The shock waves which have reverberated through the world in the last few months have caused untold social and economic upheaval. The “new normal” of lock downs, social distancing, remote working and closed borders would have seemed absurd just a short time ago. However, we humans are creative and resilient, especially when circumstances force us out of our inertia.
There are a number of striking examples as to how we have adapted to this new situation. Many have been enabled by a newly-energized use of technology. Musicians are performing concerts from their living-rooms, students are learning remotely, and grandparents who previously pshawed Whatsapp are now Zoom’ing with their extended families (ok, Zoom - it’s time to make that ‘Mute All’ button a little more prominent!).
Small business, technology, and everything in between
The equivalent has started to happen within small businesses also. My local neighborhood pizza store, limited to home-delivery for over nine weeks, has recently adopted online order tracking for their customers, an investment which would have probably seemed superfluous before COVID-19.
Much of the technology to do all this (such as ordering, last-mile delivery, track-and-trace and remote collaboration), has existed for a long time, but has now received a huge ‘call to action’. Almost overnight, these functions have transformed from being largely used by medium to large businesses, to being day to day necessities, for millions worldwide.
Small businesses, especially in the services sectors, who rely on healthy cash flow and capital for survival, were literally forced overnight into adopting online processes, from revamping websites and social media presence, to switching entirely to a model based upon online ordering and fulfillment.
Logistics - the last bastion of offline business?
While supply chains may be supported and optimized by cutting-edge technology, they are still reliant on physical movement of goods and constrained by production, inventory and good old supply and demand. The logistics industry has long been maligned by many as the last huge offline industry. For close to 20 years the world has been able to perform fairly complex transactions such as booking a vacation or buying an insurance policy online without the need for a printed document. By comparison, shipping a container from any origin to any destination will still usually involve numerous offline communications including emails and phone calls, and is likely to require large amounts of signed paperwork, like Bills of Lading, required for evidence of proof of receipt, confirmation of delivery and proof of payment among other things.
In its defense, the processes involved in shipping are numerous and complex. Some parts of the industry have been almost fully digitized. For example, thanks to the investment and success of UPS and FedEx, shipping small boxes from distribution centers to the customer’s door (often known as the ‘courier’ or small parcel industry) is fully digitized.
However, at the large-volume end, the world of 20/40 foot containers, pallets, haulage both international and domestic freight, physical paper Bills of Lading, inspection certificates, commercial invoices and proofs of delivery are all ubiquitous and often required.
It is not uncommon to walk into a freight forwarder’s office and see shelves filled with binders full of physical documentation. The flow of paperwork denoting responsibility and ownership of goods and proof of payments is critical within freight, since it triggers the release of freight to the receiving party. Despite the obvious value in electronic formats, by and large the US freight industry is still largely reliant on exchange of paperwork.
Of course, Covid-19 has affected logistics in numerous ways, from day-to-day changes endured by America’s truck-drivers, to 1000’s of logistics personnel now being forced to work away from the office. Among the other 100’s of implications, the current situation looks set to be a catalyst to finally drive automation and digital replacement for many old offline logistics processes. Smaller shippers and importers are discovering new ways to book freight services online, with Freightos.com reporting a 200% increase in Fulfilled By Amazon (FBA) imports booked on their marketplace. Other examples of this recent drive to digitize include ocean giants Zim, and Evergreen promoting new paperless processes, and JB Hunt, the fortune-500 US freight shipping leader, announcing on May 1st the introduction of technology for reduction of human contact during the freight delivery process.
One small New York based forwarder had mentioned that they have had to adapt fast to ‘remote working’ when in 2012 SuperStorm Sandy prevented them from going to their office for nearly two weeks. This had been their trigger to move some of their documentation and collaboration to a cloud-based system. With that context, combined with turbulence in the freight market driving unprecedented peaks, troughs and changes, the current crisis proves to be the catalyst to drive a new wave of innovation to freight and logistics - digitizing the flow of documentation.
Online payments - a key component to helping small logistics businesses stay nimble and competitive, especially in time-sensitive situations
A staggering 51% of B2B payments in the United States are still made with paper checks, and parts of the logistics industry have depended upon check payments for years, with many Logistics Service Providers (LSP’s) insisting on physical proof of payment. One US forwarder informed us recently (pre-Corona) that they frequently courier checks to certain LSP’s via motorbike.
Until now, solutions to replace checks with online payments have either been expensive and complex, or consumer-oriented and therefore not sufficiently functional for small businesses. The small freight forwarders (of which there are many 1000’s in the United States) have lacked the means, resources or incentive to invest in them, or frankly most other back-office automation.
Check-payments are outdated, yet somehow still necessary. The alternatives offered by the banks or by niche industry players either involve hefty fees, or for both parties to be signed up and subscribed to their service, or both. However, digitizing online payments is a great example of a process for which there is an easy and nimble route to digitization.
Melio, for example, offers a free, intuitive and flexible way of replacing the outdated and expensive practices of check-payments, with LSP’s being able to send and request/receive B2B payments from their own homes or their trucks, from their laptops or phones, without the need for physical, human intervention, trips to the office printer or the bank branch. With no investment or subscription commitment - outgoing payments can be scheduled, managed, delivered to any business vendor or supplier, and incoming payments can be requested, managed and tracked from any customers.
Last week, a colleague mentioned to me that there were some cumbersome administrative changes which they had been trying to make to a business bank account for many weeks. Due to the current circumstances many of the bureaucratic requirements for in-person signatures and physical documentation had been lifted (albeit temporarily) and the changes had now sailed through smoothly. Let’s hope that these will outlive the current restrictions.
However, with almost everyone in all walks of life actively seeking efficient online ways of replacing unwieldy manual or in-person processes, the stage is set for a new way of approaching these traditional processes, and those logistics entrepreneurs who are more open to adopting a new way of doing business will be poised to better weather future unexpected situations.
Victor Ofstein has worked at the intersection of technology innovation and logistics for over a decade.
Melio’s mission is to “keep small businesses in business” through smarter payments that improve cash flow and save valuable time - and we hope you find this resource and our services helpful at this time.