Digitalisation of Freight - A critical review...

Digitalisation of FreightA critical review

TitleDigitalisation of Freight - A critical review

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Table of Contents

1. Recent Investments in Freight Digitalisation

2. Digital Business Models

Segmentation & Examples

3. Technologies

4. Challenges & Opportunities

5. Critical Review

6. „Cagefight Predictions“

Digitalisation of Freight - A critical review

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How much money is being invested in digital players?

Digital Initiatives and Investments

Digital Initiatives & InvestmentsDigitalisation of Freight - A critical review

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Recent Investments in Freight Digitalisation - Jan 2012 to Sep 2017Digitalisation of Freight - A critical review

Source: Boston Consulting Group, Feb 2018


Segmentation and Overview Digital

Business Models

Digital Business ModelsDigitalisation of Freight - A critical review

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Segmentation

No Standard = Different Segmentations



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Segmentation - A simplified approach

Our approach to segmentation



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Freight Digitalisation - Still a moving feast…

HOWEVER, freight digitalisation, remains a moving feast!

Looking at one segment of business models only, takes it too short.

There are hybrid models already today, eForwarders trying to look likemarketplaces, and efficiency service SaaS providers that have anagenda beyond providing software solutions. Learning from the data oftheir customers.

Same caution for transport mode or market scope, those focusing tosolve trucking in the US today, might tomorrow be entering the airfreightspace.



The „hammer“ of the 21st century. Technologies

TechnologiesDigitalisation of Freight - A critical review

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Technologies

• Big Data Analysis

• IoT

• Artificial Intelligence & Machine Learning

• Blockchain Technology (we can do a 2 hour session on that subject alone)

• Advanced Communication Tools, e.g. Conversational Commerce

—> However, most technologies to digitalise freight, are available since 10+ years.

e.g. WWW, cloud & mobile computing, API, etc.



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Technologies - The Science Fiction Section

Just 3 examples

• Autonomous vehicles

• 3D Printing

• New transport modes, e.g. Hyperloop


Imagine, your core business today is urgent spare part shipments.

Imagine, you are a road haulier, efficient disposition and management of trucks, drivers and cargo were your strength today.

Imagine, you are a regional cargo airline.


Challenges and

Opportunities

Challenges and Opportunities for Digitalisation


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Challenges & Opportunities

Challenges

• People

• Standards

• Frontend vs. Backend

• B2B vs. B2C

• Broadness of the business


Opportunities

• Speed

• Efficiency

• Target market growth

• Transparency


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Challenges - People - Focus & Change Management

"My concern, however, is that decision makers are too often caught in traditional, linear

(and non-disruptive) thinking or too absorbed by immediate concerns to think strategically

about the forces of disruption and innovation shaping our future.“

Professor Klaus SchwabFounder and Executive Chairman of the World Economic Forum


People


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Challenges - Lack of Standardisation

Lack of StandardisationOptimisation in silos…

• Some examples:

• China Customs - System Unification

• eAWB Progress, 7 years = 50%

• UNECE / EDIFACT Successor?

• ISO 20022 digital payment standards

• Administrative cost Courier shipment vs. Freight shipment



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Challenges - Frontend Focus vs. Backend Complexities

FRONTEND Focus vs. Backend COMPLEXITIESMany disruptors have a Frontend focus, while backend complexities are the true challenge and source of inefficiency.


Customer

Digital Platform and Interface

VENDORS / SERVICE PROVIDERS / CARRIERS

Analog/Digital – „Fire Fighting“


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Challenges - Business to Business Particularities

Business to Business Particularities


B2C

Many ventures try to apply B2C models to theB2B driven freight industry.

Some key differences:- Decision Maker not always the same person

as the user.- Convenience for a company is different

than for a consumer. (e.g. Interface)- Legal, Risk, Data security play a different

role.


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Challenges - Broadness of the Freight Spectrum

Broadness of our business


The overall freight business has a comparably highcomplexity through different transport modes, differentmarket particularities, specific legal regulations by country,commodity, transport mode, packaging, measurements,etc.

The global point to point matrix, is close to infinite.

A „comprehensive solution“ is hard and it is easy to getlost in complexity.


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Opportunities - Speed Digitalisation of Freight - A critical review

SpeedBetter data, better information, faster and better informed decisions.

Instant quotations, instant feedback.


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Opportunities - Efficiency Digitalisation of Freight - A critical review

EfficiencyEfficiency comes right down to cost.

Administrative cost of handling a shipment is still too high today.

Courier business is the benchmark here.


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Opportunities - Target Market ExpansionDigitalisation of Freight - A critical review

Target Market ExpansionDigital Sales, enables global selling of services that a

company provides.

Internationalisation without or with minimal physical footprint.


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Opportunities - Transparency Digitalisation of Freight - A critical review

TransparencyNot only on price and service offering.

However customer ratings, bring a qualitative

measure to the industry.


Quo vadis? Critical Review

Critical Review Digitalisation of Freight - A critical review

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Critical Review - Disruptors vs. Incumbents

Disruptors - need to disrupt

+ Well capitalised often VC backed, scale focus + Low Entry Barriers (Software world)+ Greenfield approach + New organisation models possible+ Challenger advantage

- Learning curve - Awareness and brand building- Operational Know How - Underlying Data Problems remain a challenge

? Starting asset light, but might change ?


Incumbents - need to adapt

+ Experience & deep understanding of complexities

+ Exception Management Expertise + Big Data + Geographic Footprint & Coverage + Established Brand Name and Reputation+ Technological solutions can be copied+ Assets & carrier capabilities

- Geographic Footprint & Coverage- Existing organisation models under pressure - Challenges of changing large organisations- Legacy trap / Mindset


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Critical Review - Disruptive Change or Evolution?

Others have tried earlier,but failed or becameniche solutions.

„Buying cargo“ is an oldbusiness model and neverreally worked sustainably.

Customer loyalty in B2B isa different game thanB2C.


Source: Agility


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Critical Review - Initiatives of Incumbents

Incumbents are catching up,…


… so if the only innovation is anicer customer interface, theywill adapt fast.

Smaller forwarders are able tobuy „eForwarder packages“moving their offering online.


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Critical Review - Long-term value of a Technological Advantage?

In a SaaS world, where technological advantages are difficult toprotect, is longterm technological leadership possible at all?

Will not at some stage a „level playing field“ in terms of technologybe achieved among the surviving disruptors and incumbents, makingtechnology less of a competitive factor?



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Critical Review - The Timeframe for Change, a key question…Digitalisation of Freight - A critical review

CUSTOMER / SHIPPER / BUYER

Freight Forwarder

eForwarder

Digital Market

Supply Chain Consultant

CARRIER

TIMETODAY

Change of customer requirements

vs. Stickiness of legacy

issues

How long will it take?Where is the tipping point?

Source: Fact Factory - Digital industry outlook


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Critical Review - The Ethical Debate

• Man vs. Machine debate

• Regulation of online services & TAXES

No doubt, a fully automated Supply Chain, based on available andforeseeable technology would be more efficient than what we havetoday, but will this be desired? Same quandary arises for many otherindustries.



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Critical Review

A lot of room for scepticism…


…but make no mistake, the industry will change significantly and

the cage fight of freight digitalisation is on.


Future? Cage fight Predictions

Cage fight PredictionsDigitalisation of Freight - A critical review

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Cage fight Predictions

1. Until the introduction of beaming, the physical transport of

goods will be required. The carrier is needed and he can focus

on that, but the way he sells and services will change.

Carrier’s will go into direct sales.



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2. Vendor driven marketplace platforms will fail.



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3. The future of freight will be even more buyer driven.



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4. Simple, non value adding resale will be hard.

However where we add value, we do not need to be afraid.



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5. Every forwarder will become an eForwarder.

Longer term they will split between two roles:

Carrier (asset based) and/or

Supply Chain Consultant (know how based)



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6. Robots might buy from robots: Procurement automation.



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7. Relationship sales will further deteriorate.

Sales will become consulting and exception management will

be the key differentiator.



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8. Higher efficiency will need less people.



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1. Physical transport of goods will remain required.

2. Vendor driven Marketplaces will fail.

3. The future of freight will be even more buyer driven.

4. Simple, non value adding resale, will be hard.

5. Every forwarder will become an eForwarder.

6. Robots might buy from robots.

7. Relationship will further deteriorate.

8. Higher efficiency will need less people.



ThankYou


The End

Fact Factory GmbHRuben HUBERTel. +41 78 693 88 66 / +41 62 544 94 10Email: [email protected]: www.factfactory.ch

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How can we help on your journey?Digitalisation of Freight - A critical review

Fact Factory is a team of logistics industry, change managers, process and technology experts, that

focuses on exciting projects at the intersection of strategy, internationalisation and digitalisation.

www.factfactory.ch


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