Hello, Dustin. Thank you very much for inviting me to talk a bit about logistics as your new storefront. What I mean with logistics as your new storefront, it’s easiest to explain if I give you some examples. The first and obvious thing here is the online economy and the growth of the same, the Amazons of the world.
As a matter of fact, if you think about it, a lot of people have their main contact as consumers with their suppliers or vendors through what is sent to them in the mail. That means that, for many companies, the actual delivery of a product is the only physical contact that there is between the company and the customer. This is perhaps more clear if you look into the business-to-business market, where more and more companies are buying a solution rather than a physical product per se.
A very typical example here is that we are working with a manufacturer of fighter jets, and a manufacturer of fighter jets typically wants to sell a hundred fighter jets or so to a government in some country. What’s happening is that the governments are buying airborne hours instead of airplanes or spare parts or something like that, and then it’s a very different ballgame, and it’s a ballgame where logistics has the skills that make all the difference.
Another typical example is, we work with a company that supplies machinery and supplies for dialysis. What we found was that there were a lot of complaints around their deliveries. The reason why that happened was that the customers didn’t do their part of it and order when they should’ve ordered and respected the quantities and the delivery times. The reason for this is that the persons who were doing this, they were physicians or nurses and those categories, they’re busy saving lives; they don’t want to spend time managing inventories of the dialysis water. You could see that as a problem, or you can use that as your storefront and sell the solution of having all the supplies there all the time and you can charge for it.
Another example is the aftermarket, where you used to sell spare parts, and what you do now is keep whatever car or machine, whatever it is, to keep it running. Then you’re selling the availability and service. That, my friend, is raw and beautiful logistics.
What to do in this new, exciting world of logistics as the game changer?
Well, the first thing is to take control. Here, I’m talking about you have the question that many of our clients are asking, which is: Should we outsource our logistics to 3PL or do it in-house? In this case, the answer is obviously a combination of them both.
For instance, there is a huge difference between transportation and delivery. Transportation is much better done by the carriers of the world, whereas you might want to ask yourself the delivery, the actual vendor-managed inventory or white-glove services. That might be something you want to do yourself, whereas the transportation between point A and point B, that could very well be outsourced.
Another thing is material handling. The forklift truck that is putting the pallet on the racking and taking it down and that kind of stuff. Possibly done, in many cases, better by 3PL but when it comes to value-added services, then you want to be in charge of the quality, you want to be the one who is talking to the customer, because that makes a difference. You want to be in charge of the inventory management because the availability is the key in the new world here.
One aspect of this is the rise of white-glove services. What I’m thinking about here is that you make the delivery to logistics a service. This could be that you’re delivering the product and you’re installing. It could be that you did a Vendor Managed Inventory, which is a service; it may be—and it so happens to be in most cases—that you benefit from delivery of services and you get efficient with managed inventory, but it is a service. And while you’re doing a delivery of some supplies to a machine, perform service to the machine to up the availability.
And a huge thing here is to realize that all of those things are part of your product or they might be products in themselves. Instead of seeing this and handling this as an increase in cost, you should embrace the productification and charge for it. You package the services and you charge for it. If you charge for it, then you have a customer who is paying his part because he puts a value on it, and you get the resources you need to make a good job because the company’s making money out of it.
The last thing here, what to do in a storefront, what you can charge for, and those are achievements within the logistics that are very important. This could be within the sustainability area, the environmental area, where, if you’re good at your logistics, your achievements of reducing carbon dioxide emissions would far exceed, in most companies, what you could achieve with other measures. This is something that you should market; this is something you should talk about.
To summarize it, the logistics is the new storefront, and this makes the logistics so much more important and so much more fun. Enjoy yourself out there. Thank you, bye-bye.
About Hakan Andersson
CEO Establish Inc