Start-ups Aim to Shake up Logistics. Are They Doomed to Fail?

Published : January 22, 2015

logisticsInnovation drives business— without new ideas and concepts, there would be an easily-discernible ceiling for business growth that limited both product development and logistics services. This isn't to say, however, that every innovative idea is a game-changer. Some businesses start out with a revolutionary new idea yet still end up a footnote in the history of commerce a few months or years later. It's with an interested and cautious eye that analysts are examining the current crop of logistics upstarts, asking if they're truly poised to, literally and figuratively, deliver the goods.

A Strong Start, But What about Scale?

Most small companies have flexibility that industry behemoths can only dream of. Completely changing their infrastructure might be a matter of a meeting or two, altering their sales goals might only take a Skype call or email. This versatility looks promising in the beginning, as changes only need to affect a small workspace, employee base and product flow— the math is done in thousands, not millions. If an idea does take off, however, these small startups could find themselves back at square one, restructuring and recalculating— and possibly priced out, material or machine-wise— at every significant sales or customer growth milestone.

This lays out a very bumpy road that belies the ease of growth in the first leg of the proverbial race to success.

Branching Off While Staying Rooted

A good earmark of a small risk is a company with a strong core business that's dabbling in a consideration, rather than throwing themselves into it headlong. Take business darling Uber, mostly (for now) known as a courier service for people. In late 2014, however, the company used the drivers and infrastructure they already had in place to deliver Christmas trees in conjunction with a Home Depot-provided fleet of trucks— a joint venture that promised the possibility of significant reward without significant risk.

As Christine Logorio points out in INC, they weren't looking to start an arboreal empire, of course: the trees were a test run of Uber's foray into object logistics services, via brand partnerships, that builds on their already-successful human logistics business.

Small Enough to Think Outside the (Custom) Box

Another benefit to small businesses taking on the "big boys" in logistics is that their minds, as defined by research and development, are closer to the customer and, thus, tend sidestep corporate red tape.

Shyp, a "first mile" solution for entrepreneurs that want to outsource their shipping, uses a fascinating custom cardboard cutting machine to make boxes to an object's size, rather than using bubble wrap and air pillows to customize an existing one. As Marcus Wohlsen writes for Wired, this approach eliminates not only the cost of that padding, but also ensures a safer, more secure journey from initial shipping to receipt, cutting down on broken or damaged items.

The downside is that once larger competitors get wind of these new approaches, they have the manpower and capital to mimic them, unless, of course, the ideas or machines are proprietary or patented.

Start-ups are capable of completely changing, or even leveling, the playing field of logistics services with the right idea at the helm. Finding that idea in a sustainable, scalable form is tricky, though, and doesn't always guarantee that things won't trend back to "normal" once a flash in the pan simmers down.

Nearly every industry in business today has a well-stocked graveyard of start-ups that filled in the "____ is the next ____! " blanks and snagged headlines in their heyday, but are barely remembered today. Logistics is no different, but startups like Uber and Shyp are worth watching, if only to watch the innovations they bring to the table in action. No matter what happens to this plucky duo of upstarts and their ilk, ultimately the end customer will undoubtedly benefit from their existence—however fleeting it may be.

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Topics: Supply Chain Logistics

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