On-Demand Economy Changes Manufacturing & Logistics

Alterations in how we live and work evolve and disrupt business

The On-Demand Economy is a concept that nearly anyone living in the United States has come in direct contact with over the past 15 years or so. You might be accessing this article on your cell phone right now with a swipe or click. With just one more click, you could be in contact with someone (perhaps hundreds of miles from where you are) to answer a question about logistics or warehousing. In many regards, that’s the essence of the On-Demand Economy – consumer demand is fulfilled via the immediate provision of goods and services. As stated by Twitter co-founder Ev Williams for a Business Insider piece:

The Internet makes human desires more attainable. In other words, it offers convenience. Convenience on the Internet is basically achieved by two things: speed, and cognitive ease.”

Before going into the sweeping changes the Internet and communications access have brought to our lives and more specifically, manufacturing and logistics, it’s worthwhile to look at how we live today. Demographic changes affect the economy and how it functions. People are moving to cities and their suburbs. Education levels have grown. The middle class has shrunk. And we’ve seen a rise in dual-income households. People and wealth become more concentrated, our retailers fight to figure out where to place their flag and industry struggles to pair its available industrial labor with this more educated population. Trends just making themselves known a few years ago – personalization, customization, and demand for higher levels of service like one-day delivery – have taken root and are accepted practice in the average consumer’s world.

One common shorthand for the On-Demand Economy phenomenon has been to call it the “uberification” of the economy – a reference to the game-changing car service that upended personal mobility and grew from nothing to a $50 Billion company in less than a decade. Industries that have seen disruptive change along the lines of Uber? The examples are many.

“Industries seeing sweeping changes in this on-demand economy include: Food, Ground Transportation, Beauty, B2B Services, Services, Healthcare, and Logistics.” -Parag Jain, via VenturePact

In food, those busy dual-income, urban/suburban households are being served by the On-Demand Economy in the form of grocery delivery, meal prep and new delivery platforms – all made easier through the Internet. Ground transportation and Logistics are experiencing the wave of consumer-centric outlets like Uber, but also sweeping changes in e-commerce, parcel delivery (same-day delivery), cargo-on-demand and more.

What does this mean for Manufacturers?

Some manufacturers have responded to the On-Demand Economy by moving production closer to consumption. The same is true of sourcing – many US companies are looking closer to home as a means of adapting. Sourcing that was done in China, for instance, is moved to Mexico. In addition, manufacturers must adapt to the external demographic factors, mentioned earlier in this article, and decide whether they want to compete in high volume, low margin business or low-volume, high margin business. As the middle shrinks, the mass market has deteriorated, with significant implications in retail and other consumer categories.

“We have to recognize that “Out of Stock” is a response that is quickly becoming obsolete. Our customers need a 360-degree view of their inventory, orders and distribution or else we can’t all succeed together.” – Andy Hendricks, Distributors

How will Logistics providers thrive in the On-Demand Economy?

E-commerce in the US grew from $27.6B in 2000 to $143B in 2009. The forecast for 2020 is $684B. That’s what’s at stake. Nader Mikhail, founder and CEO of Elementum, offers three guidelines for adapting and achieving long-lasting logistics success:

  1. Automation – seamless transfer of information/data across the supply chain allows for agility and ability to respond to market changes.
  2. Real-time knowledge sharing networks – Visibility to inventory, shipping routes and other key information will prevent stock outs, unnecessary delays and other factors that put product at risk.
  3. Multi-enterprise collaboration – when supply chain partners at all tiers of the supply chain can sense and respond to changes in a timely manner. This improves operational efficiency, reduces risk and allows for strategic opportunism.

These align with our experience. The On-Demand Economy is predicated on access to information, flexibility, ease, convenience, speed. And it places heavy new demands on manufacturing and logistics. Are you ready to compete in this new age?

If you want to talk about the changes in your business category and how your logistics and warehousing company can help you compete in the On-Demand Economy, give us a call or drop us a note.