Crowdsourced supply chain
The word “crowdsourcing” may not have entered your technology lexicon yet, but it likely will soon.
The concept is relatively simple – use the general public to perform a set of tasks or services that would ordinarily have to be undertaken by employees, or outsourced to a specific firm.
The crowdsourcing concept has made major waves in the charity world, where fundraising targets can be achieved by soliciting a faceless (and mostly online) community to tackle tasks that need not be micromanaged.
But more and more, the concept is seeping into the transportation and logistics world. For instance, in mid-2013, Walmart executives told Reuters they were considering a concept for crowdsourcing last-mile delivery of goods to online shoppers.
Basically, the plan works like this: in-store shoppers would be given the opportunity to deliver goods from that store to an online purchaser in the area in exchange for a discount on their bill. Other iterations of this concept have the crowdsourced “workers” earning points.
The reward is not that significant, since the main issue is that Walmart (or whatever retailer engaged in this practice) could avoid paying its own employees or package delivery firms to tackle these last-mile runs.
The idea, of course, is fraught with what-ifs. There are all sorts of liability issues for the company in terms of the deliverer and the online shopper. There’s also the issue of accountability. In some sense, any company essentially using free crowdsourced staff to perform an important task might be getting what it has paid for.
But last-mile delivery isn’t the only area where crowdsourcing comes into play for supply chains. More manufacturers – especially ones that sell direct to end customers – are working with a crowdsourced demand model.
The idea works like this: the manufacturer procures the raw materials for an order. The manufacturer then sets up a proposed order online that customers can back. When the order reaches a threshold determined by the manufacturer, it is considered backed, and production begins. Thus that buffer inventory is eliminated – only what has been sold is what will be made.
This model doesn’t eliminate the need for a sound logistics strategy – after all, raw materials still have to be sourced (likely from other countries) and stored. Delivery to customers has to be arranged. There may even be several stages of production at various locations that need to be coordinated.
But eliminating, or even significantly reducing, inventory sure simplifies the supply chain exercise.
This is not to say every manufacturer can employ the crowdsourced demand model. It’s hard to envision Proctor & Gamble waiting for 10,000 customers to tick a box online before it starts a production run of toothpaste, nor is it reasonable to expect a customer to wait weeks or months for that toothpaste, and nor would P&G like to take on the responsibility and cost of delivering 10,000 tubes of toothpaste to individual customers.
For now, the crowdsourced demand model has flourished in niches, like among small-batch artisanal clothes makers – essentially verticals where long-term value and craftsmanship is cherished over speed and convenience.
But it doesn’t work for companies – retailers, manufacturers, or commodities shippers – that deal in huge, largely fungible products. Is a pharmaceutical company going to wait to start a run on a medicine until it has been assured by customers that they will buy it? How would those customers even know they need, say, a cold remedy, until the day they need it?
If you think about it, crowdsourcing goes against the very tenets of modern supply chains – expertise, service, and proprietary advantages. Logistics services providers are in the business of figuring out ways to help shippers balance the needs of their end customers with the output of their production facilities or suppliers.
If there’s a way to balance that more directly, the need for those LSPs goes away. But again, at a certain scale and level of replace-ability, inventory is secondary to getting the product on the shelf when the customers need it, not when they want it and are willing to wait days or weeks or months to get it.
The term crowdsourcing is often credited back to two editors at Wired Magazine – a seminal article on the subject by contributing editor Jeff Howe appeared in 2006. So we’re coming up on a decade of the existence of this concept and its catchy name.
Will it have more relevance to shippers? I suppose if the above examples – both for and against crowdsourcing demand patterns – represent the extremes, there is a gray area where even a giant fast-moving consumer goods company might find value in crowdsourcing to establish future levels of demand.
It’s hard to imagine a scenario where a P&G wouldn’t have to deal with huge volumes of inventory in its pipeline at all times, but if crowdsourcing could help reduce those levels even a little, it might be worth contemplating.
This is all really food for thought more than anything else. By and large, companies use crowdsourcing to accomplish tasks that might be important, but not core to those companies’ success. After all, you wouldn’t entrust a key task to a nameless, faceless person whose qualifications to fill that role are unknown. Even if the work comes for free.
The small clothing manufacturer that crowdsources its demand levels is relying on customers to shape the direction of production, but that company’s strength lies in its ability to design and produce clothes, not necessarily knowing which of those clothes should be produced at a given time. And that’s maybe where the applicability of crowdsourcing lies in logistics – to make the unknown a little clearer.
And if you want more information on crowdsourcing, just read about it on Wikipedia, the most famous crowdsourced endeavor of them all.