John Manners-Bell, CEO of Transport Intelligence, is co-author of ‘Logistics and Supply Chain Innovation’, the 2nd edition of which is to be released on November 3rd. The book explores the technological disruptions of the logistics and supply chain industry and provides step-by-step guidance to adapting business plans and strategies.
The 2nd edition of the text, published by Kogan Page, also includes a detailed and up-to-date overview of all the major trends transforming the supply chain and logistics industry, including blockchain, automation and AI.
Ahead of the launch of the book, we caught up with John Manners-Bell to get his thoughts on numerous key issues influencing the future of supply chain, many of which are covered in the text itself.
In this first part of two interview series, we quiz John on why Amazon is the ultimate disruptor, discuss approaches to sustainability, learn about how visibility tech can be harnessed, and hear what use cases blockchain will prove invaluable in.
Thanks for talking to us at Trans.INFO, John. First off, one of the case studies in the book describes Amazon and Alibaba as the “ultimate disruptors”. Although both companies are known for having brought about huge paradigm shifts, they are not alone in being disruptors. So why can the two companies be referred to in such a definitive way?
I do stand by my words, I think the reason why Amazon have had such an enormous impact on the industry is because they’ve transformed customer expectations. That really goes to the heart of the issue.
When we look back over the last 20 years to when e-commerce and e-retailing started coming about in the 2000s or late 1990s, there were a lot of companies there at the beginning. But they failed on the way, while Amazon have just continued rolling on.
The reason they’ve been so successful is they’ve been able to actually lead the market in their direction and everybody has followed. Every other online retailer has followed what Amazon has done, it’s even termed the Amazonisation of the industry.
Therefore, in terms of the engagement an online retailer now has with its customers, Amazon have been there and done it. That’s been the case in terms of the functionality of their websites, or from a logistics perspective – their delivery times. Amazon have driven things down from what was the industry norm 20 years ago – probably economy delivery of 3-4 days, 2-3 days or whatever, to next day and now same day delivery. There is even on demand delivery as well.
So in just about every aspect of the industry, Amazon have been leading. If you look at warehousing for example, they were really the first, if not one of the first, to go down the route of robots in warehouses. They’ve really driven that forward too. It’s an enormously important part of their business model in terms of the cost per unit. For example, how they go about making money from the e-retailing sector is hugely important as a lot of companies have failed to do so.
Also, if you look at the transport side of things, they were pretty much the first to stop using some of the main express companies, taking DHLs and UPSs out of the loop or at least making their role less important.
They’ve actually built up their own in-house, insourced company Amazon Logistics, which built its own structures, used owner drivers and started to use the gig economy to drive down costs. At the same time, and more importantly, they’d probably say this has given them the ability to ensure quality in terms of delivery, and also quality and customer service in terms of delivery times.
So in just about every aspect, they’ve driven the market forward. That is why I’ve said that they really are the ultimate disrupter.
The invention and development of control towers and supply chain visibility has given supply chain managers a lot of data with which to adapt their strategies and build resilience. To what extent is the development of this technology contributing to supply chain intelligence as a whole?
It’s massively important. I think the visibility issue has been an enormous risk for the global supply chain and logistics industry. It’s only just really being understood.
One of the reasons for this is the tiering system of suppliers, and the way that virtual manufacturing works these days in most sectors. A lot of companies have very little visibility of their lower tier manufacturers and suppliers.
So consequently, they are unaware of the risks which exist within their own supply chain. They may have a good understanding and a good relationship with the tier 1 suppliers, but as you go further down the pyramid, they have very little visibility. That brings huge risks.
Only in the last few years have companies started to understand those risks and the impact of, for example, a natural disaster wiping out a tier 5 supplier. If there’s a sole sourcing relationship and there’s only one manufacturer of a particular good, then obviously that has implications throughout the supply chain. It may have multiple implications for multiple OEMs as well.
Without gaining visibility on that sort of level, there will be heightened risks throughout the supply chain. I think these new platforms can provide a lot of data, but the reason they’re used is that you can drill down and actually start mitigating many of those risks that may exist in your manufacturing system.
The widespread digitalisation in the sector has arguably blurred the lines between offerings such as TMSs, WMSs, digital freight marketplaces, visibility platforms and tender platforms. It appears that in some areas at least, there is a little crossover going on as companies strive to offer their customers all the services they require in one place. Is further M&A activity thus inevitable in the logistics and supply chain sector as companies are either taken over or decide to collaborate with one another in order to meet this demand?
The transport technology sector has always been cyclical. This question has been going on for as long as I can remember.
Over the last 30 or so years, there’s been these companies which want to be a one-stop-shop provider of just about every technology application you can imagine. TMS, WMS, international transport management, treasury management, financial tools and accounting software and so on and so forth.
A one-size-fits-all approach would be one way of putting it. It provides the means for a very large company to go to a single provider and have a single contract with them. Then they will have access to all the functions they require for warehousing, transport, accounting, HR and other areas.
On the other side, there’s always been the option of going down the best-in-breed route. Not every single one of those modules provided by a one-stop-shop is going to have the full suite of functionalities or be the best.
Consequently, there are other companies who have decided they want the best WMS out there; the one that best fits their own requirements. If that means going to a separate company and integrating their solution within their own system, then that’s been the approach.
A lot of these startups are best-in-breed and so are bought and integrated within larger ones. At the same time, there are more startups coming into the market with a different way of looking at things using different technologies with a team of different managers and developers.
Again, they start up on their own, can be very successful on their own, and when they become very successful, they tend to get bought up by bigger companies. This will go on and on and on.
What might break this is the fact that the ability to integrate lots of small providers is much better. We’re seeing that through some of the supply chain visibility providers like FourKites and project44. They are providing companies the ability to use lots of different technology providers. These will all be integrated through the platform which has been provided. So the need to go to a single company is not as great as it once was.
Blockchain has become something of a buzzword that evokes different emotions among supply chain professionals I’ve talked to. Some feel the scope of its use case has been exaggerated, while others have championed the technology. In what scenarios does blockchain best provide the means to boost efficiency in logistics and supply chain? Conversely, are there other circumstances whereby blockchain is not the best answer?
Firstly, I have to agree with many of the people who I suppose take a more cynical view of these innovations in technology. There is a huge degree of hype which goes along with many of them, whether it’s blockchain or 3D printing for example.
So it’s always hard to actually see through that and know which ones are going to have that longevity and make an impact. I think you’re right to suggest there are some use cases where blockchain will become very important and other areas of industry where it will fall by the wayside as there’s no need for the efficiencies it can bring.
Where I do think it will be very useful and has been for a number of years, is this idea of it being a single version of the truth. This really has value and is especially true in the food sector, for example.
The pharmaceutical sector is another where you need to have an understanding of the provenance of a particular product. For instance, It could be milk powder in China or dairy products in Italy, where I think blockchain has been trialled intensively.
Therefore, at any stage, you can see the provenance of a particular product. Then you can look along the supply chain and see where there has been an intervention, thus ensuring the quality and standards of particular products are maintained. That may concern the environment within the temperature controlled supply chain, to make sure that it hasn’t gone outside of various tolerances, which is important in the food sector.
In pharmaceuticals, obviously, it’s hugely important to make sure that the drugs which have been manufactured are the ones which actually get to the pharmacy or to the hospital in the end. So therefore, again, you can see at every stage where those drugs are passed, what’s happened to them, and whether they are indeed the same drugs and haven’t been counterfeited along the way. So that’s hugely important.
Where I think it will be most beneficial eventually is the international trade sector. It is sort of plagued with huge inefficiencies, largely due to the very large number of companies involved, whether it be banks, shipping lines, law companies, freight forwarders, transport companies, wholesalers, warehousing companies, customs, or the actual shippers in the first place.
There are so many barriers to trade or different parties to trade, that blockchain can actually be hugely important. It could provide a single version of the truth that all the parties involved could see what stage the shipment is at. They’d have trust in the system thanks to the way the blockchain works.
Therefore, you can cut down times between documents being sent to the bank and the bank returning them, or other stages of the shipping process.
So there are many benefits to be created there. The trialling for this has been going on for several years. There’s TradeLens, which is probably the biggest that’s been established. It involves Maersk and IBM and a number of other different parties.
As we look forward, that will really bring the biggest benefits. There are nonetheless many other uses where it will fall by the wayside.
Section 4 of the book concerns sustainability and the role of new technologies in mitigating climate change. Last year, I spoke to Yossi Sheffi from MIT regarding a number of pressing supply chain issues. During our conversation, Sheffi indicated that technological development – particularly things like carbon capture – are key. This due to the fact that the desire among voters and consumers for concrete improvements in sustainability is not sufficient to bring about the required changes. What do you feel about this, and what technologies do you foresee having the greatest positive impact on the environment?
Well, there is a large body of thought that certainly does not see technology as a magic bullet for all the world’s problems. In actual fact, the benefits of technologies can be overstated, as well as the speed of their adoption. Professor Alan McKinnon at Kühne Logistics University, for example, believes that we can’t just rely on technology.
There’s a three way process here; avoid, shift, and improve. Avoiding means reducing requirements in the first place – cutting down on your use of energy for instance. Shifting means to shift your movement of goods from carbon emitting vehicles to electric or short sea shipping or other less carbon intensive modes of transport. The improving part of it comes from systems improvements and the technology side of things.
So if we’re actually going to get reduced carbon, it needs to be a three-legged stool as it were. You can’t just rely on one, you need all three.
I think now, especially with the energy crisis, a lot of the people who said “let’s go for renewables” are now probably starting to think that actually, keeping warm in winter is our main priority. Therefore, if that means having more coal and gas power stations, then we should do it. This is the type of thinking that’s going to make the push towards technology more important.
We’ve seen a number of the traditional truck manufacturers decide to collaborate on charging infrastructure in a seemingly unprecedented way. The deal between Volvo Group, Daimler Truck, and the TRATON GROUP springs to mind here. This appears to show that access to this infrastructure is going to be key going forward, not only to make electrification possible, but also provide some entities with a competitive advantage. How important could this be in the future? Could we see some new entrants to the market lose out as a result of this development?
You’re right, there’s been a huge amount of investment. There’s a lot of different parties involved in investment in terms of the electric charging requirements, whether that’s the existing energy companies, the fuel service stations, the trucking companies or the vehicle manufacturers as you’ve pointed out. Then we also have governments and a lot of private equity.
You have to then assume that electric vehicles are the way forward. This is a huge risk though, because as you’ve just pointed out, hydrogen is also a viable alternative that’s being discussed.
Then you have to ask yourself, can hydrogen charging networks or systems work alongside EVs? Is there going to be enough money to build hydrogen systems as well? Will they be at every filling station or every depo?
There are competing technologies, and it’s not clear yet which one is going to win. I think that’s something we need to make clear. There are other options that will involve huge manufacturers too.
I think that they should be brought into a solution. There has already been talk about this idea of collaboration between many different manufacturers who have facilities, depots and hubs right across Europe. If they were able to open up their charging systems as well, this could be a better alternative to the collaboration we’ve seen between vehicle manufacturers.
Whether there is room for all of these, we’ll have to see in terms of the business models and how they’re going to be remunerated. Then we’ll know about the viability.
Certainly, without all of these charging networks, adoption won’t take off as required.