Next Logistic Wave: Shared Logistics Services by Newly Independent Subsidiaries of Manufacturers?

It is said that one of the reasons why 3PL services in Japan have not done as well as expected is because most major manufacturers and retailers have their own logistics companies as subsidiaries. Still, according to ongoing research by an Industry Publication from 2005, 3PL services have been growing at an average rate of 9.45% per annum from the start of the survey.

However, it is now believed that their main source of growth, dedicated distribution centers for large retailers, have now come to hit a ceiling. According to Masahiro Oya, Publisher of Monthly Logitsics Business, there is no decline in the number of orders received, but each project is getting smaller and smaller. He also points out that existing centers are suffering from a fall in volumes.

He analyzes that the 3PL service providers need to go upstream to the manufacturers to continue to grow. But the large manufacturers have their own subsidiaries that specialize in providing logistics services.

The key difference in the way 3PL has been growing in Japan vs. that in Europe is in that while European manufacturing businesses opted to outsource non-core operations in the form of endorsing 3PL, the Japanese market has grown in quite the opposite direction. It was not the manufacturers, but retailers who wanted to take advantage of their purchasing power by collating all their purchases in a warehouse, and then break bulk and ship to their various stores efficiently that embraced 3PL.

But that has all now come to a head, it seems...

So, will manufacturers be able to cut their logistics subsidiaries loose so that they can go ahead and offer their services to competitors as well?

Will such former subsidiaries, once cut loose, become prime acquisition targets for the likes of Sagawa and Yamato? - Maybe not as especially Yamato likes to build everything in-house.

Japan Post tried acquisition and learned the hard way that service disruptions due to tatty integration processes are a much higher price than it wanted to pay.

Either way, a new trend will emerge in the Japanese 3PL market because not having one is not an option if the industry wants to continue to grow.


New Trend? EXTREME Commutes

An Australian friend who works as a mountain climbing guide in Nepal told me once that the extremely hard core climbers are usually Japanese... Doing something in the extreme, in a way, is a Japanese trait.  Why else would we be known as the market with the most demanding consumers in terms of quality, convenience, and hospitality?

EXTREME Commuting is a hash tag on Twitter that is gaining popularity.

The idea is to play first and work later - on week days - and tweet about it.

Let's look at a day in the life of self-proclaimed leaders who spearheaded the hashtag/trend. They are two men, aged 29 and 34.

At 5:20 am, the duo meet up at Kita Kamakura Station, some 50km outside of Tokyo.  Takahiko Shiina, aged 34, has left home at 4 am. His partner, Sota Amatani, aged 29, left Tokyo the night before and spent the night at a manga kissa, or coffee shop that specializes in providing private space and lots of comic books.

They head to an old Zen temple, Enkaku Temple. It is the first time for Amatani.
Their EXTREME Commute on this day started with a one-hour zen meditation.

Then, they moved on to Yuigahama beach just after 7:00am. Shiina rolls up his trouser legs and Amatani strips down to his boxer shorts and the two splashed about for around 5 minutes, though they claim "it felt like half an hour of fun!" They progress to using Shiina's tie as a blind fold to try to break a watermelon with a baseball bat - a traditional summer beach picnic event.

They manage the break the watermelon open on the fifth round of trying and lap up the fruit like a pair of hungry dogs, according to a Nikkei reporter who was with them and who reports on their EXTREME Commute of the day.

"I feel like I am at the extreme opposite position of a white collar worker right now!" proclaims Amatani.

Though the clock is ticking, the pair insist on wrapping up their excursion with a bowl of ramen noodles. They rush into a noodle shop before 8 am and devour their meals in under 5 minutes to catch the 8:12 train to Tokyo.

The rule is to play hard and never be tardy for work, they say.

Their EXTREME Commute started as a fun discussion over drinks. Now, they may have up to 10,000 followers checking their tweets on their latest adventure with other people sharing their EXTREME Commutes.

From 2 through 6 September, the duo called out to their followers to participate in an EXTREME Commute-athon. More than 100 groups have joined so far.

"It is more refreshing than taking a day off" because every minute counts and there is no dilly dallying around, it seems. And another important factor is to "try" and "challenge onself" to do new things.


Cool Geeks Have Deep Pockets: 3-Months Target Achieved in 5 Days - Domino's Pizza x Hatsune Miku

In March 2013, Domino's Pizza launched an app that enables customers to place orders using the vocaloid software Hatsune Miku; take AR (augmented reality) photos with the popular vocaloid character, and have her perform live using the delivered pizza box as a stage: http://youtu.be/gW2D_Votd2Y

They achieved their 3-month target in 5 days.

Until then, Domino's, like many other national brands, focused on securing popular TV animation characters from such mega hits as Pokemon and One Piece.

The collaboration with Hatsune Miku was the first time they went for a niche and a deep dive - which paid off.

They have launched an upgrade and a second campaign since, and continue with their success.

It is Cool to Be a Geek
When Dentsu ran a survey of 10,000 youths aged 15 ~ 39 in 2012, 49.9% of teenagers said they are "Otaku" or a geek.

The survey in dicated that the younger the group, the higher the tendency to be proud to be a geek, which clearly shows that there is no stigma attached to geekhood for teens.

"They obviously see the expression 'Otaku' to mean that 'I am really passionate about something' rather than for it to mean anything negative," says Yuichi Yanagida, Strategic Planner at Dentsu who oversaw the survey.

The "ultimate geek fest," the Comic Market (a.k.a. "Komike") showed that there are less traditional geek types and more "normal" kids who are just passionate about animated films and manga.
Held twice a year, Komike boasted a whopping 590,000 visitors in three days from 10 through 12 August 2013.

This year, it was such a popular event for exhibitors, that it was said that only 60% of applicants actually got to exhibit.

Microsoft, Yukijirushi (Snow Brand), and Suntory were among the national brands that participated this year.

While some die hard Komike fans had a chilly reaction to having such brands and companies come to Komike, many said "it is OK so long as they team up with someone on the inside who is cool (as in the case of Yukijirushi and Suntory, they joined forces with Pixiv and had fans submit drawings of pretty girls for labels. Komike became the place where the winners were announced)."

Convenience Store Chain LAWSON'S has a reputation for being geek friendly with their promotions that attract approximately 30,000 viewers when it comes to time to announce them. They have offered such services as "wake up calls in popular animation character voices," among others.

These promotions are created by an internal committee of geeks who really are in the shoes of the target audience.

There has been a lot of talk of "bid data getting personal," but these are examples of targeting a very obvious niche and diving deep into their pockets.