Logistics challenges in developing countries
In emerging markets, local players’ ease of access to global supply chains is frequently hindered by the structural shortcomings of the domestic transport and logistics industry.
In such markets, value creation through transport and logistics is undermined by a variety of deep-rooted obstacles, where some of the most common barriers (in African and some Latin American countries, for example) are steep trade imbalances, an abundance of very small transport companies, a lack of solid outsourcing culture and poor offering of value-added logistics services. Furthermore, some markets (for instance in small Western Balkans countries) are characterized by a low level of regional integration entailing small and rigid logistics markets where control is more important than quality or efficiency and where the distribution value chain tends to concentrate driven by asset-intensive strategies.
However, economic integration success stories (as experienced in some Southern and Eastern European countries post-EU access), include the evolution of local logistics industry towards more competitive standards. The transformation process bears open and dynamic markets driven by some key elements of modernization such as quality and efficiency based competition, regional integration of logistics and production chains, activity specialization and outsourcing.
The opportunity of a platform
A collaborative web platform can play a disruptive role in boosting the competitiveness of the land transport and logistics industry in developing economies. Such a platform can help create a competitive market by providing a tool to subcontract transport and logistics services in an easy and fast manner that ensures reliability while facilitating access of smaller carriers and service providers to new clients. Furthermore, such a platform will:
- Help optimize the use and ownership of resources (fleet and facilities) leading to a reduction of costs along the value chain
- Increase competition intensity preparing the market for regional integration
- Lead to an increase in quality standards due to the transparent evaluation of services
- Be a tool for information sharing, where relevant regulatory and operational information can be easily published and spread
- Allow transparent networking and knowledge sharing
- Foster freelance transport integration
This kind of platform provides opportunities to all stakeholders involved in logistics. Freight forwarders, shippers, importers or wholesalers can easily find services providers and compare their offering, while carriers and warehouse operators will optimize the use of their resources reducing costs and getting access to new customers. Moreover, public bodies and trade organizations can benefit from the platform through increased transparency of the market and have the opportunity to publish information relevant to the sector.
Many collaborative platforms are in their infancy across the world, but based on recent experience only a few will reach maturity. In order for a platform to be successful, long-term strategy must be addressed from the early stages through the definition of a robust platform concept adapted to the target market requirements.
Initially, the platform scope must define a differentiated value proposition, offering features that are distinctive for users and guaranteeing reliability and trustworthiness.
Moreover, platform sustainability requires a true community of users networking and sharing information through the platform and establishing it as a reference web within the industry. In that regard, the involvement of public stakeholders willing to increase competitiveness and transparency in the sector and the participation of private stakeholders who see the platform as an opportunity to expand their business is a key success factor. It will help define robust governance and business models addressing the ownership, operation and monetization of the platform.
Very importantly, platform success requires a critical mass of users and transactions. The deployment of market-tested middleware facilitating quick implementation and scalability is key so that implementation and growth efforts can focus on business development and platform fine-tuning to market requirements.
Overall, the platform project should be based on a carefully crafted concept, designed to address the target market specifics. The concept will integrate the key building blocks of the platform: its general scope, the targeted users, its functionality and the model that will guarantee its sustainability.
Platform implementation strategy
Based on its experience assessing the performance of logistics markets and deploying collaborative platforms, ALG recommends an implementation strategy articulated through two broad phases: an initial phase to test the platform concept and a growth phase, where the platform must achieve its sustainability.
The initial phase will tackle:
- The logistics assessment of the target market in order to identify shortcomings and improvement areas
- The design and development of the platform
- A pilot implementation of the platform involving real market transactions
The pilot project results will feed the comprehensive definition of the platform, to be tackled during the growth phase. At this stage, the role of the owner and operator is crafted in detail, and the platform’s operation is granted to a specialized private player.
The operator will conduct its organizational deployment to run the platform and will develop the go-to-market strategy and the functionality roadmap in order to reach the maturity phase of the endeavor.