Have been working with FMCG companies for several years, I am more and more excited about creating technologies that enable more jobs and productive businesses. Productivity increase means releasing human form boring repetitive tasks for human and enable them to do more creative work.
Among all of the customers we have been working with, I am specifically excited about the distribution of the people and goods. About a year ago, I was watching series of introduction videos about Supply Chain Management. I was totally swiped by the ease of the instructions and open my mind up to the idea that every business activity is a part of the Supply Chain Management.
What I am proposing for Distributors of Future in 2020:
Sales Force Automation devices are eliminated, smart retail businesses orders items directly from the manufacturer websites. Their product list will be delivered on the same or next day.
Delivery Forces are all digitalized. Business owners can locate where each of their SKUs is , at anytime they want, even in the middle of the night or when the goods are down on the road.
Delivery Forces are all optimized, by the applications such as vRoute. Routing for delivery is a difficult problem. This NP-complete problem alone probably produces hundreds of PhDs. So, we don’t expect that it is completely solved within recent technologies. Optimal Dynamic Delivery will reduce from 20-40% of logistics costs and put human labour to the limit of delivery.
Warehouse optimization is the next step which we will cover in our next article.
To further optimize resources, we will need to look for drones and self-driving cars to reduce cost caused by human errors.
What is the current state of distribution infrastructure in the world from 2000 to 2016?
There are different advancements in different continential economies - that we will look at the US, Europe and Southeast Asia. First the US is notorious for an automobile economy and has built extensive network of roads to cover up most of its country. On the other hand, Europeans countries are more well-connected with public transports. Cities are built gradually from the existing infrastructures during centuries.
Next, looking at the Southest Asia countries, we see a huge gap of development among countries. For small but highly organized society like Singapore, roads are available on Google Maps and it is quite easy to go between places by cars. At the same time, the developing countries like Vietnam, Phillipines or Indonesia, problems are many. First, with a huge number of motocycles in Vietnam or Indonesia, there is an extra layer of transport mode that are more flexible than trucks due to truck restriction time. In fact, the motocycle layer is very close to the pedestrian routes where the riders break the law and go on the pavement if needed. Second, the building numbering system could be very inconsistent that there is no building between block number 35 and 57 Lang Ha or imagine the number 1806/127/2/6/15/48/2A Block 6, Nha Be Town that take you to the right address of the Alley 1806 of Block 6, and then good luck with finding that address.
This comes with several solutions: either (1) the local government will rearrange the numbering systems of the houses or businesses or (2) delivery services will have to manually mark additional information for given addresses, or (3) Map services like Google Maps or Bing will have to spend to bring people going through the matrices and index them back to their applications. At the end of the day, the solution is who paying for that solution?
What the future of distribution would look like, in 2020, 2030 and 2050?
What I would imagine for the future of distribution for the next 5 years, from 2016 to 2020 in Southeast Asia is that all of the distribution processes are fully digitized: from Manufacturing, Packaging, Delivery, Warehousing, Accounting to Sales and Marketing with the human labour still at the centre of the activities. This is where some of our products such as vRoute come in place. We optimize the route planning for the delivery team in the way that there are only 10 out of 14 delivery men required to deliver the same amount of goods to the stores. The existing plans are usually for fixed region or routes and cannot be quickly adapted for the change of demand. We also optimize the inventory of multiple distribution centers to make sure no order is rejected due to out of stock. The financial benefits for employing this method is tremendous. Many distributors implementing inventory optimization reduced inventory levels by up to 25 percent in one year and enjoyed a discounted cashflow above 50 percent in less than two years.
Looking further to the next 5 years from 2020 to 2025, there will be rapid deployment of robots and drones. I am more personally interested with self-driving cars. This product will require all sort of cutting-edge technologies in AI and Robotics. In this way, the last-mile delivery will be done by robots or drones, hence increase the precision to deliver orders on-time. We will bear no cost for human attendance or mistakes.
In what way the human labour cost can be reduced and the operating cost can be saved?
Distribution cost are coming from different sources: salary to hire delivery men, cost to lie the items inside the warehouse.
What can we do to get to the future ?
There are several parties need to get involved. First, the manufacturers - quite often the multi-national corporations such as P&G or Coca-cola - will have a standard to build a full-functioning factory. The process of building items from raw materials and chemicals to end-product should be fully digitized. If this has not been done, the manufacturer needs to ensure that before we go to the next step. Secondly, the distributors or other retail businesses such as supermarket needs to employ three data-driven characteristics: have a mindset of making decision based on data instead of opinion, having a system that allows business owner or manager to get instant access data at any time, having an policy set or procedure that enable people working productively.