What if your logistics is already the best? (Part I)

Is this the end of logistics as we know it?

Let's say you have done just about everything you can to optimise your logistics processes.  Let's just imagine that you have the best forecasting and inventory management process.  You have the latest warehouse systems and materials handling technology.  You have the best value freight deals and the most efficiently routed transport fleet.  You are now toiling away at the last 1 or 2% of productivity and efficiency gains available to you.  What now?  Sit back and relax because you are now done?

Now lets add in the fact that you have done all this just to stay in business.  You have several major competitors who have done the same things that you have.  You and your competitors have had to do this because you are in a business that used to be nicely profitable but is now a commodity where the cheapest price wins.  The sliced bread market would be an example of this.

At the macro level logistics is just maths and the maths work the same for everybody.  So all else being equal, at some point your logistics simply cease to be a competitive advantage.  If your products are also a commodity then no doubt you have competed in a race to the bottom based on price.  Your razor thin margins mean that your business may well be an unpleasant place to work because cost control is a primary focus.  A serious dose of innovation is required.

What do you do?  Is there even an answer to this question?  Is this the end point of logistics?  How many industries and organisations are already at this point?  Where else can logistics go?
Does anyone care about who delivers your product?  If your logistics has become a commodity and is largely invisible as long as it fulfills the promise, then does it matter who does it?

If logistics is just maths, and the maths works the same for everyone, then why not make it work for everyone?  Once it has reached this point, there is only one place for logistics to go next and that is to embrace collaboration to its fullest extent.  This means collaborating with competitors - no I don't mean price fixing, I mean take advantage of the maths and get your cost reductions from consolidating logistics operations with competitors in industries that serve the same markets.

Each of the retail outlets you supply probably also get a delivery from your competitor or your competitor delivers to a competing outlet nearby.  This is currently done by two vehicles with two drives travelling similar routes.  How is this not a waste?  You each have a warehouse and storespeople and associated infrastructure and administration.  Your individual volume may not justify investment in the most efficient technology but the combined volume would make such an investment worthwhile and reduce the overall costs further.

This is how third party logistics works and how they make their money.  They share infrastructure across multiple clients and charge what the market will bear. This is about the same or a bit more than what it would cost you to do it yourself if you did it well, which you didn't or you wouldn't have outsourced it.

Does this sound crazy?  If so good!  This is just Part I.  I will explore some possible business models for this really not so crazy idea in Part II.

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