If you don’t change, your friends or boss will pick a new person to meet with.
This makes sense, doesn’t it? This is what users are expecting today. They expect deliveries at a specific time to a specific spot. An ETA or offering a track & trace service doesn’t satisfy them in the end. Only if you are able to offer a flexible and reliable service that makes sure end-users are getting their products as expected will you be be successful in the future. Logistics providers must focus on user experience.
You need to use ETAs to react to incidents proactively. You must achieve full transparency, not to check on the whereabouts of products, but to enable them to find the most efficient way through complex logistics networks.
Logistics is the new marketing
Although many people are discussing a general lack of courage for digitisation, I understand the current situation differently. Digitisation doesn’t require courage if you have defined and understood your target group.
You should focus your attention on the end-user or consumer. The way logistics is today, the only direct contact to the end-user and the only real experience comes via the logistics process.
E-commerce platforms currently have more or less the same technical standard, offer the same pricing and invest equally in marketing. Only their business models perhaps vary slightly. One thing they all have in common is that they must deliver products to consumers by using logistics service providers. Consumers therefore expect the best possible service and quickly switch platforms if they can get a better experience elsewhere. E-commerce platforms are therefore highly dependent on seamless logistics processes.
This isn’t just true for consumer goods, but also for any production process. Manufacturers, especially in the automobile industry, are depending on a proper logistics chain. Production processes are getting more and more automated, which requires that single parts be delivered not only just in time, but in perfect sequence. All processes are perfectly timed and highly optimised. If one part is missing or doesn’t arrive in time, an entire production cycle will be delayed. This requires a highly efficient and optimised supply chain. Only then can production cycles work smoothly and consumers experience the service they are looking for.
And when you think about it, this puts traditional logistics companies in a promising position. Logistics is complex, and traditional companies have solid knowledge and experience. If they can use this knowledge to provide flexibility and reliability, they will survive and win the logistics battle.
Start the change today
Therefore, in order not to lose competitive advantage and your current position in the market, you need to rethink your approach to the market today. Remember, clients don’t want to know how late you’re going to be. They just expect their products to arrive on time. Understand who you have to make happy, and focus on this target. Make sure that you undertake the strongest effort to ensure they receive their products in the order, at the location, and at the time they are expecting it.
Make sure that you don’t have to expensively buy every client through advertising. Use your marketing budget to make your clients as happy as they ever had been. Keep in mind that the only point of contact to your offer is the person that is delivering your products.
You need to keep your promise all the time. This means that you need to invest in solutions that allow you to get full control over processes and that make your supply chain highly efficient and flexible.
Digitisation of logistics and transportation will have the biggest impact on our lives that we have all ever experienced. It will change the way we work, the way we move and the way products are going to be produced. Everything will change when logistics and transportation are fully automated.
Therefore, we at Evertracker developed a sophisticated IoT platform and focus heavily on machine learning algorithms to automate processes along the value chain. We provide ETAs as well as full transparency. We use predictive analytics to react on incidents, we make supply chains highly efficent and logstics flexible.