China sourcing: The Future of Logistics and Technology – Part Two
June 6, 2018
In Part One of this series, we talked about the logistics industryand how it was antiquated and expensive. In this blog, we will discuss the changes and improvements that will shape the industry’s upward progression.
Last week, wepointed outthat freight forwarders and brokersare making it difficult to drive down the cost of logistics because they have a vested interest in keeping costs high. Cost comparison would help create competition and reduce costs, butshipping companies’ quotes are not readily available—so there areno easy comparison like you might have on Expedia and Kayak for air travel. Some firms take two or three days to provide a quote, and then are unable to say when the goods will get from China to the US. Fixing this is not easy. One solution would be regulation, but that too is difficult:too many countries need to agree.
So, what does the future hold? How can change happen?Here are a number of steps being taken which will have a positive, and progress-inducingimpact on the logistics industry as a whole.
- Tracking Improvement
Inmarsat, a UK satellite telecommunications company, is now providing satellite services that offers tracking for ships and planes. Tracking for each singlepackage the containers handle may also becomean option in the near future. This would allow importers to react to data more quickly, resolving issues causing delays and gaining greater flexibility in the management of shipping at granular level.
- App Development
Apps are also being created to work much like Uber, pairing importers with free cargo space in order to book their containers at short notice, rather than wasting un-booked space and delaying shipments.
- Leading companies disrupting logistics
Companies like Amazon, who are users of logistics and have an interest in reducing costs, are taking advantage of technologyand stepping into the vacuum created by the lack of efficiency. In 2017, they grew their logistics department from delivery-to-the-consumer to door-to-door-logistics, from the supplier to the consumer. Amazon’s logistics may be serving its own customer base for now, however it’s possible that they may grow to service other e-commerce networks as well.
Alibaba, although a much different platform from Amazon, owns the largest logistics company in the world by volume (in China). They also announced the growth of their own logistics services. Two things separate platforms like Amazon and Alibaba from the smaller competitors that have tried to barge into the industry. First, these e-commerce platforms know more about their customers than the logistics companies like FedEx or UPS do. And second, their size gives them a competitive edge.
- Digital Updates
All this causesother larger players in the logistics industry like Maersk tohave to roll out sophisticated digital updates in order to stay competitive. In turn, this could influence smaller competitors to do the same. But they have a long way to go before they are considered as digital-friendly and flexible as the Amazon delivery truck driving around your neighborhood.
- Research and Analytics
Betterdata acquisition and information technology are important factors but of courseanalytics is needed. Thishelp prevent delays, providing a forecast about market trends and allowing such things asorders to beactually be shipped before they are needed. An approach already being taken by Amazon and Alibaba.
The logistics business does not want to change, but time waits for no oneand things will be very different in the future. Lower costs and greater efficienciesare expected and this willincrease trade (and sourcing)substantially.
What changes are you looking forward to implementing into your logistics in the future? How would that change benefit your currently sourcing program? Share your thoughts with us in the comments below!
By Jocelyn Trigueros