In the effort to reach a global market impact, companies intercept very specific needs of individual consumers, which translates into distributing a huge variety of niche products and into demanding customized shipments by specialized logistics service providers. This is best met by a network of specialized logistic services, each covering a portion of the chain and offering the right cost/performance trade-off.
Could you name your smartphone model and compare it with others from the same brand? Do you exactly know which Lego game your kids are playing? Have you found all the original ingredients for your typical Italian dinner in the local grocery in the German countryside?
There are good chances that what you are eating, wearing or using to make phone calls and check your email is a niche product, tailored by a (non-)niche company to satisfy exactly your needs as a consumer who wants a specific object, a specific cost, a specific functionality, color, size etc.
It is the business model of “selling less of more”, where companies are able to intercept very specific needs of individual consumers, and to profitably market and distribute a huge variety of products. This phenomenon is already well established in the digital media and e-commerce markets, but it is rapidly expanding in traditional retail and manufacturing, involving companies like, e.g., LegoTM and Kitchen-aidTM.
When the aggregated sales of niche products become more important, in margins and/or volume, than the sales of the few top-selling products (the “head” of the curve), global markets show the so-called Long Tail phenomenon. Here, producers are able to offer a massively expanded variety of products, and consumers are able to find niches that suit their particular needs and interests.
What impact does the Long Tail have on logistics?
The first evident impact is an evolution towards more flexible, responsive and widespread distribution networks, fulfilling the need for fast and efficient deliveries of small shipments. This is by itself a tremendous challenge for the logistics industry, which demands a rethinking of logistic organizations that were conceived to move huge quantities of few products to few mass-market destinations.
The second impact, less obvious but even more important, is the transformation of the logistics sector itself into a Long Tail market. The growing demand for smaller, customized shipments must be met by specialized logistic services, globally accessible but maximizing efficiency on a local scale. For example, a niche food producer from Italy must be able to reach specialty grocery shops in London without setting-up its own distribution network, that would be unfeasible for the volumes involved, or resorting to courier services, that would lead to excessive prices. This demand is best met by organizing a network of specialized logistic services, each covering a portion of the chain and offering the right cost/performance trade-off.
This is the vision promoted by the iCargo integrated project, that aims at establishing a business ecosystem for door-to-door logistic services. In the iCargo ecosystem specialized providers, like forwarders and carriers for the different modes, expose their services and resources through a globally accessible and interoperable information infrastructure, and shippers are able to combine the different services into customized, efficient and environment-friendly logistic solutions.