The Physical Network
The world's 4th largest port - Yantian, China
Before getting into the consumer products business, I spent many years working in the Internet business. One of the most important fundamental elements that allows the Internet to function is the data packet. This is how information traverses the Internet and gets from one computer to another. So when you send an email to a friend or watch a video on YouTube or do a search on Google, information is moving from your computer to another computer somewhere else in the world and back again. This data is sent in packets, which wraps the actual information being sent with header and trailer information that tells the data where to go, makes sure there are no errors, etc.
What does that have to do with Skip Hop? Ever since moving from the business of bits to the business of atoms (thank you Fred Wilson for once giving me that analogy), the global supply chain – the way product moves from factory to warehouse to retailer to your hands – has always seemed to me to be very similar to the Internet, but in this case a network for the physical world. After all, it’s the network that allows for the quick and efficient transfer of something from one location to another. For data, that network is the Internet. For physical products, that network is the global supply chain.
The other thing that always seemed interesting to me is that – like the Internet – there was a fundamental invention that transformed the way we move products all over the world. The fundamental invention on the internet was the Internet Protocol (IP). The way IP works is quite complex but basically, it organizes the locations of computers all over the world so information can move easily from one to another – whether it be next door or in Siberia.
The global supply chain had a similar fundamental invention allowing for the efficient movement of product, and that was the creation of ISO shipping containers. You know what these are – you see them every day on the road being hauled by trucks. The same containers go on container ships, trains, planes, etc and 90% of everything you buy has spent some time in one of these containers. So the container is the data packet for physical products! Really, it’s the same thing.
For the global supply chain - this “physical Internet” - the way the container works for moving product on this air/land/sea network is very similar to the way that data packets move information on the Internet, via wireless, fiber and cable. The container is loaded with product at the factory, and usually it is not opened again until it gets to the retailer (or the warehouse of the manufacturer). The container goes by truck, sea and train - often all three in a single "trip." And the network that these containers move on has become incredibly efficient, which is why we now buy products made in factories all over the world.
So the next time you see a container sitting on the back of a truck or parked at a warehouse or at a port, you’re looking at the invention that really transformed the world of products, and just like the Internet has made the world a smaller place, the container has in many ways done the same thing.
posted by Michael Diamant
