Technology Convergence – The Philippines as One Virtual Bodega 2 of 2

(Start of 2 of 2)

In this post, we propose a solution to the problem via a change in the national logistics model. This proposal lowers delivery cost for producers and buying cost for consumers at the same time. This proposal is an opportunity for existing or new players and systems integrators to come together. Players who refuse to compete, in consolidation with others, using the same model will be sidelined as niche placers. The proposed business model needs investors with substantial resources for the initial investment to act as systems integrator.

In effect, they share from the savings created by this innovative convergence of existing technologies. The savings will come from the following:

1. Total cost savings: lower inventory carrying cost, cheaper warehousing cost, lower obsolescence and wastage, lower delivery cost, lower systems and IT cost, lower communications cost offset by service or utility charge,
2. Expenditure reductions: lower inventory level to carry a given volume of sales, lower system storage and delivery investment, lower system ICT investment, lower transport investment as less duplication.

Sharing this pool of savings will benefit consumers and producers alike at the same time.

Our proposal to have the Philippines as one Virtual Bodega involves the convergence of the following elements and existing technologies.

The customer will manage his inventory in the one Virtual Bodega via workstations linked to the system. The success of the proposal depends on how it creates credibility from the accuracy and timeliness of the information on the customer’s screen. In effect, as in cloud computing, this proposal transforms the current messy and high cost logistics scheme to a utility or a service to subscribe.

As is obvious to the systems integrator, the other huge benefits of this proposal are tollgate and network effects (first mover, switching, lock-in). These effects are much like what you get running a franchised telephone business, water or power distribution, a railway or a toll expressway.

(Click here for Part 1 of 2.)