Case Study: The Uberisation of Supply Chain, Study notes of Material Science and Technology

Download Case Study: The Uberisation of Supply Chain and more Study notes Material Science and Technology in PDF only on Docsity! SAMVAD: SIBM Pune Research Journal, Vol X, 26-31, June 2016 ISSN (Print) : 2249-1880 ISSN (Online) : 2348-5329 *Author for correspondence Keywords: Innovations, Supply Chain, Technology, Uber, Uberisation 1. Introduction Uber is a well-known taxi aggregator that is famous across the globe for its path-breaking service process innova- tion. Uber, a technology company, provides a platform for customers who wish to source a taxi ride on their smart phones. Due to digital matching of demand and supply, capacity utilization of the vehicle is optimum and this leads to an affordable pricing mechanism for the services. This creates a win-win situation for the taxi aggregator services, customers and drivers. The Uber model has become so popular that it has spawned several imitations of app-based services of various types. Demand uncertainty has always been an Achilles’ heel for supply chains. The Uber model has, through real-time digital matching of demand and supply, managed to address the problem of demand uncertainty in the supply chain. In an era of uncertainty, implementation of strategy should not follow a ‘command and control’ approach. Ground level people must be involved in the action and they must be encouraged to provide inputs that can help greater level of visibility in information sharing. The objectives have to be clear to everyone only then strat- egies to reduce uncertainty in supply chain will lead to success. 2. Literature Review The objective of this review is to trace the evolution of technology based apps. The World Bank’s “ICT for Greater Development Impact” strategy seeks to transform delivery of public services, generate innovation and improve competitive- ness2. Software development has flourished along with the development of smart phone technology. Transportation industry has benefited from this new smart phone app technology. In a smart phone the apps provide utilities like built in maps, traffic and parking information, public transportation, taxi services, airlines and data collection. The app has revolutionized the interactions that people have with each other. In transportation, apps have streamlined the information we need to move ourselves and our goods3. The role of technology in socio-economic development is at the heart of ICTD [Information Communication Technology Development]. History has justified the role of ICTs in socio-economic development. Digital interactions via smart phones have pervaded not only the developed world but also the developing economies4. Mobile phones have played an important role in networking society. People are able to negotiate their day Abstract Uber, a technology company, provides a platform for customers who wish to source a taxi ride on their smart phones. This case study analyses the impact of Uberisation on supply chains and addresses the risk Uberisation entails for traditional firms that are unable to leverage the smartphone app technology. This development based on app technology has necessitated innovations across the supply chain. Case Study: The Uberisation of Supply Chain Venkatesh Ganapathy* Associate Professor, Presidency School of Business, Bangalore, India; venkateshganapathy@presidency.edu.in Venkatesh Ganapathy SAMVAD: SIBM Pune Research Journal 27Vol XI | June 2016 providing services to other people. This revolution in ser- vices is expected to spread to other sectors in the future like consulting, on demand doctors and video making1. Doctor on call services and a dentist on call services have already been introduced in Bangalore. The size and scale of operations determines if technol- ogy adoption is going to increase profitability. Turnover, margins and ownership determine if the technology spend is an investment or an expense. The Indian logistic landscape is all about faster time-to-market as competi- tion between the E-commerce players intensifies. Many organisations operate on hybrid supply chain models that combine paper-based and IT-supported processes. Technologies like Radio-Frequency Identification (RFID), GPS and sensors have led to more flexible, open, agile and collaborative digital supply chain models. Digital supply chains help in automation of business processes and lead to greater flexibility of organization. Companies need to internalize digital supply chain models as an integral part of the overall business model and organizational structure9. This helps in resource management and better capacity utilization. Fleet management is more efficient. Warehouse throughput increases as there is quality information about demand. Fill rates are better optimized. The success of Uber supply chain can be attributed to the right service available at the right time at the right quality and right price. How can Uberisation benefit supply chain? The Uber phenomenon not only improves asset utilization but also labour utilization12. The mobile app captures the data and transmits it to interested par- ties in real-time. There is less paper work. GPS tracking has become the de-rigueur now. The information has to be used intelligently and the key is in creating smart networks that provide high quality accurate information. It has been predicted that smartphone apps will be used to connect the entire supply chain - including supplier, manufacturer, distributor and consumer in real time. The apps will help reverse logistics, warranty and order management. Uberisation of supply chain is irresistible from the standpoint of asset utilization. Research and innovation policies have to be centered of socio economic change - in demographics, resource consumption, consumer expec- tations and technological disruption. In the future, focus will be on value added manufacturing with technology playing a significant role. Cost reduction will be achieved by reducing time to market by shortening supply chains. to day mobility with increasing fluidity. The contextual awareness capabilities of smart phone technology are enhancing this ability. Smart phone app development has redefined travel across the globe5. 3. Uberisation of Supply Chain Supply chain is experiencing tremendous transformation due to digital technology. Today the competition is not between organisations but between supply chains. It is due to digital influence that electronic invoicing, computer- ized shipping and tracking and automation have become essential components of supply chain. Companies like Federal Express, UPS and DHL have been successful in leveraging technology. The business model of Uber has now become so popular that many supply chain practitioners are talking about the Uberisation of supply chain. The Uberisation of  services will become the norm in the future. The Internet-based matching platforms have reduced the transactions costs1. The People-to-People economy is one in which self-employed individuals offer services in transportation, accommodation, cleaning and dining through platforms that connect demand and supply. This economy will increase the efficiency of the economy as competition intensifies and there is optimal allocation and use of resources. Monitoring of every link in the supply chain has become a distinct possibility as there are automated noti- fication systems that can send a single message to many players. App technology has made Email communication somewhat redundant. Whats app is now available for free and so there is mass consumption however it will be interesting to see the consumer reaction if it becomes a chargeable service. If we look at Uber, it does not provide the ride - it merely connects the driver and the customer as a plat- form6. The transaction cost is the sum total of cost of seeking and sourcing information, cost of bargaining and cost of enforcement. These technology-enabled services have empowered the customer who can write an unfa- vorable review if the service was unsatisfactory. These platforms are proving to be efficient because they enable the reduction in information asymmetry between the different actors in the supply chain1. How is the emerging economy different from the one that preceded it?14 It is the sheer scale with which self-employed individuals (or micro entrepreneurs) are SAMVAD: SIBM Pune Research JournalVol XI | June 2016 30 Case Study: The Uberisation of Supply Chain level and this input can be matched with production inventory. This will help in production planning and control. But the success of this process greatly depends on the technology algorithm and the manufacturer’s ability to train people on using the app. Using predictive data modeling, information can replace inventory and this can lead to better inventory management. This can eventu- ally lead to lesser inventory and hence adoption of lean manufacturing. Additionally the production department can work with purchase to have a smart phone app with suppliers so that demand can be placed with suppliers. This can help in avoiding excess stock of raw materials and suppliers can deliver raw-materials just in time. Services involve co-creation of value by customer and service provider. Services cannot be inventoried. However, Uberisation can help achieve a better match between demand and supply in certain specific services like logistics, health care, travel and tourism. 8. Limitations of Research and Future Research Directions This research suffers from the limitation of not having conducted an empirical study or use of a real life case study. As Uberisation in supply chain is an emerging area of research, future academic research can follow the exploratory method of research to get a better perspective of solving last mile delivery issues in a specific service sector. This can later be followed by an explanatory study to investigate the benefits reaped by firms that have adopted Uberisation as a business process. It will also be interesting to study the impact of Uberisation on the performance of service supply chains and also investigate sectoral challenges in adopting Uberisation. 9. Conclusion As per a report in the Times of India dated 26th December 2015, India is projected to grow at 7% and has the poten- tial to be the world’s fastest growing economy till 2024 far outpacing China. The prediction for India is positive because of increasing sophistication of industry; services led industrialization, ability to adapt to changing global demand and variety in exports. India has made produc- tive gains in manufacturing and services. It has diversified its exports into more complex products. The report says that gains in economic complexity will lead to higher incomes. In the economic complexity index, India’s rank- ing is 42. In this economic climate, it is no surprise that taxi aggregators like Ola and Uber, food aggregators like Swiggy, Food panda, Fresh Menu and hotel aggregators like Goibibo, Trivago and Oyo rooms are doing very well. Technology is playing a greater role in new business development. A report in the Times of India dated 25th December 2015 states that Uber is setting up its first engineering center in India in Bengaluru to customize solutions for the local market. Uber is planning to hire software engi- neers and product managers in Bengaluru who will work closely with the on-ground operations teams and product engineering team in San Francisco. This center will be responsible for projects related to growing Uber’s business. Uberisation reflects a radically new business model. It is triggering a social revolution. This poses a serious competition to traditional businesses that are unable to leverage the benefits of smartphone applications. Customers are more empowered now. The success of Uber has spawned other businesses who are motivated enough to pursue a similar strategy – medical services for non-emergency cases and legal support19. The taxi aggregator services like Uber and Ola have proved to be successful as their service innovations have disrupted the market. These innovations have changed the dynamics of business in a radical manner. But a survey of supply chain professionals revealed that the “sharing economy” apps were mostly dismissed by them as trivial (Kevin O’Marah). One reason why services like Uber (taxi aggregator) and Airbnb (room sharing) have become popular is due to the fact that they are able to reduce the role of middlemen and brokers. Uberisation restructures supply and demand and creates entrepreneurship at the local level. Uberisation is associated with collaboration, agility and greater levels of trust in employees. Data driven decision making is the hall mark of Uberisation. The problem of uncertainty in demand can be resolved through use of technology. Though companies recognize the need to transform their business model, they falter in identifying the tech- nology that is critical to changing the business model. In the Internet era, customers expect solutions. Traditional businesses have to be prepared to handle the risk of their being “Uberised”. Aggregation using technology can render some peo- ple jobless but this is the price that they have to pay for Venkatesh Ganapathy SAMVAD: SIBM Pune Research Journal 31Vol XI | June 2016 inefficiency. In the internet-era, survival of the fittest has assumed greater importance. The app-based aggregator services also called as sharing economy needs to be in the  agenda of supply chain strategists for long term sustainability. Uberisation can influence supply chain performance by helping businesses focus on last mile delivery. Supply chain activities like sourcing of suppliers and purchasing of raw-materials can benefit by deployment of technolog- ical screening - however the role of purchasing executives will continue to be more pronounced. Data based deci- sion making will increase the efficiency of supply chain professionals. Manufacturing and quality monitoring are activities that can only be enabled by technology and smartphone apps are thus more suited to the logistics services. An Uber-like model for trucking can enhance the agility of supply chain deliveries. The performance of computing technology is increas- ing exponentially. Uberisation is symptomatic of the velocity of change in business in the last few years. This meteoric revolution in the form of Uberisation is fast becoming an integral component of the business land- scape. Uberisation is leading to a user generated market where entrepreneurs at the local level can collaborate and develop their business with a greater level of autonomy. Risks have become an inevitable part of any supply chain. Some natural calamities such as the Chennai monsoon floods were rather unexpected. Supply chain professionals need access to topical, quality data to deal with contingencies. Data is important to reduce the vul- nerability of supply chains. Network connected mobile devices are powerful com- munication and sensor platforms. They are the means to engage every actor in the supply chain. Virtual partnership of actors is now a reality due to smart phone app based technology. Transportation services are highly inefficient. Using mobile technologies, independent contractors can now be linked more efficiently which in the case of Uber could result in the disintermediation of legacy carriers in logistics services. Thus, Uberisation is where the future efficiency and effectiveness of supply chains lies. References 1. Nurvala, J.P. (2015). ‘Uberisation’ is the future of the digi- talized labor market. European View, 1-9. 2. 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