Why logistics sector will be the world’s next goldmine

One of the most hallowed names in the US retail industry is Sears which declared bankruptcy last week.

The retail chain has been there since 1886. It started the same year as Coca-Cola.

Sears problems partly came from advances in the internet that made it easier to buy online. With e-commerce, big stores lost their attractiveness

We just buy online and the product is delivered home.

As one Kenyan in the US reacted after Sears declared bankruptcy “I just go online and buy anything I want including groceries and United Parcel Service or FedEx does the rest”

In developed countries, shopping online has become the in-thing aided by good logistics and trust. Paradoxically, as online shopping picks up, so are the malls in Kenya.

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But our malls are not just shopping centres, they are entertainment joints after all playgrounds and parks disappeared.

They are like dams that trap water, only that they trap money.

In the future, we shall realise mall builders might not have been that wrong in Kenya.

Generation Y

Online shopping is slowly catching up in the country.

But it will take some time to get entrenched for a number of reasons. One is cultural, we still do not trust machines enough.

That is why we still count money from ATMs.

We still want to see the real thing and touch it.

But Generation Y is beyond that, even marriage partners are got online, virtually despite the technology to change my photo to look the way I want.

Two is logistics. Once you buy, you must have the product delivered to your home.

You need a well-developed transport system from roads to rails or air and more importantly, their inter-connectivity.

How do you shift goods from one means of transport to the other e.g water to rail and to land or vice versa? These gaps create bottlenecks in the supply chain and raise the costs.

Automation is bridging that gap. But another missing link is efficient logistic firms. That include firms like FedEx, Kuehne and Nagel and UPS. What is our equivalence in Kenya?

Uber is getting into that space. What if Uber gets into trucks, rail and air transport?

But the idea of logistics gets more interesting through the physical internet. Think loudly.

When you send your email, you have no clue how it gets to the other person and neither do you care. Suppose transport for goods was like that.

You want goods to go from point A to B, just go online, search for the quickest and cheapest route, just like Uber.

You can even find out who you can pool with to reduce costs. Most goods have some information technology in them through the internet of things.

Goods can now “talk” to each other. While we are all glued to big ideas like blockchains and artificial intelligence, the next money spinner is the old fashioned logistics.

The good thing about logistics is that there is no risk of becoming redundant. It doesn’t matter whether cars are electric or hybrid. It does not matter if trains are electric or diesel, they all transport goods or people.

Interestingly, the method of buying and payments will change but not the method of transporting.

You can’t shrink the physical distance that much, except the speed of delivery.

Behind Amazon and Alibaba is an efficient logistics system, mostly outsourced.

Traditional shopping

Our retailers and entrepreneurs do not see the real threat to their business. It is not net and its websites, it’s the logistics of getting the item to the owner in the shortest time possible.

After all, getting and paying for the item is the easiest thing, you can do that on your phone.

That is why motorcycles are doing so well. While we see them as a nuisance, they are making the logistics more efficient.

Cars might be prestigious but they are useless if they can’t take you where you want or when you want. We really do not need cars, we need transport.

In Kenya, logistics is our soft underbelly and might prolong the life of traditional shopping. Logistics goes beyond roads and other means of transport.

What of simple things like address systems or physical addresses?

What if our physical addresses were as easy as email addresses? Try explaining to someone where you live, particularly if it’s not a leafy suburb.

Some of our supermarkets now allow online.

That is how Walmart remained ahead of the pack when Sears declined.

But who will deliver for the supermarkets and other online platforms?

It is unlikely that supermarkets will get fleets of vehicles waiting for the next shopper.

That can be outsourced to experts. Pizza sellers pioneered the delivery model others can emulate. As the economy grows, demand for logistics along the supply chain will also grow.

Yet, supply chain and related departments have been at the backwaters of most organisations. Even in academic institutions, the supply chain is not considered as cool as finance.

That is changing and the golden age of logistics and supply chain management is near. It’s the conveyor of e-commerce.

Can the Government or even private sector build the transport network and leave us to figure out how to best exploit it?

Logistics and supply chain management professions will undergo a rebirth like the human resource from personnel management. Who will reap from this rebirth?

Operations Management Society of Kenya should be defining the future of logistics like other professions in accountancy, medicine, and law.

-The writer teaches at the University of Nairobi

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