All week we’ve been seeking contributions to add to the debate on how digitalisation is transforming shipping. Today, we seek the views of Dr Zvi Schreiber, the ceo of online freight marketplace, Freightos.
With 40 airplanes, a fleet of trucks, dozens of US distribution centers and an NVOCC license, Amazon is the latest (and largest) newcomer to the world of logistics. As the ecommerce giant’s shipping expenses climb, this strategy makes perfect sense. Jeff Bezos is sending a clear message to the industry; great technology can change the industry.
He’s right but he’s certainly not the only person saying it. After decades of being limited by technology, the convergence of three key trends are digitizing the logistics industry like never before:
1. It’s what customers want. By 2020, 50% of all the workforce will be millennials who grew up with Netflix, Amazon and Airbnb. These procurement employees grew up as children of the web, accustomed to the transparency and convenience of digital sales and they expect the same at work. If existing logistics providers don’t provide it, there are enough tech-enabled logistics providers that will.
2. The competition is (almost) there. Forget Amazon. According to a recent survey by Freightos, only one of the top twenty global logistics providers is currently selling online. Don’t expect that to last; top executives at Maersk, CH Robinson, DHL Global Forwarding are all speaking off the same sheet; digitalisation isn’t an if, it’s a when.
3. Logistics needs this. It’s been a rough couple of years. Shippers are consolidating providers, margins are dropping (especially on international air and ocean) and industry M&As mean steep competition. Capgemini research has found that up to 45% of a freight executive’s time can be spent on pricing and data analysis. Providers can’t afford not to take advantage.
The slow march of digitalisation
Make no mistake – the technology is here.
In 20 years, freight shipping will still likely take place with 20’, 40’ and ULDs. The main difference will be the underlying data technology that stitches carriers, forwarders, shippers and ports together. Today, cultural readiness – not technology – is the rate-limiting factor. It’s easier for a small forwarder or startup to adapt new systems. For a global logistics provider to switch systems takes much more effort. But players that mistake a slow transition with no transition will pay the ultimate price.
Last forwarder standing?
Taxi dispatchers fought Uber. Hotels fought Airbnb. Airlines fought Priceline. But freight digitalisation is a whole other ballgame. It’s not even necessarily a zero-sum game. Digitalisation means increased efficiency. Forwarders and brokers will still play an important role in supporting freight processes, bringing together carriers, customs brokers and service providers to make even the most complex supply chains purr.
For providers, there are two ways this will play out. Logistics players that have built their empire on merely being a pass-through, taking a margin for reselling rates and services, will find that their castles are built on sand. Companies that adapt technology to work better will continue to differentiate with outstanding supply chain services and incredible support, just like they always have.
Technology isn’t the enemy; it’s a lifeboat. And the alternative for providers is ctrl-alt-delete.
This new technology may work for containers, airfreight and smaller parcels of cargo. Movements of heavy lift, oversized, charter type cargoes, strict US Export regulations, etc, require consistent monitoring with hands on expertise by quality freight forwarders. Amazon, Priceline and others alike are successful with selling their products up to a point. Try calling a company like Priceline when errors arise with your booking or when one has damage with an item bought online. Being held on the phone for hours or waiting for replies online would be disastrous to valuable cargoes. What happens if vessels break down, collide, go bankrupt, get arrested, etc, etc..Will the astute employees of these companies be able to reasonably explain or correct the problems? Hanjin still has thousands of containers held in limbo due to their current financial issues. Not all freight is alike and customer will require an experienced and available voice to represent their cargo and prevent fines imposed due to inexperienced representatives. The cost for these type of shipments will drive the price of shipping lower then they are already, which may also see the demise of more carriers.
Very interesting views.
Let us assume that digitalisation is more probable to reign in parts of the business/market where standardisation is the norm. Pls kindly regard my observations
1. Millennials i am afraid will need themselves to adapt to the nature of shipping business. Netflix sells movies, amazon books and others and airbnb allows home owners to rent their homes to tourists without a license. Carrying over the argument that millennials are keen on using i-phone apps to the support of the claim that the whole industry will need to shift in order to accommodate this peculiarity is in my opinion an overstatement.
2. Many people have still not understood the difference between selling online and producing online. Emails are exchanged online as well, yet when they were introduced no one cast doubt on the business model of the industry. Where i am getting at is that there will still be real persons in the two ends of the line, it is just the means of communication that will evolve. Can anyone really expect an algorithm to be able to set up a proper procedure of clearance or know whom specialist to call in any given port [from technicians to agents, people that can bribe officials and have something released and so on]?
3.I thought that pricing and data analysis are intrinsic parts of the business of a freight executive.
Last, i do not understand the meaning of the term “freight digitalisation”. The only way i can see this coming is for big liners to introduce web based apps where interested shippers would log into and book some space on a given schedule. Yet the liner will still need to have a physical interface with the customer [documents, bills of lading and the like] so i do not see any meaningful reduction of cost. But then again the whole setting will lead to the liner being able to capture a large part of the customer’s surplus. This means that the liner will be effectively say: come to my platform, reveal to me all your preferences and sit around until my algorithms calculate a freight that minimises your surplus [this being the difference between the value of the service to the shipper and the freight the shipper pays to get hold of that value]. In the end the House always wins.
Also, I have to admit that there are times when I view this whole debate as a stir up by consultants and companies in their effort to sell to the industry something that gives the impression of being new, yet that extends little from delivering just that, an impression.
cordially
g
In many arenas digitization and technology are being held back by labor organizations fearful of the loss of jobs. The reality is that ports, carriers, and shippers that embrace this future of digitization and technology will be the survivors and the others will fall away like CF Motorfreight, Port of Portland, Montgomery Wards, Sears, Kmart, etc.
I agree somewhat with Tim’s comment. “Some” areas of our industry are being held back by labor, but not certain the freight forwarding business is one of them. But agree that organized labor is making the mistake of clinging to jobs from the past. They need to be part of the solutions of the future and think of the change in job types, not loss of jobs. All the new technology will require service and repair people…and plenty of them.
It’s funny to me that many people equate new technology and digitization as being a huge cost saving shift in the economy. Perhaps. But the “types” of jobs will change. The numbers may be a net loss. But digitization will create a new and greater demand for different jobs in the future. Also, better trained and educated people that can work with their hands on equipment. This will be a problem in certain countries.