This next big technology trend has already started, and it's actually quite simple: more and more, transportation and logistics providers are integrating with each other and with manufacturers and retailers via common network backbones. Widespread integration and collaboration among transport and logistics companies? This in itself is pretty newsworthy, but what's even more interesting is what it enables - namely B2B transactions that deliver a seamless buying/fulfillment experience similar to what we've come to expect as consumers. Essentially, what I'm talking about are virtual orchestration highways for enterprise communities. The implications of virtual highways are massive and are already beginning to be felt.
The best example for how virtual highways work comes from the airline industry. Let's say you want to buy a plane ticket from the U.S. to Australia. You prefer to fly American Airlines because of your frequent flier miles, but American doesn't fly to Australia. You're out of luck, right? Of course not"”as anyone who flies knows, airlines have formed alliances among themselves in order to provide a far larger travel footprint than any single airline can. Thus, you can book a ticket to Sydney solely with American Airlines' website, but since it doesn't fly to Sydney one of its partners (in this case, Qantas) will carry you for part of the route. Seems simple, but actually such a seamless experience is only possible because of extensive work on the back end to integrate multiple airlines' booking, schedules, rates, and routes information"”all of which are subject to minute-by-minute changes. It's a pretty amazing arrangement when you think about it, and yet as consumers we take it for granted that buying a ticket halfway around the world with multiple carriers should be this easy.
Similarly, in the virtual highways I'm describing, enterprise customers are able to source products anywhere in the world and fulfill them to anywhere. Meanwhile, behind the scenes, suppliers and transportation providers use the virtual highway's underlying common network backbone to seamlessly work together to fulfill these orders.
Consider the value these highways create: For the first time, enterprise customers have at their disposal all the information that usually is scattered across multiple companies and often invisible, such as order info, customs info, the ASN, tracking info, and most crucially, the contents of containers, or to be more specific, the actual inventory being moved. Second, it also now becomes possible to aggregate products from multiple companies into common containers and shipments. For example, a retailer might bring all of its PCs and thumb drives on common containers across the virtual lanes, or two CPG companies might aggregate their supply onto common trucks to increase frequency and reduce days of supply and transportation costs.
The upshot is that retailers and manufacturers will be able to match supply to demand globally regardless of the number of suppliers and logistics and transportation providers. Think of transportation as nothing more than the physical movement of supply to demand, or where demand is going to be. Like an airline ticket, customers will feel as if they are interacting with a single company, while in fact multiple companies are collaborating behind the scenes, from the shelf or website back to the raw material supplier, and all fulfillment partners in between.
You may believe that virtual highways are far-fetched; that moving physical goods across the globe is much harder than organizing an airline ticket, but in fact you've likely already using one for physical goods and you don't even know it. The most notable example right now is Amazon's "fulfilled by Amazon" service. A third-party seller offers items "fulfilled by Amazon", and Amazon handles the rest. Sellers store their products in Amazon fulfillment centers, and Amazon picks, packs, arranges shipping, and even provides customer service for the products. It's an incredibly clean transaction from the customer's perspective, and yet consider that there are at least two transportation providers, a seller, a buyer and Amazon involved. This sort of arrangement benefits all parties to the transaction"”customers get better service, and Amazon reports that sellers who join the program experience an immediate 20-percent increase in unit sales, which means more business for transportation providers, and Amazon, of course.
Similarly, virtual highways that form among the global 4PLs, transportation providers, manufacturers, and the retailers of the world make everyone better off. It's reminiscent of what happened 60 years ago in the U.S. when its physical highways were being built. Eisenhower's plan for a federal interstate system"”designed to unify what were then 48 disconnected states"”was originally criticized for being too ambitious and too costly (over $425bn in today's dollars). And yet, most economists agree the rapid growth of the U.S. economy post-WWII was fueled in large part by the interstate highway system. At the very least, I think you would agree the transportation industry has benefited in a big way.
There is a similar amount of upside to virtual highways as there was for physical highways, and yet the risks and costs to building them are almost negligible in comparison. As consumers we are developing the taste for a seamless shopping experience and rapid shipping/fulfillment, so too will virtual highways in the B2B space quickly gain a following. Early adopters will be rewarded. Not joining could be fatal. I can tell you that the enabling technology is there, and the necessary relationships are forming. Are you ready?
Source: One Network Enterprises
Keywords: supply chain management, supply chain management IT, supply chain solutions, logistics & supply chain, transportation management, enterprise systems, retail supply chain
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