Sharing Data Improves Supply Chains

Kai Goerlich

Most people have more stuff than they need. And more often than not, items – such as cars and production machinery – are not in use. For some, owning a car or a professional machine is a status symbol, but that attitude is beginning to fade. More people, especially millennials, prefer to lease or share everything they can. If this mindset continues to reach the mainstream, the resulting sharing economy will inevitably influence our societies and economies.

Until now, businesses have generally focused on ongoing production and sales, but that is now changing. The shift started with Uber, which made it possible to share cars and revolutionized the way we use them. Then came Airbnb, helping us to share accommodations. As PwC and our estimates indicate, the sharing economy will grow 20 times between 2015 and 2030 – reaching as high as US$300 billion.

Like most disruptive trends, the sharing economy might take or give jobs, disrupt value chains, and create new ones. We may just as well live in a zero-margin economy if we follow the arguments of Jeremy Rifkin: Many goods are shared, and those that are still produced won’t make high margins anymore. Money then becomes the ultimate sharing and add-on service.

What will happen to global supply chains if a majority of goods are shared instead of being produced and shipped?

Driving worth twice the global flow of goods

According to McKinsey’s report on digital globalization, the combined global flow of goods, services, and finance yielded approximately US$30 trillion in 2014. Roughly half of the US$19 trillion in goods was realized through long-distance trade. Meanwhile, the remainder was shipped within the same region.

If 10% of flow-of-goods costs is reduced by sharing assets and data, we could then recover over US$50 trillion between 2016 and 2030 – more than twice the value realized in 2014. While it is difficult to model the impact of sharing resources in the production and delivery process overall, we could attain greater clarity in the potential savings of the logistic process.

Sharing real-time data is a promising start

According to the SCM report about the sharing economy in supply chains , commissioned by SAP, businesses are interested, but hesitant. While collaboration is widely used, resource sharing and co-management are not. And this level of attention is even lower for physical assets such as manufacturing equipment, trucks, and facilities. In contrast, sharing transportation assets is viewed as a high-reward, low-risk scenario. One explanation for this perspective is the complexity and competitiveness of the logistics industry, which considers sharing as more risky than rewarding.

By shifting perspectives, supply chain managers may know where to begin. The flow and sharing of real-time data throughout the supply chain are possibly one of the most-promising starting points for sharing to reduce costs, boost efficiencies, and improve customer experiences.

Saving money and carbon emissions

According to Hendrikus Fox, VP of Land Transport for logistics provider DBSchenker, sharing data within a logistics network can increase the load-capacity matching and create cost savings for partners. DBSchenker’s approach to the sharing economy is a portal (Drive4Schenker) that gives its approved carriers access to available shipping offers in Europe in real time. Carriers may pick up freight to reduce empty running and expand their load ratios and utilization. For DBSchenker, the benefits are clear: Better efficiency and customer satisfaction.

Worldwide, land transport companies experience roughly 12% of their full truckload (FTL) running empty, on average. If providers make multiple stops for pick-up and delivery, the load ratio for less than truckload shipping (LTS) hovers around 60%. Depending on the freight and routing, the optimization margin is between 10% and 40%.

“Even if logistic providers never achieve 100% load capacity, a 10% improvement is very realistic,” comments Fox. While 10% might not sound much, it is a significant margin in a highly competitive and efficiency-driven business such as transport. In global numbers, they could recoup approximately US$100 billion in annual logistics costs and a significant amount of carbon emissions.

#SMARTER2030 and SAP estimate that the abatement potential in the transport and logistics market is approximately 1.5 GT in carbon emissions within the next 14 years – nearly 12% of the total 2030 carbon emissions of 12.1 GT. This reduction is achievable by using information and telecommunication technologies.

While sharing valuable and formerly confidential data in competitive environments is risky, it may actually benefit all aspects of the business network and more than outweigh the risks under the new conditions of the digital economy.

For more insight on supply chain efficiency, see What Is A ‘Live’ Supply Chain? 6 Traits You Need To Know.

Kai Goerlich

About Kai Goerlich

Kai Goerlich is the Chief Futurist at SAP Innovation Center network. His specialties include competitive intelligence, market intelligence, corporate foresight, trends, futuring, and ideation. Share your thoughts with Kai on Twitter @KaiGoe.