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How the Sharing Economy Has Changed the Supply Chain
There was a time not too long ago when the thought of getting into a stranger’s car, or sleeping in their bed, was unthinkable. We only trusted cab drivers to ferry us from place to place, or hotels to rent us rooms when we were away from home.
Today, we consider these things relatively normal, thanks to the work of sharing economy businesses like Uber, Lyft, Airbnb, and many others that turn regular folks (and their personal assets) into entrepreneurs (and their business assets). It’s as if the lights have come on, and we realized in our hesitation to share, we were creating incredibly inefficient systems in which to live. Why shouldn’t people leverage what they already own, and why shouldn’t consumers feel comfortable utilizing those things?
A similar trend has emerged in the world of supply chain management. For years, companies have dealt with the inefficiency that is delivering over “the last mile:" While it’s relatively easy and efficient to transport goods via rail networks, container ships, airplanes, and other modes of mass transportation, getting products to their final destination is by far the most costly. It’s estimated that more than a quarter of the total cost to move a good comes in that mile.
The last mile comes with its own set of unique challenges as well. Oftentimes, the last mile is in an urban area, which is rife with traffic congestion, safety issues, and other problems that lead to delays in delivery. And if it’s in a rural area, the inefficiencies multiply, as a driver makes his or her way off the beaten track to deliver a package that could have been picked up at a more centralized location. These issues lead to drops in value or quality.
Basically, while the way in which we shop has changed, and our expectations for how, when and for how much a product will be delivered has shifted, the supply chain has remained a bit stagnant. So how can businesses capitalize on the rise of the sharing economy to make their supply chain run more efficiently? There are a few ways.
Enlist the help of third-party delivery services
If you’re a small business owner, you know the absurdity that is the cost of shipping. Big companies like Amazon and Target cut deals with shippers like FedEx and UPS because they move in bulk; you, on the other hand, have to pay almost three times as much to send something from New York to Atlanta.
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One of the ways that small businesses can get out ahead of the mega retail giants is by using a third-party sharing economy service like Postmates, Uber, and Instacart. Want to get an item to a local customer that very day, but don’t have the time to do so, or even the infrastructure in place to make for a timely and safe delivery? Outsource that job to another company which takes care of everything and covers that last mile.
Making your products available via one of these services could be a way into markets you didn’t even know existed. A certain community or region may not even be aware your product exists, but a platform like PiggyBee can open you up to people and places that you never thought you’d succeed. (Note: You don’t actually “put yourself” on PiggyBee, which is a crowd-shipping site where the transactions occur between individuals—however, the popularity of the site speaks to the evolving nature of “the last mile” and how far people are willing to go to cover that distance themselves.)
Find new ways to unload unsold inventory
This is part of the “Uberization” of the supply chain. Uberization speaks to finding inefficiencies in a given industry and utilizing existing assets to help bridge those gaps.
In the past, if a company overestimated the demand for a particular item, they might have stocked their shelves and warehouses with that product—only to see it go undersold, and that previously assumed-to-be-sold product to sit around, losing value, eventually sold for a loss or disposed of altogether.
In today’s world, inventory management software has become sophisticated enough that overstocking shouldn’t be the business-killer it once was. Big data is deep and wide enough, and now fast enough, to predict what products are expected to surge (or drop) in demand, and a responsive supply chain can pull needed inventory in the case of an unexpected surge.
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But: One way that companies have dealt with unsold inventory is to find new, inventive ways to offload it. Take “Rent the Runway,” which buys their dresses wholesale from designers and then rents them to customers for short-term use. The concept of “ownership” in this day and age—when most people stream their music rather than buy it outright, or live nomadic lifestyles fueled by Airbnb rentals—is making these endeavors more viable by the day.
Plus, the third-parties that rent the unsold inventory can then share information with the supplier on their customers—which items were most popular, if many of them needed certain adjustments—which the business can use to design more popular items in the future.
Allow customers the option to pick up in-store or at other locations
Okay, this isn’t exactly attributable to the sharing economy, but the point here is the best way to avoid the inefficiencies of the last mile is to avoid it altogether.
What the sharing economy has done is to make ease of use and transparency paramount. One of the issues with the car service industry was that customers often felt left in the dark about their ride—when will it show up? Can I trust the driver?—and the system for calling a car often felt a little like shouting into the ether, with no record of your request.
By giving your customers several delivery options, including one that involves shipping to a store location or shipping locker for pick-up at the customer’s convenience. It’s about a third of the price for a business to ship to store than to ship to a customer’s door, and in many cases it’s easier for a customer to swing by a brick-and-mortar location than to play the classic game of “Tag” with a FedEx driver that we all know so well.
For the most part, supply chains remain massively complex systems that require great synchronization and organization to run smoothly. But it’s the little things that can take a business from good to great, and recognizing some of the perks of the exploding sharing economy—from its ease of use, to its accountability, to the way almost no task is too small to let someone else do for you while you focus on your business—is one way to incorporate little changes that make a big difference.
