Every time you go on a longer trip outside of the city, you’ll see trucks full of stuff for us to consume or stuff that has already been consumed. This is the most apparent visual for logistics, the transportation of goods all across countries, oceans and continents to trade goods between countries, companies and people. The estimated CO2 emissions in the UK from this is estimated around 28 million tonnes of carbon dioxide equivalent in 2009.
But setting that aside for a second, in business terms logistics are part of the value chain, which means that cutting costs or increasing efficiency at the stages of inbound logistics, operations, partially, and outbound logistics can add tremendous value to a company. Inbound logistics is what a company does to get raw materials or products to their operations floor, outbound logistics are what a company does to get the finished product from the operations floor to the retailer. The operations in between are all the company does to add value to the raw material to resell as a packaged product.
As this seems theoretical, I will give the best example I know in the clothing industry and one I’ve referenced before: Zara.
Zara is the most efficient brand in the fast fashion industry and that is largely due to their logistics. The three aforementioned stages are big aspects that lend itself to this. Firstly, they control as much of the logistics as possible, having many times loyalty based contracts in place to ensure steady raw material sourcing. Also, since their raw material is not a scarce material, they have big bargaining advantage over their suppliers, who are more than happy to operate under those conditions. They get most the raw material white, to then add the colour later and be more flexible within their operations.
Within operations, they have a location in Spain where 300 designers are working every day on new designs or improving designs that didn’t sell as well within the season. As they produce 60% of their product themselves and are always on top of design flaws and improvements, they can quickly get changed or better products in shelves mid-season. They are the only fashion brand to react so well to trends, which is because of the outbound logistics, as they have 2 weekly deliveries of goods to each stores to take back low selling items and bring in better selling ones. As such, they also produce low quantities of each item so as to not have to take back many items. Because of this constant shipping, they are able to use the flexibility in operations to get new items on shelves within 3 weeks.
As fashion brands usually model trends 6 months in advance of the season to properly adapt before they have to finalise designs – around 3 months before the season, or best case scenario 90 days – Zara, being able to be extremely flexible in all its logistics while also reacting to mid-season changes, is able to sell around 85% of their goods at retail price, compared with the industry average of 50%.
As shown in this example, logistics, when used properly, can be a huge strategic advantage over competitors, especially in fast paced industries. Even with delivery services, where logistics are a key component of the service, speed of delivery can be a key towards good customer relations. It’s an assumed aspect of the product as a package. A huge component of the value chain.
And here I ask, what if that suddenly becomes irrelevant? This is a question to be taken with a pinch of salt, because what I’m proposing would neither be sudden the worst thing for industries as a whole. On top of that it’s also not fully ground breaking-it’s 3D printing.
Technology is being developed to make clothes production via 3D printing, a reality for clothes you’d want to wear. Since I’ve heard of 3D printing in its more technical forms and seen it in action, and especially because I was doing a report on Zara at the time, I always thought of its potential to really hurt Zara’s current business model. Try to imagine torrenting clothes designs and 3D printing them at home, that means that both inbound and outbound logistics (as well as retailing) become useless steps in the process, in an extreme scenario.
The number of assumptions I’m making to reach that scenario are staggering, as it would include things such as the software to operate 3D printers and design 3D printed material would have to be a) standardised and b) adapted for every day use. Also, this would imply 3D printers reaching a level of accessibility and cost that you could viably have them in every house/neighbourhood and, finally, that retailers or even city governments would actually allow the elimination a huge chunk of retailers.
Normalising 3D printing is a big threat to many business models in current economic systems, and this is where business will need to start adapting, because the one reason any company would cut out logistics and retail from their business model is the same reason why online business has thrived, it cuts costs quite severely allowing for investing in other parts of the business or, even better, cutting the price towards the consumer.
However, the adaptation would have to go even further as the product itself would take a slight backseat in the value proposal since, in this (extreme) scenario, torrenting clothes would be viable. Companies would have to find a way to stay relevant despite that, instead of clinging on to what they know and actually crippling innovation in the sector through a technology that could bring many more advantages. Adaptation “à la Virgin” would be needed, instead of “à la record executives”, meaning: cut the fat and innovate (by closing megastores before anyone else thought about it) instead of trying to regulate what’s cutting into the profits (attempts to control the Internet by trying to ban torrenting, etc).
Finally, I need to touch on the environmental. No trucks or other freight, no packaging, no stores full of waste, no production of all those things, no plastic bags to carry the products; 3D printing could potentially be an environmentalists dream come true. It could eliminate many environmental problems at the roots. Only thing you’d potentially need stores for would be for the 3D printers version of cartridges.
I will recommend taking this article as a utopic scenario building exercise, but that shouldn’t take away from the fact that it is a possible scenario. Who knows, when I am 50 I could 3D print a screwdriver for that one loose screw just to let it melt back into its composite parts to be used again right away. That sounds incredible.
Benjamin Tirone Nunes