Tuesday, May 18, 2021
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Smaller and Smaller Hubs

SCMAPIt happens fairly regularly: most days of the week, several times a day, we’d hear a rider from Shopee or Lazada call out to our next-door neighbors.


Do they order online this often? I used to ask.


Wrong. Our neighbors aren’t ordering, but the opposite: they’re the ones being ordered from. Turns out they’re online merchants, doing business through the two major shopping websites in the country. They’re selling sewing and knitting supplies—yarn, mostly. You wouldn’t notice because the inventory doesn’t really take up much space. Maybe a couple of boxes in the living room at one time. I haven’t really peeked inside.


We’ve talked a lot about how the Internet has enabled these smaller businesses crack bigger markets. The fact that there’s always someone knocking on our neighbors’ door to pick up an order for delivery suggests that a lot of people out there—perhaps really far out there—are patronizing their wares. And this is the case whether they’re selling through online websites, or just keeping a storefront on Instagram.


We’ve also talked about how, at this point, our supply chain networks are still not optimized for the growth in e-commerce. Once again, it’s about limitations in both capacity and capability, the same issues we face across supply chain. We still have difficulty utilizing transport and storage options because of congestion and a shortage lack of qualified personnel, a problem evident during those 11/11 and 12/12 sales. Internet connectivity remains an issue both in rural and urban places, meaning the potential of e-commerce isn’t yet fully optimized. (I have friends who’ve struggled with having their connection problems repaired for months. And I am one of them, too.)


That’s not to say we haven’t made strides to improve our services and provide more value to vendors and customers. Logistics providers and retailers continue to further embrace technologies that provide better visibility and convenience to everyone. But while these new applications help, the physical aspect of supply chain is still important. You can be as transparent as you want with delivery times, but waiting weeks for your order to arrive is still not ideal for most consumers.


In response to the e-commerce boom, logistics providers have embarked on an aggressive expansion, opening more, smaller hubs to cover the whole country. That allows products to be pre-positioned closer to where their customers might need it. But I imagine the trend points towards a more local direction, especially when we start doing our groceries online more often—and I’m thinking weekly supplies, not just big discounts on infant formula and diapers.


One trend that might emerge is the rise of even smaller hubs in urban areas. Imagine a small room in one of the big condominium complexes in Manila, regularly replenished with fresh food items and other supplies. A delivery man would access it—he’d have to have a valid order; this is where technology comes in—and pick up the items before sending it to the customer, which would perhaps be in the many flats upstairs, or in a 200-meter radius. In theory, this means delivery can be done within hours from the order being made: a positive for time-starved urbanites.


But this isn’t as easy to implement as it sounds. Sure, the technology is there to support the concept, and I imagine the bigger retailers would have the capability to expand their networks. But would residents want this near their homes? Would this run foul of planning regulations in the towns and cities they’ll be in?


Perhaps if we figure this out we would be one step closer to really taking advantage of e-commerce, of enabling its possibilities for businesses and customers and everyone in between. The dream of doing it like Amazon does in Singapore—deliveries within four hours of ordering—may be improbable for obvious reasons, but again, imagine what e-commerce can do to everyone. For us in supply chain, we have to continue working on it.


Supply Chain Outlook: Join us this Friday as we kick off 2020 with a look at how supply chain can better enable and take advantage of the possibilities offered by the digital economy. Joining us are DTI assistant secretary Mary Jean Pacheco and fintech veteran Jojo Malolos; and as always, our friend Ronilo Balbieran will present his economic outlook for the year. Registration for the event, happening from 12nn at the EDSA Shangri-la Manila, is still open; visit scmap.org for more details.


In Style Hong Kong 2020: SCMAP supports this event organized by the Hong Kong Trade Development Council, happening on March 5-6 at the SMX Convention Center in Pasay City. This free event will spotlight how new innovations and Hong Kong’s competitive business environment can bring Philippine businesses further, as well as products and services from the city. Visit instyle-hk.com for more details.


Henrik Batallones is the marketing and communications executive of SCMAP. A former board director, he is also editor-in-chief of the organization’s official publication, Supply Chain Philippines. More information about SCMAP is available at scmap.org.


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