Economists can argue whether the marketplace is perfectly efficient, an axiom upon which much macro-economic theory is based. But there would be no argument about whether there are efficient and inefficient industries within the marketplace.
The supermarket industry is highly efficient and continues to improve. It ships from centralized warehouses to large retail locations, where its customers pick, pack and help check out, then deliver their own purchases. The checkout process is being made more efficient by allowing consumers to bypass the cashier and scan their own purchases.
The bar code was brought into widespread use at the insistence of the supermarket industry, as the Universal Product Code to make the checkout, inventorying and other aspects of the industry more efficient.
At the shipping and receiving docks, efficiency was gained by simply making the lowly wooden shipping pallet conform to the Grocery Manufacturers Association’s 40×48-inch standard. Trucks exchange empty pallets, receive cargo on the same standard-sized pallets, deliver the load and receive empties to exchange at the next loading dock. This simple solution allows semi-trailers to be loaded and unloaded in 30 minutes or less, a great efficiency from a simply standardizing a wooden pallet.
Products that can make the supermarket industry even more efficient are welcomed, but I wouldn’t want to try to use new technology to compete with that already efficient industry.
Next look at EZ-Pass. It is ubiquitous on the East coast, where automotive traffic is high and there are many toll booths. The lines at the booths at the many bridges and tunnels would back up as the driver and toll taker exchanged money, change and receipts.
Along came EZ-Pass with technology to attack the inefficiencies. With a device the size of a deck of cards mounted on the dashboard, a car goes to the EZ-Pass only lanes and slows as the toll is deducted from the EZ-Pass account. You can even set up your EZ-Pass account so when it drops below a certain level, it is automatically recharged from your checking or credit card account.
Manual toll takers still accommodate those who pay cash, but more and more lanes are converting to EZ-Pass. Clever technology successfully attacked and replaced inefficiency.
With these examples, think about how using the Internet to buy 50-pound bags of dog food ever made sense. And in terms only an economist could love, look how much more efficient an Internet dating site is than the bar scene in making multiple contacts.
Go after the inefficiencies; that’s where there the opportunities are. Erwin Bruder ([email protected]) is president of The Gordian Organization. Reach him at (216) 292-2271.
