The Future of Logistics and Distribution: Is Technology the Sector’s new ‘Silver Bullet’?

Business models are changing. Whilst companies like Airbnb and Uber offer a platform or virtual marketplace that aims to make the best use of other people’s resources - whether that’s a car or living accommodation - logistics and distribution (L&D) providers are taking a very different approach. For them, it’s all about creating ecosystems by crowd sourcing ‘capacity’ to move goods.

Future of Logistics and Distribution

Does this mean that selling ‘space’ will be the next shared economy bubble?


The logistics, postal and distribution sectors are being driven by numerous market trends, including the rise of eCommerce, sustainability and the explosion of data through new technology. These are all creating new business models, partnerships and experiences across the L&D ecosystem. 

As a result, the strongest players are consolidating assets and integrating technology to drive down costs ready for the inevitable business model transformation. Historically, significant focus has been given to how much a product costs, with little attention being placed on the cost and agility of transportation. The fundamental challenge facing L&D organisations today is how to provide an efficient and cost-effective service, within capacity constraints, by using more innovative operations and technologies.

Market Growth

The retail sector is experiencing a growth rate of just 1-2%. In stark contrast the eCommerce sector is booming, running at 15% CAGR, according to Forrester. As a result, demand for integrated service providers, increased competition and customers requiring a global reach are all driving L&D organisations to consolidate their activities into hubs or shared user facilities with spokes that are much closer to population centres.  

Sustainability

As a major contributor to the carbon footprint, logistics and distribution providers must deliver efficient and sustainable services, reducing fuel costs whilst minimising environmental impact. This is a key element of each organisation’s strategy. Customers are increasingly focused on environmental impact which, combined with ever more stringent environmental regulations, is bringing sustainability to the fore. It is increasingly dictating both operational processes in terms of materials and waste, but also the transport routes taken to deliver goods. 

Technology

An L&D provider’s ability to implement technology to both improve efficiency and quality of service is mandatory if it is to meet the growing cost pressures in the sector. The integration of new technology provides the necessary data transparency to enable this to happen. Track and trace, 2D serialisation and the use of mobile devices are enabling organisations and their customers to interact with deliveries in real time. Many see the benefits of integrating systems with physical spaces. This can help to improve how physical assets are best used, with data being generated across the network. This data will drive additional efficiency and value for customers, end users and employees. Metrics such as customer experience, security and data quality are the new silver bullets for distribution and logistics providers.

Assets

Over time, infrastructure, technology, regulation and the skills to operate the modern logistics business are transforming and so must the assets if they are to accommodate the new demands from the sector. As balance sheets also provide the security to fund business operations, there are considerable risks in wholesale change without affecting current performance or value. Operators must therefore balance investment in existing facilities whilst generating new cash to build campus-style, multi-functional facilities in new key locations across UK and Europe.
 

The competitive landscape in L&D continues to evolve and presents further strategic challenges. The UK market, with the opportunities that a post Brexit economy will bring, has the potential to increase costs and competition, putting further pressure on prices. As a result, businesses have no choice but to differentiate on service if they are succeed in improving long term viability. 


To discuss these issues in more detail please contact Ed Gibbs or Nilesh Parmar

Edward Gibbs

Partner, Manufacturing & Technology Ask me a question