New logistics concepts can boost global trade and give smaller logistics businesses the chance to compete with established industry players.
The future belongs to those who are best prepared for it. It’s a truism that applies as much in logistics as in other sectors. Right now, a number of new logistics concepts point to how services will be commissioned and executed in years to come. This theme – logistics services – covers three that look set to have a lasting operational impact and will demand that providers overhaul their infrastructure if they are to continue competing across different market segments.
Logistics services is one of five themes that we believe will be central to the digitization of the logistics industry over the next decade. The other themes we examine are information services,delivery capabilities, circular economy and shared logistics capabilities.
Digitally enhanced cross-border platforms
The internationalization of businesses, especially small and medium enterprises (SMEs), depends on reliable, easy-to-use logistics systems with global reach. Digitally enhanced cross-border logistics can thus boost worldwide trade for the SME sector in particular.
Digitally enabled global shipping platforms not only connect individual sellers with millions of potential buyers. They display fully landed costs, offer customs and shipping documentation services, provide end-to-end international tracking and allow users to place pickup requests. In the past, only globally integrated companies could win a contract to deliver a global shipment, but open cross-border logistics platforms can now break down the end-to-end delivery process into steps (by geography or transport mode) and put these out for tender separately. This means independent, specialized SMEs can oversee the different steps and, together, offer an end-to-end service to compete with the big players.
Digitally advanced logistics companies can also cater better to emerging markets, where rising demand for their services could create new jobs. However, more trade could mean more harmful emissions and waste, particularly if transactions involve smaller, less environmentally advanced logistics providers.
Case study
LightInTheBox
LightInTheBox, the China-based e-tailer, launched its LanTingZhiTong platform in January 2015, with the aim of reducing shipping costs, cutting delivery times and enhancing customer satisfaction by connecting cross-border e-tailers with cross-border logistics service providers.¹ The platform includes a global logistics price comparison engine, route optimization tools, and integrated logistics tracking and big-data analytics.
It is estimated that global trade will increase by as much as 70% as a result of trade simplification and removal of trade barriers.² We assess digitally enhanced platforms to capture 20% of this increase in trade. This can provide SMEs access to a global marketplace with an estimated increase in profits of more than $600 billion. In addition to this, there is further value addition flowing through to platforms of approximately $120 billion in commissions. The increased trade will in turn drive additional value of $50 billion for logistics companies. However, from an environmental perspective, increased trade flows without subsequent changes to emissions are likely to have a negative impact of greater than 1 billion metric tons in total.
City logistics
The aim of this initiative is to reduce the number of vehicles in our cities through a focus on the optimization of logistics in urban areas while considering traffic conditions and fuel consumption. Urban logistics services can usually be divided between consumer-related distribution (such as retail consignments or parcel deliveries) and producer-related distribution (for instance, waste collection and disposal or industrial haulage).
City logistics has a major impact on the infrastructure requirements of a metropolis, with intelligent traffic control systems, noise insulation, air pollution monitoring and underground routes all contributing to improvements in the well-being of inhabitants.
Carbon dioxide emissions are expected to decrease as freight consolidation efforts across all logistics providers reduce vehicle miles driven in cities.³ Better coordinated urban operations will reduce vehicle numbers, benefitting all city users. And those firms with the best city logistics concepts should gain an edge that helps them increase market share.
Case study
Oasis
Oasis is a women’s clothing retailer based in the United Kingdom that ships to 24 countries. To cope with increasing demand, it uses a split-order system that minimizes the impact of stock fluctuations on customers.⁴ Orders are usually fulfilled from a distribution center but, if an item is out of stock there, Oasis has a Seek and Send service that can source the product from one of its stores and send it directly to the customer. If necessary, orders can be split, with some items sent from the distribution center and others from stores. Customers are offered standard, next-day and nominated delivery. Within those time frames, they can choose hourly slots throughout the week or a 90-minute delivery service in selected cities throughout the United Kingdom.
Same-day delivery
This is currently the fastest and most flexible solution for urgent and time-critical shipments. Customers of an omni-channel retailer, such as a bricks-and-mortar grocery store with an online home delivery service, tend to want their goods as soon as possible – especially if they are perishables.
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Case study
Billa
Billa, the Austrian supermarket chain owned by Rewe, has launched a same-day delivery program for customers in Vienna and Linz.⁶ Working with Berlin-based startup Lockbox, Billa delivers perishable and retail goods ordered online in its partner’s secure boxes, which can be attached to front doors if the recipient is not at home. Deliveries are made by Billa, using its local stores as extended warehouses.
Taking into account same-day deliveries such as Amazon Prime Now or Google Express shopping, logistics companies stand to earn an additional $50 billion of operating profits, including $30 billion in premiums for same-day deliveries. However, same-day deliveries could have a negative impact on the environment due to increases in air freight instead of road freight, which could lead to an increase of approximately 30 million metric tons in emissions.
Footnotes:
1. http://www.prnewswire.com/news-releases/lightinthebox-launches-global-open-cross-border-logistics-platform-lantingzhitong-300025372.html
2. World Economic Forum, “Enabling Trade Valuing Growth Opportunities” http://www3.weforum.org/docs/WEF_SCT_EnablingTrade_Report_2013.pdf
3. http://www.sciencedirect.com/science/article/pii/S038611121100015X
4. Barclays, “The Last Mile: Exploring the online purchasing and delivery journey”, http://www.barclays.com/content/dam/barclayspublic/docs/BarclaysNews/2014/September/the-last-mile-report.pdf.
5. BI Intelligence, https://intelligence.businessinsider.com/.
6.Retail Intelligence Lab, “Consumers Will Be Able to Receive Their Food Orders from Rewe Billa in Secure Lockboxes”, http://www.retailintelligencelab.com/blog/consumers-to-receive-groceries-from-rewe-billa-in-lockboxes.
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Logistics is one of six industries (along with automotive, consumer, electricity, healthcare and media) that have been the focus of the World Economic Forum’s Digital Transformation of Industries (DTI) 2016 project. An overview of the DTI program can be found here.
Our in-depth findings about the digital transformation of the logistics industry are available in a white paper, which can be downloaded here.
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