Dominic Wilson, co-founder and managing partner of Pi Labs, on how technology will help prevent logistical nightmares.
First the chicken, now the gravy too: back when KFC and DHL announced their new logistics partnership it was billed as “groundbreaking” and “revolutionary”, but the past few weeks have shown it’s been anything but.
This is hardly the first time a global brand has suffered a major logistics meltdown, but in the wake of this year’s #KFCCrisis it’s worth adopting a birds’ eye view for a moment: what went wrong, and could technological innovation in the logistics sector prevent it from happening again?
Warehousing: the main culprit
DHL relies on one warehouse in Rugby to process KFC’s supplies. It’s based in Rugby for a reason: the town is at the heart of the ‘distribution golden triangle’, an area of the UK that is equidistant from all major ports and delivery hubs in the country. This setup might make processing more efficient for DHL, however it also creates a dangerous single point of failure: if something goes wrong with that one warehouse, the entire supply chain is disrupted, as we have seen.
If a company is going to rely on a single warehouse to hold its entire supply chain together, that warehouse had better be extremely well-managed, efficient, and with multiple fail-safes. It might surprise some to hear that warehouses have actually been at the head of a huge wave of innovation in the logistics sector, precisely for this reason. Amazon, with its reliance on enormous warehouses hosting a wide variety of products, has driven step-changes in this regard.
Dynamic warehousing is a technology showing great promise: fluctuations in inventory are a huge problem in logistics, the root cause being the time-consuming nature of adding inventory and warehouse space to a company’s books. Dynamic warehousing, such as that provided by startup FLEXE, creates a network of available warehouse space made available through a technology platform, so that retailers can purchase short term warehouse space in the same way a software company would spin up a new cloud server on AWS.
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Dynamic warehousing is primarily aimed at smaller players unable to afford their own warehouse infrastructure. However it could feasibly be used by a large corporation like KFC as a backup system, which might have at least reduced wastage of perishable chicken products.
On the road
We’re seeing even faster innovation in the transportation sector. Autonomous forklifts have now been widely adopted in warehouse operations, able to pick and onboard orders for delivery up to four times faster than human. But this is only the first step: Amazon has already patented a design for a ‘multi-level fulfillment center’, which would radically redesign warehouses to accommodate fleets of autonomous drones. The warehouses we see on the outskirts of town could look very different in a few years, and drone-delivered KFC for consumers could be coming sooner than we think.
But coming back to earth: we’re more likely to see autonomous trucks on our roads before autonomous drones in our skies. Tesla is only one of many companies experimenting with autonomous truck fleets, and when the technology does become mainstream it will necessitate a real shift in how we build our infrastructure.
Autonomous trucks are best driven in fleets, also known as ‘road trains’. When multiple trucks are networked together and drive in a single file their fuel consumption is reduced by 10%. Over the course of millions of trips, that adds up. Following successful trials of this technology in Singapore, Germany and the Netherlands, the European Automobile Manufacturers Association anticipates that truck platooning will become widespread by 2023.
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When this happens the flow of traffic in and out of warehouses will also have to change: dozens of trucks arriving and departing all at once will create an even greater need to load and offload goods efficiently. This in turn will create a need for larger warehouses and bigger bays so that more trucks can be processed.
Data: the new petrol
In many ways logistics is stuck in the past, with key data about deliveries being siloed across different databases that don’t talk to each other. According to a 2016 survey by PwC, 90% of experts in the transport and logistics sector believe that increased data collection will significantly change the way decisions are made over the next five years. The Port of Rotterdam Authority has even set up a task force to explore whether blockchain could be used to record disparate data sources in a smarter way. Such technology could be used to spot gaps in supply and demand faster, which would help companies like DHL avoid another chicken catastrophe.
A new breed of companies have taken it a step further, changing their business models to rely on data and software rather than physical assets. Shyp, Zipments and Flexport are all companies operating in this way, which allows them to deliver innovations in data management and tracking to their clients without having to shoulder the costs of managing and maintaining the assets themselves. This ‘Uberisation of logistics” will continue in the coming years, and will deliver substantial new flexibility and analytical capacity to supply managers in companies like KFC.
The logistics sector has been around for centuries, and technological change has always pushed the industry forward. The biggest opportunities today come from step-changes in autonomous vehicle technology and new ways of using software and data to manage physical assets. Huge players like KFC and DHL are always a little slower to adapt to these kinds of rapid changes, the logic being that they have more to lose if things go wrong with experimental technology. But as the past few weeks have shown, there’s just as much risk in business as usual.