Home > 2023 > US logistics giants are crushing small businesses

US logistics giants are crushing small businesses

US logistics giants are crushing small businesses

by Elian Pres-Gurwits, Co-founder at Gently

The logistics system in the US is unfit for purpose. Small businesses have become dependent on large e-commerce companies while the patchwork system the industry is built upon is crumbling. But what’s the answer?

We need a major rethink that makes logistics more efficient, offers new alternatives to the e-commerce giants, and supports small businesses. I believe decentralizing the supply chain and breaking industry monopolies is the way to do this.

 

A broken system

At the end of 2022, CNBC carried out a survey to understand how US logistics companies and trade groups saw the future of the supply chain. More than half of managers didn’t expect the supply chain to return to normal ‘until 2024 or after’. Thirty percent said they didn’t expect it to return to normal until at least 2025 – or potentially never.

The impacts of the pandemic are partly to blame for this. But we need to look deeper to understand how to improve the supply chain at its roots. There will likely be further disruptions to the supply chain in our lifetimes – whether that’s another pandemic, climate disasters, or political unrest – and logistics needs to be able to weather the storm.

A significant reason for the lack of resilience in the supply chain is that it’s too centralized. The supply chain is made much more vulnerable by operating from a select number of large warehouses. If one warehouse is put out of action by flooding, for example, the knock-on effect is massive. Even if retailers are not impacted directly, they cannot fulfill customers’ orders for as long as the warehouse is impacted.

It’s also adding to the carbon footprint of orders. The last ‘mile’ is getting stretched to longer and longer distances as the supply chain becomes more centralized. This is making it harder for retailers to stick to their sustainability commitments. As inflation rises, it adds another financial pressure as the cost of gas creeps up.

 

E-commerce giants damaging SMEs

Meanwhile, Amazon has come under scrutiny for the way it uses data. The ongoing antitrust investigations revealed that Amazon collects data from the sellers on its site, tracking which items are selling well, and then uses that data to create or promote its own products in direct competition. Rather than supporting small businesses (as it claims to do), Amazon does the exact opposite.

But what choice do small retailers have? Once small businesses grow past a certain point, they rarely have the means to deliver to a large customer base. If they want to keep up with the competition and offer the short delivery times that are now expected, their only option is to go to major e-commerce companies.

These e-commerce giants’ monopoly on logistics, specifically last-mile delivery, has made the industry completely impenetrable. There aren’t currently any good alternatives that give small businesses the same quality of service without risking their data being used against them, and the e-commerce giants are the only ones to reap the benefits.

 

The future of logistics

The combination of a broken supply chain and e-commerce giants’ monopoly on logistics has created a perfect storm to stunt the growth of small businesses. Given that over 99% of US businesses are SMEs, that’s a serious threat to the US economy.

The future of logistics needs to be decentralized and challenge the chokehold that major e-commerce companies have on last mile deliveries. The gig economy has attempted to do this to some extent, but the results have been lackluster, and it’s not sustainable in the long run.

Nano-fulfillment centers are the answer – that’s what we’re doing at our newest venture, Gently. Using predictive AI, we can ensure that fulfillment centers only store the necessary amount of stock. And we can bring parcels closer to the end destination to create a more efficient supply chain, cut emissions, and, ultimately, reduce the delivery time to the customer.

The centers also help drive growth for local businesses who are often based in the physical economy, and they provide job security for those involved in last-mile delivery, which has been seriously neglected in the gig economy.

We believe this will help make the logistics industry more resilient, especially as we head into a period of deep uncertainty. If we want to make it easier for small businesses to operate, fixing logistics must be the first step. It is now up to us to put this change into action – if we’re successful, we can double the number of entrepreneurs in the US by 2030.

 

 

About the Author

Elian Pres-Gurwits is a serial entrepreneur and business advisor with experience launching and scaling ventures in the US, most notably the beauty subscription service Glossybox. He built Glossybox into an international success and served as President and Managing Director for the company. The firm was acquired by The Hut Group in 2017. Gently is Pres-Gurwits’ newest venture, a disruptive logistics company he co-founded with Harvard classmate Anas Aljumaily in January 2023

 

 

 

You may also like
Industry 4.0 – Where Are We Now?
Staying a Step Ahead in the Existential Challenge of Securing Your Most Valuable Resource
Evaluating Challenges and Opportunities of Digitalisation in Supply Chain Management
Demand Forecasting in an Inflationary, Supply-Constrained, Semi-Post-Pandemic Environment
Malcare WordPress Security