Get It Your Way
How improved logistics and efficient supply chains are delivering the goods—faster than ever.
The days of heading to the store to pick up a few things may be coming to an end. Whether shopping for groceries, cleaning supplies, or lightbulbs, super-efficient delivery options mean that you can have all that and more without putting down your smartphone.
Until a few years ago, these kinds of deliveries simply weren’t a viable economic business model—the cost of maintaining supplies in warehouses and paying drivers to deliver goods couldn’t match consumer demand for competitive prices.
The tech boom’s on-demand delivery services weren’t just some of the most colossal failures of the early 2000s, The New York Times pointed out: “They also became a sort of grim joke, symbolizing the excess that portended the bust.” Now, however, we are entering a new on-demand economy, where the Internet of Things is connecting consumers to goods, services, and delivery companies via smartphones and smart software.
Today we are all just a few taps away from getting booze, dry-cleaned clothes, and even haircuts at home. Results from a National Technology Readiness Survey of adults conducted in 2015 actually projected that the on-demand economy will attract more than 22.4 million consumers annually, as well as $57.6 billion in spending, Harvard Business Review reported. While the survey showed that millennials made up almost half the consumer base for the on-demand economy, it also revealed that 22% of purchasers were 55 or older and 46% had an annual household income under $50,000.
One key to this shift seems to be in the utilization of modern middlemen, made possible by the Internet of Things. Data collection allows for new software that connects consumers with exactly what they want, minimizes delivery times, and targets the customers most likely to use the apps, which, in turn, helps the on-demand economy grow. Delivery-oriented companies don’t necessarily need to own their warehouses or trucks; instead they’re able to rely on contract drivers, personalized client information, and internet connections. Mike Jaconi, co-founder and CEO of the mobile deep-linking service Button, noted in Business Insider, “The ground transportation, grocery, and restaurant industries are prime examples of hypergrowth categories in the on-demand world—growth that is in large part a result of the application of new technology on top of existing infrastructure.” He called this new change in spending the fastest and most significant since the advent of the internet.
In-house delivery workers are being replaced by free agents who, connected by software, are available to find work that suits their schedules. When Uber rolled out UberEats, its food-delivery component, in 2016, the ride-sharing company jumped headfirst into this app-based on-demand revolution. Today, consumers aren’t just choosing between salad or sushi for lunch; they’re choosing who will bring it. They’re using apps such as Postmates, Caviar, DoorDash, and Grubhub, which notably acquired Yelp’s Eat24 food-delivery arm for $288 million. Players such as meal kit–service companies Blue Apron and HelloFresh, alcohol-delivery startup Saucey, and speedy local grocery–delivery company Instacart are attracting attention and investment in the on-demand economy. For house repairs and furniture assembly, Handy Delivery and TaskRabbit bring workers right to your door. And if you need to send a gift to a friend but don’t have the right-sized box, packing materials, or time to stand in line at the post office, the New York–based startup Wynd will pick it up, pack it, and send it on its way for a small fee. All of these services make it easier than ever to get almost anything you need quickly without leaving home.
If there is one company that has come to epitomize the power and influence of the new delivery economy, it’s the online juggernaut Amazon.
Delivery times and logistics costs have been enormous challenges for the company: For 2016, Amazon posted a loss of nearly $7.2 billion on shipping, an all-time high. At the same time, Amazon launched Amazon Key, a service that makes it easier for delivery drivers to leave a package inside a front door, once the consumer installs a special lock and camera. In a sign of things to come, the company also made waves with its announcement of Prime Air, a program that will use delivery drones to drop off small packages within 30 minutes. The company has filed a patent for hivelike multilevel fulfillment towers, too. While Prime Air is still in development, Amazon’s $13.7 billion purchase of Whole Foods could be an important component of these drone delivery ambitions in just a few years’ time. Amazon’s foresight may be an indication of delivery methods that other companies might explore soon in order to shorten delivery times, whether that’s through third-party drivers, delivery drones, or even self-driving cars.
While services such as Uber, Lyft, Seamless, and other on-demand giants have already established the networks, applications, and software needed to redefine the delivery process in their markets, many companies are still faced with the challenge of how to get their goods to consumers faster and more efficiently than ever.
For Tom Linton, chief procurement and supply chain officer at Flex, no matter what you’re doing from a supply-chain management standpoint, speed wins. Linton takes this approach when helping companies scale their operations to fit current delivery needs. Receiving and utilizing real-time information is the key to working smarter and faster. “Everything has to be knit together,” he says. “What we really need to do is link all the operating systems of the company so that they’re providing information in real time and not giving us yesterday’s information. A lot of traditional enterprise software in IT systems is based on batch-based systems. In other words, you get your information, but you’re getting it from some repository, which is telling you what happened yesterday. When you operate in real time, you’re actually getting information as it’s happening, just like the speedometer on your car [tells you how fast you’re driving]. This allows you to deliver and solve problems faster. That’s how a delivery economy really works.”
Linton, coauthor of the 2017 published book, The LIVING Supply Chain: The Evolving Imperative of Operating in Real Time, points out that with mobility—the movement of people and things—globalization can work against companies. “You’ve got to have a footprint that is more proximate to the point of consumption,” he says. For companies to successfully adapt to consumers’ higher delivery expectations, business leaders need to understand how products move, such as the time it takes for a customized
item to be manufactured overseas and shipped, and also how people want to move, from the use of mass-transit networks to self-driving cars. Linton likens business models such as Amazon’s to a flywheel spinning faster and faster, and the customer is at both the beginning and the end of the process, dictating the speed and urgency at which they expect their orders to arrive and pressuring companies to match those demands or find another option that can.
With that in mind, Linton explains, supply chain design should have elegant, repeatable patterns. To operate efficiently, companies must figure out the right pattern. Airlines try to achieve streamlined service by moving aircraft through their hub-and spoke systems. FedEx and UPS also have patterns for shipping items from distribution centers across the world until they reach their destinations, which is why you might see that a package stopped in a location that seems out of the way before it arrived at your door. “It’s about creating the right patterns, focusing those patterns in proximate locations to the point of consumption, and then starting with that simple, basic truth,” Linton says. “Generally, those who do that really well do really well. Those who don’t think about that tend to stumble.”
Of course, the rapid growth of this new on-demand economy raises significant concerns. The focus on the utility of hyperlocal delivery could mean that traditional services such as FedEx, UPS, and the United States Postal Service may have to drastically alter their current operations. Some members of the business community worry that the on-demand-delivery bubble could burst. Not only is the gig-oriented economy eroding workers’ brand and employer loyalties, but the landscape is already littered with examples of failed startups, such as the premade food-delivery services SpoonRocket and Maple. Tech entrepreneur Sunil Rajaraman, writing in Quartz this year, highlighted the crucial role that VC funding plays in fueling many of these startups. “VC money does not make your company invincible, and you can only finance growth through venture money for so long,” he wrote.
While delivery drones and instant product and service delivery haven’t been fully realized yet, the current ecosystem has come a long way since the internet bubble burst in the early 2000s. As consumers turn to new startups for personal deliveries and gig-economy workers look to supplement their incomes, companies will likely continue to get smarter and faster at bringing you the goods you need right when you need them. The future of the on-demand economy is coming—in 30 minutes or less.