Will IoT Minimize UPS and FedEx Value Proposition?

Last month, both FedEx and UPS announced price increases for 2017.  Will companies continue to pay premium for FedEx and UPS services? Well, right now they will, but could the internet of things (IoT) change all that? Is it possible that the two leading logistics providers value proposition would become irrelevant in the near future? Here’s a look at the possibility.

What Is IoT?

The Internet of Things is a popular topic, especially when it comes to any device with a sensor or an on-off switch. Since Wi-Fi and cell networks are more widely available and easier to afford than ever before, there are many companies and individuals looking into connecting everything to the internet.

Such is the potential, that items that didn’t have sensors and connectivity previously, are now getting them.  Some are in built into our everyday consumer products like toasters and coffee makers, or enterprise products like jet engines and vending machines, and then some are designed to be attached to normally non-connected items, and removed after use.  Items like pallets, crates, or even individual boxes, during shipping.

So, how does this affect the FedEx and UPS value proposition?

Many companies still buy into the old tag line, “When it absolutely, positively has to be there overnight”.  It makes us feel safe, like if our jobs or personal lives depended on it.

The reality is companies pay a premium to use UPS and FedEx rather than cheaper, nimbler operators, and 3rd party logistics providers, and they do so, in part, for the visibility into their shipments.

But now, with the advent of connected sensors and global communications networks, we have the ability to monitor items during shipping to avoid disruptions and for tighter security.  Visibility right down to the individual carton.  We can see the actual location of a shipment, whether all the cartons in the shipment are together, and what the current environmental and handling conditions are.   Tie that with the tremendous level of granular data collected to analyze the performance of a company’s physical supply-chain, and the promise of IoT delivers a value proposition far greater than the “departure” and “arrival” messages we’ve come to expect from premium-priced logistics companies.

Now, a company can have the confidence to use 3rd partly logistic companies, freight forwarders, combinations of vendors, or even smaller trucking companies, at far lower costs then the premium providers.

So, while IoT alone will not make the likes of UPS and FedEx irrelevant, IoT has the potential to challenge some of the core aspects of their value proposition.