Logistic Wars: When A 48-Hour Difference Is All That Matters
It took them five years, but Amazon is finally ready to compete and undercut traditional delivering services like UPS or FedEx.
The company plans to test the new service, called Shipping With Amazon (SWA or a reverse AWS!), in Los Angeles in coming weeks. The move isn't surprising at all. Traditional delivering services have been failing to meet consumer expectation.
"As more shoppers bought products online, Amazon executives concluded that the rate of parcel growth was too large for existing carriers to handle."Amazon to Launch Delivery Service That Would Vie With FedEx, UPS
Amazon is doing what they do best, apply technology to infrastructure problems. Once they've mastered their operations, they'll open it for others to use. Delivery As A Service.
My interest isn't much on the service per se but the reiteration of the same maxim. Businesses that don't place technology and more specifically, automation, at the heart of their operations, will be ousted by technology incumbents.
Owning the logistic layer is becoming increasingly strategic in the battle for world domination. Amazon is but one example, but other industries would benefit from it too.
For example, Inditex, the retail behemoth, owns his logistic system and can place orders in less than 48 hours. Apple is another example of critical logistic operations.
As the acceptable threshold of moving goods in less than 48 hours becomes the norm, many of these private logistic operations will become outdated.
Companies built these systems in an era where the expected delivery window wasn't that critical. Not only speed wasn't essential, but expectations were low too. If the system collapsed, no worries, we will outsource the delivery to a third party.
This situation is unacceptable today. Not only the expected delivery window is shorter, but third-party companies can't cope with their workload either.
This is why Amazon's move might have a much more profound implication. It's not just about Amazon's reliance on UPS or FedEx. It's the fact that Amazon might become the underlying logistic operator for many industries.
Still, Amazon can't best a tightly implemented logistic operation. Now is the time to invest heavily in upgrading your business's logistic structure. The goal must be seamless scaling capabilities and decreasing delivery times.
There is a need for better automation, tracking, and autonomous technology. On top of this, predictive software, aided by Deep Learning, will become mission critical.
There is also another space Amazon isn't aiming for, that other companies could exploit and defend. Last mile delivery.
It still surprises me the lack of interest and focus most companies pay to the last mile delivery. A user doesn't care how you transport something, as long as it gets to its destination fast enough. Nonetheless, it doesn't mean they don't care about the last mile integration.
Companies need to focus on that part of the logistic chain. They need to create real-time last-mile tracking systems. Predictive models that can optimize for the bests routes for local deliveries. Automatic sorting, scheduling, and management of unsuccessful deliveries.
Startups are dabbling in this space; I know at least a couple just in Spain. However, not enough companies are taking this issue seriously. Product quality isn't the only metric anymore. Product-driven markets are long gone. The current status quo are customer driven markets. And customers care about last mile delivery. Customers care about the delivery experience. Customers care about delivering companies that deal correctly with 'unsuccessful deliveries'.
If you make me chose between a food delivery service that keeps my food warm or a cheaper one that brings it cold, I'm going for the warm one. Telling a customer they weren't home when they were, won't be tolerated much longer.
So I hope Amazon's move serves as a wakeup call for all those businesses that are in need of robust logistic operations. Here are some key points companies need to think about.
- Invest in upgrading your systems now or face ostracism.
- Upgrading won't be enough though. Current fast-moving markets require serious innovation of the logistic layer.
- Design user-friendly customer interfaces so that the end user can track last-mile delivery of your goods seamlessly.
- Build last-mile predictive models to allow for better delivery routes and resource management.
- Start investing in the use of autonomous vehicles. Both in the warehouses and for the last mile deliveries. Relying on humans for scale and speed won't cut it much longer.