Can Companies “Uber-ize” Their Way Out of Supply Chain Troubles?
Uber revolutionized passenger transportation by providing a third-party platform where consumers “compete” with each other for rides. Now, platforms that enable companies to “compete” for supply chain assets have emerged as a way to lower costs and increase efficiency through Amazon-like economies of scale.
It is an intriguing development, but how far can it go in improving the performance of today’s complex supply chains?
E-commerce a catalyst for growth
The idea of creating a platform for selling goods and services is far from new. The traditional shopping mall is, in effect, such a platform, in that it is a space built and managed by a third party used by a variety of companies to sell their wares to consumers. The mall owner also provides many common services such as parking, security, and advertising. Similarly, a port authority can be responsible for the overall management of a port facility (akin to the platform provider), but the terminals that make up the port may be run by autonomous operators. The operators contract with the port authority to move cargo through their terminals. The port example is analogous to airlines contracting with airport authorities to run their operations.
The shift to an online environment supercharged the mall concept and spawned mega-retailers including Amazon. In my book The New (Ab)Normal: Reshaping Business and Supply Chain Strategy Beyond Covid-19 (MIT CTL Media 2020), I explain how platform-based retailing gained another boost when the Covid-19 pandemic accelerated the growth of online shopping. “Online platforms like Etsy offer a dynamic and flexible retailing channel for selling in more volatile and less predictable environments. Consumers can search for anything, and that search data (along with data about what consumers did or did not click on or buy) provides powerful, real-time visibility into demand, including demand for entirely new products.” The online marketplace Etsy was able to offer bespoke face masks at lightning speed when the pandemic created a surge in demand for this product.
Capabilities like these make platform-based commerce extremely compelling. As I write in The New (Ab)Normal: “These online platforms are part of the same accelerating technology trends that created cloud computing, Airbnb, Uber, and TaskRabbit.”
B2B variations
Platform models also encompass business-to-business retailing. An example I cite in the book is C&S Wholesale Grocers, that teamed up with Instacart during the height of the pandemic to offer e-commerce and same-delivery solutions to more than 3,000 C&S independent grocery retailers across the United States.
But the concept is not limited to retailing. For example, there are platforms, like Flexe, that provide warehouse space for companies without a long-term commitment. An enterprise can rent its excess storage capacity to a company in need of warehousing and the process is managed by the digital platform. The transaction provides a classic win-win: the seller defrays the cost of an expensive asset that is not being used, and the buyer can acquire space without committing to a long-term investment in warehousing.
If platforms can be used to sell storage capacity in this way, why not use them to sell access to other supply chain assets and services such as truck space, scheduled runs, or last-mile delivery?
Again, this is not a new idea, but it is attracting considerable interest at a time when many companies — particularly enterprises in e-commerce markets where customers’ service expectations are high and rising — are struggling to maintain the performance of their supply chains.
Retailers sell the idea
Walmart is capitalizing on the demand for logistics services with its GoLocal platform. Launched in April 2021, GoLocal provides delivery services for companies and “furthers the retailer’s strategy to build alternative revenue streams and profit pools.” Given that Walmart’s market dominance in retailing was built largely on the organization’s supply chain prowess, this seems like a logical move.
American Eagle Outfitters is another retailer that is looking to turn its supply chain expertise into a source of revenue by creating a supply chain service platform for a community of retailers.
In a recent interview, American Eagle’s Chief Supply Chain Officer, Shekar Natarajan, explained that by pooling their delivery business and working together on a platform his company is creating, mid-size retailers can achieve the economies of scale enjoyed by Amazon. He terms the platform a “frenemy network” that is based on the idea that retailers should continue to compete on product, marketing, and customer experience, but not necessarily on their supply chains which can be a shared resource.
Limited in scope
This may be an attractive proposition for mid-size retailers that are finding it increasingly difficult to come up with the investment required to build and manage the supply chain infrastructure they need.
However, the idea that a supply chain can be a communal resource delivered via a third-party platform faces several hurdles.
Supply chains are still considered competitive weapons that companies wield to get ahead of their rivals. Switching to a model that requires companies to ditch this idea and “compete” for shared supply chain services requires a different mindset. This is particularly the case when the services in question are managed by a platform operated by a player in the same industry that derives revenue from the entity. Also, companies can turn to other sources of supply chain services such as third-party logistics providers and digital trucking platforms like C. H. Robinson, Convoy, Uber Freight, and FreightVerify.
Given the pressure companies are now under to improve their underperforming supply chains, Uber-like platforms will probably find a market niche. However, the global disruptors that have thrown company operations into disarray require more profound responses that involve reappraisals of how supply chains are designed and managed.
