All industries have to stay on their toes to keep up with the changing environment, but the transportation industry seems to be in a particularly difficult spot. Confronted with digital transformation, rising customer expectations, new competitors and their innovative business models, not to mention legislative curve balls, logistics providers have their work cut out if they want to stay competitive
by Karolina Papros
The transportation and logistics industry has been one of the latecomers to the digital era. PwC stated in its latest industry report that half of transportation and logistics companies lack digital culture and training. Therefore, companies have recently been under attack on all fronts. Their greatest concern is no longer securing goods and orders but adapting to the pressures of the fast-paced world of technological innovations, where everything should be performed more quickly, better and at a lower cost.
Meeting customer expectations
A recent study by Capgemini reported that the logistics industry is constantly under pressure to cut transportation costs while investing in innovative technological solutions to catch up with the digital world. The pressure is exerted mostly by increasing customer expectations to receive goods quicker with more flexibility of choice and at low or practically no delivery cost. These expectations put both companies’ profits and their existing business models into question.
PwC added that there is no brand loyalty in logistics. Customers are not interested in who is delivering their parcel as long as it is delivered quickly, undamaged and for a low price. Moreover, the majority of e-shoppers expect delivery to be free of charge and traceable at all times.
Increasing digital fitness
How are transportation and logistics companies responding to this challenge? They do it by improving their digital fitness. This means that they take advantage of technological solutions to meet customer expectations, for example, by developing new smartphone applications, utilizing GPS tracking capabilities or improving the flow of information exchanged with suppliers, as well as the process of directing and scheduling transport. Some even go as far as giving their customers the possibility to choose the fastest and cheapest route, as well as control over when, where and how the booking is made and the bill of lading is delivered, as is the case with global giant Maersk Line. Flexibility is what every customer is looking for.
Investing in automation
Increasing the speed of delivery and potentially lowering costs at the same time may be possible – as suggested by PwC – by utilizing delivery drones, installing automated loading and unloading systems, investing in the development of unmanned vehicles or augmented reality solutions (like Google Glass) that would help the driver oversee their load and manage the route in a more efficient way.
Amazon has already put some of these solutions into practice. Apart from piloting “Prime Air,” 30-minute delivery using drones, it has its own Amazon Robotics business unit and at least 20 aircraft to handle shipments. Mix these technological solutions with the potential of the Internet of Things, which may facilitate the cooperation between the warehousing team and the distribution team and guarantee the desired traceability to the customers, and you have a recipe for success.
Another challenge that existing transportation and logistics companies have to face is new entrants. The majority of newcomers are start-up companies. They do not own any real infrastructure, but they claim their share in the market by offering new technological solutions. A good example are virtual freight forwarders who have competitive pricing, provide quotes quickly and match shippers with available capacity. Moreover, the biggest hunting ground for start-ups is the so-called last-mile delivery – moving goods from a transportation hub to their final destination. Take UberCargo launched in Hong Kong or Nimber in Norway for example.
It is possible to fight off this challenge with extensive collaboration and partnerships. Now, more than ever, logistics companies need to team up, exchange information and share the technology. Imagine the boost in efficiency if companies had access to real-time data on available capacity across different logistics networks. If a standard 40-foot container can carry over 27,000 kg and has almost 70 cubic meters of capacity, then, thanks to real-time data analysis and smart cooperation between logistics companies and customers, the latter would receive a better rate if they combined orders and the former would have a higher utilization of the container. It is a sort of a win-win situation. However, it is easier said than done as fragmentation and inconsistency make it almost impossible to achieve – each company has its own systems, rules and procedures, trying to standardize them across the industry seems an impossible endeavor.
Exploring the physical internet
The idea of standardization lies at the heart of the “Physical Internet” – a current buzzword in the transportation and logistics industry. It is an idea that objects can be easily transported from point A to B if they become standardized and share common channels, in the same way data packets are sent across the internet. In fact, the European Union has already started exploring the potential of the Physical Internet as part of its Horizon 2020 program that aims to develop a smart, green, integrated transport system.
This year, one more difficulty has emerged to keep transportation and logistics companies occupied – the new data protection act (GDPR). It regulates how businesses process and store personal data, how clients’ consent for their data to be processed must be obtained, as well as introducing the so-called right to be forgotten. There is no doubt that the act is needed in the current digital world, especially taking into account the fact that almost every week there is news about data theft, cyber-attacks, human errors or negligence that results in the loss of sensitive data.
In the case of transportation and logistics companies, data protection is indeed a massive issue as they gather huge volumes of information about their customers in order to provide a more efficient and effective delivery service. If they wish to increase traceability, they may need to obtain and store even more data. If that data gets stolen, it may cause irreparable damage to the company’s credibility, not to mention the affected customers. These new requirements may force companies to apply time – and money-consuming changes, but firms that want to remain competitive should treat all of these challenges as an opportunity to grow.