The Uberization of Distribution
That question is generating a great deal of discussion among logistics and distribution executives. Here are some of my thoughts mixed with theirs..
Transporting goods long distances can be done far more cost efficiently than the delivery of the last few miles when goods arrive in congested metropolitan areas. Last mile delivery has taken on added urgency as traditional retailers have embraced omni-channel capabilities as a way to compete with ecommerce giants like Amazon. Omni-channel fulfillment, which spans a variety of delivery flow paths – store to home, delivery from warehouse, etc. – is all about last mile.
Uber has definitely created buzz. The company has grown incredibly quickly and has a very high valuation. Founded in 2009, it is reported that the company may now be worth $50 billion.
Uber’s secret? In is easy to use, often cheaper than taxis, and is generally a more pleasant experience than a taxi ride. If you are live in a metro area in the U.S., it may be hard to believe that there are people that don’t know about Uber. But Uber has not fully penetrated smaller towns in the U.S., and while Uber is a global company, it is not as widely available in other regions of the world as it is in North America.
So for non-Uber users a quick tutorial is in order. Uber is the tech company that developed an easy to use app that can be downloaded to smartphones. Using this app a person can order a ride. Uber is designed to leverage “the sharing economy.” In logistics we call this a “non-asset based model.” Both of these terms mean that Uber does not own any vehicles. Rather Uber drivers use their own vehicles to taxi passengers to their destination.
Carriers who own logistics assets and make last mile deliveries, like FedEx and UPS, are not competing based upon an Uber style business model. Nor is Amazon, who steeply subsidizes their deliveries, but still makes money based upon retail sales and other nonlogistics business lines.
Dick Metzler the Chief Marketing Officer at uShip, a sharing economy-based company that makes deliveries of vehicles, furniture and other bulky goods to consumers, is emphatic that the Uber model will not work for “on demand” parcel or food delivered in 1-2 hours.
“More volume just makes it worse.” Dick’s work history includes time at FedEx Freight, DHL Express and APL Logistics , so Mr. Metzler has a strong understanding of freight industry economics. “What works is route density; short miles between stops. One to two hour deliveries destroys the ability of a carrier to consolidate a route. There is lots of dead venture capital dollars chasing the wrong stuff. If you back off to one day deliveries, there is at least some prospect at getting to delivery density. But consumers don’t want one day. And they want free deliveries.”
In contrast, Dave Mount, a partner in Kleiner Perkins’ Green Growth Fund, believes there could be an Uber type play in last mile. Kleiner Perkins, incidentally, is an investor at UShip and that investment is “doing well.” According to Mr. Mount, “you would need participation of existing local fleets to create the necessary density. If a plumber or service technician is already going to a certain neighborhood – why not pick up omni-channel order for delivery” and make some extra money.
Mr. Metzler adds, “venture capital dollars are shielding (consumers) from the real costs of delivery. The chickens will come home to roost.”
Here is where I add my two cents.
the first piece is why don't we concentrate on the ease of use for Uber?
It's so much easier then calling a cab, and they give real time feedback on the driver as well as personalize the interaction.
These are all things any distribution company can do. From simple stuff like including notification when items ship, to customized billing and invoice forms.
To including a one click option for the most frequently ordered items by customer on your web app.
These are all ways to "Uber" up your current business.
Want to leverage the delivery model?
Here are some innovative views on the supply chain we discussed a few months back http://blog.tshinc.com/2015/10/smaller-faster-warehouses.html or another unique delivery model that may also get you to the Uber level is the warehouse on wheels concept. http://blog.tshinc.com/2015/10/same-day-delivery-with-warehouse-on.html
So the concept for today is not to be exactly like Uber but rather look at what they do that works and builds market share. Then take those ideas and incorporate into your business model and make it work for you.
For more information on TSH or MDS call The Systems House, Inc. at 1-800- MDS-5556. Or send a message to sales@tshinc.com
