Global consulting firm McKinsey & Company is calling for a rethink of supply chain processes to accelerate micromobility’s path to profitability.
Traditionally, micromobility companies collaborate individually with entities at different stages of the value chain, such as manufacturing, logistics and after-sales.
McKinsey highlights the emerging solution of digital manufacturing and operations platforms. These are single platforms which bundle orders of various micromobility companies and connect customers with a large network of suppliers in the value chain.
The “core of this approach” is matching companies with the right partners while still achieving economies of scale, McKinsey highlights in a blog written with US-based operations and manufacturing platform Bloom.
“About a third of costs typically reside in manufacturing…As a result, reducing expenses associated with the prototyping, assembly, and fulfilment of micromobility vehicles is a primary mechanism to drive profitability.”
McKinsey explains that digital platforms enable contract manufacturers to benefit from higher, continuous order volumes and greater utilisation of production lines, reducing unit and sales costs. Meanwhile, micromobility providers get access to manufacturers even when order volumes and proven sales are low, allowing them to focus on “core competencies” like R&D, vehicle design and branding.
McKinsey argues that digital operations and manufacturing platforms can lead to more efficient allocation of capital as less money is lost through ineffective production processes. Additionally, it enables regulators to establish technical standards across the industry thanks to bundled orders from various micromobility providers.
According to the consultancy, the micromobility sector is in the midst of a new era – having left its early days of unsustainable hypergrowth toward profitability and long-term players. By 2035, the global micromobility market is forecasted to be worth $520 billion – up $360 billion from last year.
Ahead of this year’s Micromobility Europe expo, McKinsey Center for Future Mobility Expert and Engagement Manager Darius Scurtu told Zag how shared micromobility in particular is now in its “third phase” defined by maturation and sophistication.
“Firms are now focused on profitability and operational efficiency rather than growth alone, first cities are looking at increasing fleet sizes and expanding services areas, and investors are targeting profitable and established operators,” he said.
As micromobility players strive for profitability, McKinsey highlights that it’s not declining top-line revenue posing the challenge, but a high cost base from complex supply chains. The consultancy therefore calls for a rethink of supply chain processes to put the industry on a sustainable trajectory.
