The Logistics Industry is Ripe For Disruption

The Logistics Industry is Ripe For Disruption

PHOTO: WASHINGTON POST

E-commerce is transforming retail which in turn will disrupt a large sector of the logistics industry. Unfortunately that realization seems to be very slow in getting through to us. I’ve heard said that the logistics industry is opaque, extremely slow to embrace change and is ripe for disruption. Well my friends, to be honest I haven’t seen any reason to think otherwise.

Package Delivery is Immediately Affected

Consumers purchasing habits are changing quickly and next day delivery is now considered slow. There’s a long list of technology startups  from outside our industry lining up to get a piece of this $700 billion sector. And it’s not only startups. Our friends Amazon are building their own logistics infrastructure fueled by the need to get the job done, (UPS, FedEx, and USPS just cannot keep up with Amazon’s growth), and it represents a huge profit opportunity, (more on that below).

The Writing is on the Wall

One of the very few people in logistics that seems to know the writing is on the wall is XPO CEO Bradley Jacobs:

XPO Logistics Inc., which brokers freight as part of its portfolio of services, said it is investing millions of dollars in technology. “Many aspects of transportation brokerage will ultimately be disrupted by technology, but we are likely to be the disrupter rather than the disrupted,” said XPO CEO Bradley Jacobs.

Amazon Logistics Inc.

I discussed in my last post that Amazon are building their own logistics infrastructure. Their end goal, apart from having total control of their own logistics needs, will be to turn their logistics division into a profit center. Yes, they will be competing for delivery business, competing against you!

They have the financial resources, technology, their own fleet of trucks and planes are on the horizon, their own freight forwarding business, and of course don’t forget their drones. They are particularly well placed to carve out an extremely large market share of the e-commerce parcel delivery business.

Turning a Problem Into a Profit Opportunity

For those not familiar with the Amazon business model or the technology sector in general you might ask the question

“Why would Amazon offer their delivery services to a competitive e-commerce retailer?”

The answer is quite simple. Because they will make a whole bunch of money doing it!

They have already proven this with their Amazon Web Services (AWS) division which offers scalable cloud computing services from home consumer up to enterprise. This is their most profitable division which in fact is financing their expansion into the logistics sector. Comcast, Netflix, Pinterest, Expedia and Adobe Systems number among AWS customers. 

AWS first started as a platform to meet Amazon’s own operational needs and it is exactly the same principle that fuels Amazon’s logistics division. They need to rapidly scale up volume and guarantee on-time delivery to their customers. Something they are unable to do when using third-party parcel carriers.

Once they’ve worked the kinks out of the system the logical next step is to sell their freight services to the open market and build a new profit center.

Disrupt or Be Disrupted!

If you operate in the parcel delivery space, or thinking about it, take a leaf out of Bradley Jacobs book and invest in technology. Become a disrupter and not a disrupted casualty like EZ Worldwide Express. It’s a fate that awaits all of us unless we take our heads out of the sand, read the writing on the wall, and embrace change.

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