Forces like digital start-ups and entry of giant non-logistics players are triggering disruptions within the logistics industry. They are threatening existing business models, but at the same time opening new opportunities for revenue generation. To protect market share from these disruptors, there is a need to shape new business models and develop innovative offerings. While it is difficult to predict the right model and offerings, there are a set of questions, which when answered would lead in the right direction.

1. How to shape new models and offerings?
2. What are the new opportunities in logistics space?
3. What are the considerations for successful implementation of business models and offerings?

How to shape business models & offerings

To stay relevant and ahead in the game, it is imperative to be ready for disruptions by developing new models and offerings for the market. These factors should be considered to design, develop and deploy new business models and offerings:

• Business segmentation – The changing landscape due to digital empowerment of end customer and double-digit growth in e-Commerce (currently ~$400 billion¹) has created a level playing field for small and medium businesses (SMBs) by moving online. SMBs typically lack IT infrastructure and capabilities; logistic players can develop products and offerings that will help SMBs to focus on their core business and at the same time, take advantage of changing landscape and trends.
• Digital platforms – In freight forwarding industry, we notice that many incumbent processes and data are managed manually through papers, e-mails, fax etc. All processes are slow, error-prone and non-scalable. To overcome these challenges, large enterprises and SMBs are looking for logistics players with a strong digital DNA. Digital platform provided by logistics players can be a one-stop-shop for all interactions, right from inquiry to cash for logistics requirements.
• Delivery models – Innovations and developments like light manufacturing using 3D printing, shared economy, autonomous vehicles/equipment has given rise to new last mile delivery models. Last-mile delivery is 1/3^rd of the overall shipping cost and in many cases, only physical touchpoint with end customer. Logistics players can collaborate with vendors or manufacturer to reduce shipping cost and provide a unified experience to end customer.
• Advanced technology – Advent of new technologies like big data, AI, machine learning etc. unlock unprecedented opportunities for new offerings. Logistics players can act as business partner by using new technology tools or analytics capabilities to provide actionable insights that could improve customer’s business.

New opportunities in logistics space

Above factors have shaped new business models and offerings. While some models are driven digitally with the help of physical operations, others may have a dominant physical aspect augmented by digital transformation. Matrix given in Figure 1 shows a few of those opportunities along with physical and digital involvement.

Figure 1: Opportunities in logistics

SMB Commerce

A commerce platform, which is well integrated with supply chain execution system to handle order and logistics management, can be provided by logistics players for SMB to go online. Third Party Logistics (3PL) players can provide this as a platform to SMBs using their network for supply chain execution and collaborate with their parcel/transportation team for line haul and last mile delivery.

Virtual Address

Virtual address is a concept where logistics players across different geographies can collaborate using a common digital platform to enable online ordering from any location and smooth flow of goods by providing import/export clearance services and handling core logistics operations. Postal/parcel players can collaborate with postal/parcel providers in different geographies and global e-retailers to provide platform to citizens to increase their reach across globe to shop online.

3D Print

Logistics players providing aftermarket or spare parts logistics services can leverage their facility network’s front-staging locations, and parcel/postal companies can leverage their retail outlets to provide finished/semi-finished goods through 3D printing by means of contract manufacturing.

Voice-as-a-Service

Majority of households are/will be using smart speakers for transactions. SMBs want to provide conversational commerce to its customers without investing too much in technology to develop and maintain new services. 3PL players can integrate inventory management and provide this as-a-service to SMBs, so that they can provide voice as one more channel to its customers for booking an order.

Fast Quotes

Traditional freight forwarding players are losing the advantage to their competitors due to transparency, flexibility, speed and competitive prices bought in by the startups through the emergence of marketplace models for online booking of international shipments. Incumbents can develop online platform with capabilities of fast quotes, competitive pricing mechanism, guided selling etc. for selling and booking.

Key considerations for successful implementation of business models & offerings

While we work on the details of the process, operational and digital technology aspects of the above opportunities, it is also critical to consider some key factors:

Specialization – As global organizations are widespread, it is imperative to assess elements of specialized or industry or local logistics needs of customers as they may vary significantly. For instance, the hi-tech industry’s logistics need varies from that of the healthcare industry.

Simplification – New models and offerings need to simplify processes, reduce operational complexities and increase customer satisfaction. Logistics players providing intermodal capabilities or cross docking, need visibility across value chain, hence simplified integrated model will benefit every stakeholder in the value chain.

Collaboration – Business models can’t work in silos; hence it is imperative for logistics players to have right collaboration strategy for vendors and customers. Depending on the business model, adapt an asset heavy/light model to collaborate with vendors. Customers no longer look at transport solutions as a commodity but more as a collaborative relationship with logistics players. This opportunity can be used by logistics players to be a partner of choice for customers.

The future of logistics

Our research shows that the right business model positively impacts top-line and at the same time, helps in digitizing customer experience and operations. Looking ahead, there are two ways to create and tap into the potential of new business model. First, the logistics players need to understand the journey of their customers and then move up in the value chain of their business. Second, they need to leverage next gen technologies like artificial intelligence, machine learning, robotics, 3D printing etc. to provide customer experience and operational excellence. Design thinking and digital ways of working are the key essentials for shaping new business models and gaining competitive edge.

Reference

1 – https://www.digitalcommerce360.com/2017/10/30/how-smbs-are-finally-winning-at-e-commerce/

Ashok Bafana

Ashok is a Consulting Partner & Global Transportation Consulting Practice Head at Wipro. He is responsible for shaping transportation solution strategy, process consulting, package consulting and providing thought leadership in 3^rd Party Logistics, Parcel Logistics and Freight Forwarding areas. Ashok has 16+ years of experience and has managed consulting engagements, transformation programs and global implementations for leading logistics and retail players across geographies.

Sarthak Krishan

Sarthak is a  Senior Consumer Domain consultant & working as a Business Analyst at Wipro. As a supply chain SME, he is responsible for industry research, consulting, and shaping solutions and requirements. Sarthak has 6+ years of experience and has been part of digital transformation programs for leading postal, logistics and transportation players across geographies.