The various supply chain organizational models resulting from digital transformation, deal little with the case of carriers, who are ignored or even suspected of resistance to change. Let us review the changes taking place and highlight the initiatives at work in this sector that is in fact more modern than it sometimes believes itself to be.
In a previous article devoted to the TMS, the foundation for the digitalization of transport, we recalled the 4 essential pillars of digital transformation, according to Inboud Value:
- The disappearance of space and time barriers
- The ability to stay connected on the move
- The Internet of Things
- The universality of internet.
These technological advances have created new expectations and needs among consumers, which are now reflected in the world of the supply chain.
An irreversible transformation
At the end of the chain, the consumer expects minimal transport costs, free returns, ever faster deliveries, real-time and precise information available on smartphones, tablets or elsewhere...
Overseeing the chain, is the European legislator who believes that the digitalization of transport and logistics "enables cooperation between supply chain actors, better supply chain visibility, real-time management of traffic and cargo flows, simplification and the reduction of administrative burden, and allows for a better use of infrastructures and resources, thereby increases efficiency and lowers costs”. In short, digital transformation should create value, open up new business opportunities and reduce the carbon footprint of transport.
There is consequently an objective alliance between consumers, politicians, and the technology suppliers to ensure digital transformation takes place. The movement is now irreversible but taken into account in greatly varying degrees by market players. In this article, we have chosen to highlight emblematic examples of the transformation underway, before evoking significant initiatives from established transport and logistics operators.
The emergence of platforms
The emergence of digital platforms in the transport and logistics sector is obviously one of the major emblematic events of the digital revolution. One of the pioneers, who has also become one of the most famous, even gave its name to a phenomenon that the Le Petit Robert dictionary defines as: “Uberize: destabilize and transform with an innovative economic model taking advantage of new technologies”.
Obviously, digital technology likes to invite itself into sectors populated by intermediaries where methods and technologies have changed little in recent decades. And so in 2018, two former Uber employees decided to tackle the freight forwarder sector by founding the company Beacon, not only affirming its claim to a place in the logistics organization but also in retail financing. CEO, and co-founder Fraser Robinson finds that "The traditional freight forwarder model remains surprisingly analogue, using systems and processes that are slow and inefficient, with opaque pricing and limited use of technology." The roadmap is therefore: “With digitalisation accelerating globally as a result of COVID-19, we believe the future of the traditional freight forwarder is more precarious than ever. Shippers are seeking technology-led products and services that will meet their needs more effectively, enhance their experience and cut their costs. We look forward to meeting that demand.” In France, on a lesser scale, we can also cite the case of Ovrsea, a digital air and maritime freight forwarder that is making its way into the market, including signatures with some large accounts.
Embodied by start-ups, some of the new arrivals therefore have the ambition to offer an alternative to the traditional market. But many are also developing by providing digital solutions to established players, who, whatever may be said, have proven their effectiveness. It is therefore a question of tackling the sources of inefficiency or dysfunction with surgical precision, which requires knowing how to bring digital experts, but also fine connoisseurs of the market, to the table. It is precisely on this axis that our Upply platform, launched in November 2018, is developing. Relying on Data Science and business expertise, Upply provides industry professionals with an instant vision of road, sea and air transport prices on a global scale. The company's ambition is also to reconnect freight supply and demand, with its first phase being the launch of a marketplace to connect shippers and road carriers. The aim here is not to replace existing players, but on the contrary to support them in their digitalization.
The common characteristic of these platforms is indeed the aim to bring added value thanks to one or more technologies, to manage a great deal of data and very few assets. This forms a fully-fledged operating model. All of these companies make up a segment of the transportation market that is expected to take off in the coming years. In road transport, for example, Frost & Sullivan estimates that the market that they define as “Truck-as-a-service” (TaaS) is expected to reach $ 79.4 billion in 2025 in the United States, against 11.2 billion currently.
The era of connectivity for asset managers
The potential of digital technology does not only concern 3 and 4 PLs. Real opportunities are also appearing for asset managers, whether they manage warehouses or means of transport.
In the logistical real estate sector, the explosion of e-commerce is extremely promising. In a white paper titled “Future of the Tech Economy”, published in June 2020, UBS estimates that warehouse rent is no longer the main driving force behind decision-making. In this document, Prologis, the largest owner of logistical warehouses in the world (1.7% of the world's GDP passes through Prologis warehouses each year), indicates in particular that online sales will require three times more warehouse space than the traditional economy. As a result, warehousing has become a fairly stable sector, with steady growth, and therefore generating long-term dividends.
Another underlying trend, which accompanies the powerful upswing in volumes is that warehouse automation should increase from 41% to 55% over 5 years. This will have two major consequences: on the one hand, customer captivity should increase, and on the other hand, data production should also increase substantially. Sineesh Keshav, Director of Technology for Prologis points out that Prologis can use this data to help customers streamline their operations. He even imagines a future in which the operator can use its scale and information to influence the decisions and strategies of the global economy.
The new technological situation could also transform manufacturers of rolling stock into genuine asset managers. In any case, it is a reorientation of the business model that many are seriously considering. As we indicated a few months ago in an article devoted to new energy solutions, a new-comer like Nikola is seeking to manufacture hydrogen fuel cell trucks and then lease them for 7 years, maintenance and hydrogen fuel included.
The manufacturer MAN also confirms that digital services will bring lasting changes in the years to come. A study by management consultancy firm McKinsey indicates that 80% of all commercial vehicles will be networked by 2030, providing great potential for the emergence of additional digital services. This is welcome news for manufacturers: while their classic core business, the sale of trucks and buses, is likely to show little growth over the next few years, a recent study by the Boston Consulting Group suggests that the provision of services should increase tenfold.
Whether you are a real estate owner or a vehicle manufacturer / rental company, there is a common business model which consists in managing a large number of assets, but also in enhancing the value of data by using it to offer new services and build customer loyalty.
The shipper at the center of the new digital ecosystem
Digital technology's potential is of course also present for the shippers themselves. The performance of the supply chain has long been based on an efficient exchange of information to avoid operational friction. But the volatility of the economy, regulatory changes, the development of emerging markets, and ecological upheavals are all elements that require increased agility to maintain an efficient supply chain. Shippers therefore demand full visibility and real-time data on the movements of freight transport. In this area, the margins for progress are enormous, and the use of new digital technology is a decisive element in reaching the level of excellence required by customers.
A true digital ecosystem is being built around a supply chain environment that connects the purchase of raw materials, transport, logistics, documentation, customs, carbon footprint calculation…. The example of the transformation initiated by the global giant Unilever is in this respect edifying. Like other sectors, the traditional consumer products market is being shaken up by digitalization, which is transforming the customer experience. Technology enables direct commitment between consumers and manufacturers, increased personalization, production that is close to the customer, and precision marketing.
To support these trends, Unilever is developing a concept of a connected supply chain. “we have to move away from a linear supply chain towards a supply circle in which Unilever is a digital hub in the centre. Traditional functional silos such as Sales, R&D, Marketing and supply chain are being replaced by three overriding processes; demand creation, demand fulfillment and innovation”, describes Marc Engel, Chief Supply Chain Officer for Unilever, in the columns of the digital magazine Supply Chain Movement.
Several digital projects are currently underway, in particular:
- The creation of digital twins for the group's factories (8 at present, but all their industrial sites should eventually be virtualized)
- The fight against deforestation by palm oil producers thanks to AI, block-chains, and the processing of satellite images
- A partnership between Alibaba and Unilever in digital marketing
Refocusing the ecosystem around the shipper brings a new approach to data, which delivers the full potential of its value through sharing. This creates an opportunity for new digital services that address the entire business environment: customers, suppliers, and peers.
Carriers: the great forgotten ones?
What about carriers, and more specifically road carriers, in this digital tornado? Market fragmentation does not make it easier to respond to the initiatives launched by the various players mentioned above.
However, the digitalization of the management of transport companies responds to their need to improve the productivity, safety, and profitability of operations. The digital solutions that aim to better exploit data thanks to connected tools now cover all the activities of the carrier: from the management of driving times, to the forecasting of the maintenance of trucks and their tires, through to the administrative management, the organization of rounds, the geolocation of trucks, the electronic bill of lading, freight searches or price benchmarking.
If they do not speed up their digital transformation, carriers and logistics companies run a high risk of their role being depreciated. Without integration into digital ecosystems and mastering the sharing of their data they could become second-tier suppliers, deprived of direct contact with shippers, cut off from the marketing channels for new services, and dependent on other players.
Taking back control of the data means capturing, recording, and organizing data provided by customers, or from systems, drivers, trucks, and trailers, but above all knowing how to share it to provide better service to the end customer. It is about comprehending new technologies and thus imagining new optimizations and new services.
The major freight forwarders have already started this move. Numerous initiatives have emerged. For example XPO Logistics has set up a collaborative cloud portal to exchange information between its shipper customers and its transport providers. This portal makes it possible to optimize the flow and cost of freight transport and to forecast future transport needs by combining machine learning and predictive analysis tools.
In the United States, the carrier JB Hunt has created a transportation network through its Carrier 360 portal designed to make technology accessible to small carriers. They can automatically connect to thousands of potential customers rather than trying to manually capture shipments one-by-one by phone or email. JB Hunt has also unveiled its new Shipper 360 portal that gives shippers access to multiple modes of ground transportation as well as information on carrier performance.
New technologies open up infinite opportunities for innovation. Our brief overview does not pretend to draw up an exhaustive inventory, but rather to allow an idea of its extent! An example is that augmented reality is in the application phase for young apprentices in technical trades in truck fleets in the United States. Primarily, the application aims to seduce by dusting off the tarnished image of diesel-powered truck maintenance technicians. And secondly, the application allows technicians to access troubleshooting procedures and methods on their smartphones by directly viewing the part in question. The product called Augmentor was even designed to allow retiring workers to share their knowledge with new technicians. The final mile delivery business also has a keen interest in augmented reality!
For new services, the possibilities are boundless. Carriers and logisticians have a real treasure-trove of expertise that they can exploit and develop ... or see it looted.