Superstitious "demand first" is a entrepreneurial trap

Let's take a look at an entrepreneur's article. The author Marc Kuo is the founder of a startup express delivery company named routific. routific is different from the express delivery company in the general sense and does not pursue "fast ", it is committed to providing enterprises with the "Optimal Route" service. Marc Kuo's point of view is very interesting. He suggested that before creating a company, entrepreneurs seem to have become superstitious about "demand first". Why must they be demand-oriented? Can you forget the on-demand service model like Uber?

If you are a hard-working entrepreneur who still holds the "need first" Bible, let's take a look at Marc Kuo's Thoughts on business models:

In this entrepreneurial age of "all to serve users", one of the most popular overnight industries is the express delivery industry. Large and small express delivery companies spring up in front of you, an endless stream. I was wondering why the express delivery companies all switched to uber-on-demand services? For example, the most common promise of XX express companies-delivering objects at the fastest speed can certainly reflect a great capability, but how much does it cost? Most demand-based start-ups may not pay attention to this issue, resulting in them being at a loss and have to struggle to maintain basic daily expenses.

Why must we be demand-oriented? Before committing to meeting the customer's needs at all costs, consider the alternative method of "how to help the customer arrange delivery.

"Fast", not king Tao

Every successful startup story in Silicon Valley will give birth to a large number of derivative start-ups, and Uber, which is highly sought after, is no exception. The Uber and Uber models are popular, so that every entrepreneur with a dream of success will follow the ass to imitate and want to compete for Uber in a certain field.

Of course, this is based on a reality: consumers become increasingly lazy and demanding, and all needs are expected to be met immediately. What do you want? Please arrive by taxi as soon as possible! Hungry? Fast food delivery! Are your clothes dirty? Door-to-door dry cleaning service!

-- Ignore. This is the status quo.

However, not all things should be provided as needed. Taxis and fast food are fine-because they always depend on services that quickly meet guests' needs. But do we really need a dry cleaners to pick up the clothes immediately? Do I need to deliver the drinks sold at the bar immediately? Do grocery stores need to be delivered soon after we think of buying something? What about massage? Who planned massage in advance this year is not a few hours of flexible schedule. Normally, do people want to end the massage quickly? I would rather arrange it in advance and choose to shop, massage, and wine tasting at my own convenience.

The main reason is that "demand" does not mean "fast ". Sometimes, as a user, we have to wait for several hours to get a certain service (such as a hot restaurant next to the office building at noon), depending on what kind of service we choose and how busy the service provider is.

Such uncertainty wastes our time. Imagine that if you want to set a reservation in a high-level restaurant, it is equivalent to placing the name of the reservation person on the list waiting to meet the requirement. The reservation person can only wait until the restaurant has a vacant space, call your own name.

It is remarkable to promise to complete the service within 30 minutes. However, it is often more difficult to follow the plan to provide the service than to make a reasonable distribution plan. We have talked with many companies that receive orders from major customers and provide express delivery services as needed, and have witnessed the heavy pressure on them to provide services on time.

If the service you provide is not "fast", but a reasonable schedule for delivery, it means that you have a good understanding of the future workload in advance and can prevent actual execution (Delivery Service) logistics problems (this is a nightmare ). Then you will see a happy ending: happy employees, loyal delivery drivers, and better customer service.

Here, I have found some feasibility for the pattern routific wants to try. Must we provide a good delivery service? It is necessary and has reason to say goodbye to the on-demand service that pursues speed!

Of course, from the perspective of economics and enterprise management, we can also see why it works better.

Scale can achieve "economic"

From the perspective of economics, the profit can be calculated by deducting the cost of the operating income. The operating income is the income of all express deliveries, and the cost of each delivery service is equal:

Cost of each delivery = (driver * salary) + (fuel * distance)/number of deliveries

Therefore, in order to ensure profit, a courier company needs to charge enough express delivery fees to guarantee the cost, but at the same time, it also needs to maintain a delicate balance between price and demand. If the charge is too high, the demand will be insufficient, and if the charge is too low, it will lose money.

Based on the economies of scale brought about by business integration, logistics suppliers and operators have always been charging extremely low-this is precisely the disadvantage of startups. In the express delivery market, the scale is crucial, and Uber's new generation involved in the express delivery industry is indeed unmatched.

To fulfill the on-demand service commitment, resources distributed throughout the city must be available to meet market requirements. At the same time, we also need to have enough business to make the company operate at full speed. Otherwise, the company's resources may be wasted.

More drivers should be hired to meet the service requirements, and higher salaries should be paid to avoid labor disputes. To continuously meet customer needs, more vehicles and more fuel are delivered. All this means that the cost of express delivery increases. Delivery within the planned time can bring about the same high operating income, but it does not need so many drivers, nor need to bear such a high salary, and will not travel so far. Therefore, the operational efficiency is greatly improved, and the profits are also significantly increased.

Operational Efficiency and asset utilization

The final key is to maximize the utilization of assets. How many delivery services should each driver provide when the company balance payments? This depends on the fee for each delivery and the number of deliveries that each driver must complete each day. Assume that the number of express deliveries provided by the driver every day is X. Starting from any aspect, the operator's goal should be to maximize X.

Theoretically, knowing where you want to go in advance is more conducive to obtaining the largest x value.

Another advantage of planned express delivery is that operators can distribute the concentrated delivery pressure. Many customers may prefer to deliver the goods at night, but the operator can give discounts for the morning delivery services. The express delivery company has not been able to solve the problems caused by peak demand. Even if the algorithms carried by predictions are no longer brilliant, it would be difficult to arrange delivery during peak hours. Why do we have to watch the whole company in a hurry? If it is determined that the next day will be busy, you only need to ask the driver to help temporarily in advance.

Planned delivery can also enable operators to make good use of the Optimal Path Algorithm. These algorithms can automatically distribute the delivery process to minimize unnecessary delivery detours and increase the value of X delivered by drivers to ensure the company's profit.

Burning money is a cloud, and making profits is the foundation.

If you are in charge of a newly established express delivery company, you can choose two ways to operate the company, or make a large investment to maintain the expected sustained growth rate, to achieve the expected business scale required to achieve balance of payments before depletion of funds, you can either choose to immediately improve operational efficiency and spend the same amount of money to complete more work.

Many startups in the express delivery industry seem to adopt the previous method. They hope to eventually become a sustainable enterprise, seeking a lot of support from venture capital. Kozmo raised $0.25 billion in the early days and spent $29 million a year on applying for public offerings. Webvan raised $0.325 billion through the IPO, but ended in bankruptcy two years later. FreshDirect focuses on profitability rather than rapid expansion. Now the company has a continuous business.

Planned delivery enables the operator to profit from the company's own strength, from having to developing customers without any place, and gradually and smoothly let the company grow and grow. The benefits of such a plan are similar to those of flexible cloud computing: cost increases proportionally when necessary. If there is no plan, hire a large number of drivers first, such as a bare-metal server group first, and then try to fully occupy their capacity. Who is willing to do this?

Here, do not misunderstand what I mean. There is always a market for on-demand express delivery services, but I would like to remind you that the market for delivery as planned is at least as big as on-demand services. One major difference between the two is that the latter is easier to implement, with fewer difficulties and higher profits. In short, planned delivery can help entrepreneurs continue to operate.

Even in the food delivery market, many customers (mostly enterprises) will understand that they need to arrange meal delivery at least a few hours in advance. Therefore, planned delivery can also be achieved in such markets.

Of course, the premise for such inference is that the delivery service is not outsourced. It is easy to run your own fleet, especially for delivery as needed. From a financial point of view, it is always not the best practice for companies to maintain their own fleet. However, if you want to keep full control of the customer experience, you need to have your own fleet.

The current situation is slightly different. Webvan spent $30 million to build warehouses in 26 cities across the United States. The next generation of startups that are born on demand are not vertically integrated, and they maintain low costs. However, we can still see that such enterprises did not place their business expansion and profit first, but all of them took market share. This is exactly the same as the profit-making business model for financing.

Superstitious "demand first" is a entrepreneurial trap