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Sharpening competitive edge through innovation “at the margins”

Innovation in logistics means thinking outside the (metal) box

It has been a while since the logistics industry was credited with some truly revolutionary innovations. Arguably the biggest game-changer came over fifty years ago, when Malcolm Maclean, an American entrepreneur, introduced a metal box that we now know as the shipping container. The super strong, standardized, stackable container transformed the industry.

With drones, driverless vehicles and 3D printing making the headlines in mainstream international media, however, and firing the imagination of budding transport entrepreneurs and customers alike, logistics has recently been enjoying some of the “corporate rockstar” media attention typically reserved for Google, Amazon and other pioneers of disruptive innovation. These technologies, coming alongside the advent of online shopping, have the potential to revolutionize logistics and global trade in the coming years.

At the same time, challenges, both commercial and regulatory, remain to some of the more ambitious technologies, which may push their prospects for broader international adoption back to the mid-term. In the near-term, logistics companies will continue to slug it out on a more conventional and increasingly competitive battlefield of trucks, ships, trains, planes and, of course, metal boxes. Technology, such as customer apps, electronic documentation, scanning systems and data analysis, will continue to play an important supporting role.

Planes, trains, automobiles… and helicopters

This is where incremental, innovative changes “at the margins” come in, and this week’s launch of DHL’s helicopter service in London is a textbook illustration.

The international express delivery industry, in particular, has become increasingly competitive. All players have worked hard to build up international networks of aircraft, delivery vans, IT systems and warehouses with modern sorting technology.

The international express delivery industry, in particular, has become increasingly competitive.

And we are all capable, to a greater or lesser degree, of navigating traffic, airways, borders and staircases to deliver packages. The overall quality of service within our industry is reasonably high. So how does a company offer differentiated quality and achieve leadership in such a mature and competitive market?

The answer lies in focused, incremental innovation.

In the ’80s, we could still establish a competitive advantage by opening up new emerging markets for express delivery services. In the ’90s, we could ride on the back of the Internet’s global expansion to introduce tracking services that gave customers unprecedented visibility on their shipments (and give us even better control of the shipping process). In the ’00s, we could introduce bigger, more efficient freighter aircraft with even longer ranges and higher payloads to connect the major intercontinental trade lanes even quicker. In the ’10s, it’s become more difficult than ever to achieve quality leadership within our industry. This has meant that our efforts to keep ourselves apart from the competition have become more incremental and more closely focused on a number of areas – in particular, customer service (instilling a customer-centric culture in an industry where customers still talk every day to employees), targeted but impactful changes to our network that shave crucial minutes or (where possible) hours off the transit time and a tailored focus on the sectors that need express services most.

Time really is money

The financial services industry is heavily reliant on express delivery providers. We play an important role in the sector’s supply chain. Obviously reliability and security are extremely important when carrying financial and trade documentation. However, speed is often even more critical: in an industry where financial capital is the inventory, keeping that inventory moving and generating value is vital. When it comes to letters of credit, guarantees or contracts, minutes can literally translate into millions in interest payments or gains on a transaction… or losses! This gives express providers an incentive to invest in even quicker solutions for financial services customers. In London, our helicopter bypasses traffic congestion and reduces transit time from the airport to the financial district by up to one hour. This small time saving in London allows us to upgrade our delivery time from key financial centers such as New York, Boston and Chicago from a two-day to an overnight service. It’s a relatively small change to our transportation network that has a huge impact on customer experience and sharpens our competitive edge.

Competition at the margins

Incidentally, helicopters are not a natural fit for the express business. They have limited cargo space and come with a high unit cost of transport, making them appropriate principally for high-value deliveries or, as is the case here, a customer segment that places a premium on time. To the best of our knowledge, despite the prominent role that aviation plays in our business, no other express provider deploys them on a routine, scheduled basis.

Standing out in extremely competitive markets requires unconventional, outside-the-box ideas like this. Companies that make simple but innovative changes at the margins can carve out a competitive advantage of their own.

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