Get Your Supply Chain Up to E-Commerce Speed
It’s hard to go more than a day without reading about a new startup or outside party looking to “digitize” the supply chain or logistics process.
While some logistics companies such as freight forwarders are automated and use software packages based on EDI or newer cloud-based technologies, if the output of your technology is nothing more than a PDF that has to be emailed, then you’re not truly digitized. All this does is move your business from an analog fax machine to a digital one.
There are several reasons why your logistics business or process needs to be completely changed in order to compete in the age of e-commerce:
The back-and-forth of emails just to get or issue a shipping quote is onerous. Yes, email made things faster than phone calls or fax but rates can change daily (and sometimes hourly as is the case in major export markets like China). It’s simply impossible to keep up with the volume of rate and booking requests by email, pen, paper, and fax. But since the whole industry has “always done it this way,” outside parties are coming in to fix the problem and challenge the dominance of existing stakeholders.
Thanks to e-commerce and cross-border selling facilitated by online merchants and marketplaces, the volume of shipments is growing. Currently, logistics companies are the only ones with the capabilities and knowledge to process such transactions. However, they’re left to meet this growing demand with manual tools that are used by a growing army of workers, which leads to an unsustainable situation. Not only is your business not fast enough, it can’t process any more without staffing up, which in turn places a massive load on your internal infrastructure. While your logistics business needs volume to grow, the manual processes required are directly interfering with that growth.
In traditional logistics businesses like freight forwarding, variable costs are generally manageable, and their growth can directly correlate to a growth in sales. The problem is the fixed costs of acquiring new business and servicing that business. Manual processes drive up the fixed cost of kilogram, pound, or cubic meter of capacity sold, whereas digital processes drive down the fixed costs per unit sold. Just how bad is this problem? According to a recent report published by IBM and Maersk, an estimated 20 percent of cost of goods sold in international ocean freight shipping is attributed to processing documentation relating to a shipment. That’s an estimated $16 billion per year acting as a ball-and-chain on the growth of your logistics business or processes.
Supply chains have a unique problem when it comes to speed: No matter how automated your processes are internally, you’re only as fast as the next guy in the chain. That’s why the logistics industry needs to implement and adopt common platforms and standards, or else it will find itself in a state of obsolescence in the next few years as new entrants disrupt the entire flow of the world’s goods.