#BigOpinion - Tech-Enabled Logistics and the Future of Freight
There’s a stereotype of logistics as an outdated industry bucking against the technological revolution. And it’s true. Well, it’s partially true.
Logistics drives the global economy. There’s a global network of dozens of ocean carriers, hundreds of airlines and millions of trucks that connect the global economy. And it involves some of the most complicated machines in the world. Maersk’s EEE ships move almost 20,000 TEUs with fewer crew members than a Boeing 747-400.
Today, it seems that virtually anyone in the world can source goods on Alibaba and sell them on Amazon. When it comes to selling goods around, we’ve entered a whole new chapter. So far the logistics industry has kept up with the pace, but mostly by focusing on ramping up scale.
In his book “Zero to One”, Peter Thiel, the legendary Silicon Valley investor, differentiates between making something bigger and better (going from One to N) and creating a brand new model (going from Zero to One). For decades, freight has been pursuing N, growing in size and scale – bigger ships, faster fulfillment and better inventory control.
But, as Bob Dylan says, “the times are changin’.” And change doesn’t happen in a vacuum. Profitability for core aspects of ocean, air and trucking is declining, and competition is increasing, forcing the logistics industry to look for new “1”s –starting fresh with technological revolutions. Here’s where it’s happening.
Technology-Enabled Logistics Better Data Movement for Better Freight Movement In its most simple terms, freight is about moving something from A to B. But in today’s supply chain networks, there are literally billions of ways to move freight. A plethora of carriers, routes, shipment dates and modes means more choices than ever. And as e-commerce evolves, shippers and producers are increasingly sensitive to changing customer demand. Shippers are looking for the same service from freight. And on-demand supply chains can mean shipping requirements changing daily.
Intelligent freight shipping starts with intelligence data. In the not-so-distant future, retail locations will automatically report inventory velocity to databases that predict retail patterns, instantly triggering changes to manufacturing volumes. Once manufactured, the shipment itself will communicate with a global network of carriers and logistics providers, and calculate the optimal shipping route and pricing. Even en-route, the shipment will stay connected, monitoring global patterns. Strike at West Coast ports? Not a problem with live rerouting through the Panama Canal. The shipment will then use real-time warehouse capacity assessments to determine where best to be stored, taking advantage of on-demand warehouse rental space before fulfillment.
And yet, every link of this futuristic supply chain will probably be happening on the same planes, trucks and ships in use today. 86 percent of senior logistics providers already believe that technology will change logistics. Not all of them yet realise that the biggest potential lies in better movement of bits and bytes, not TEUs.
Freightos exemplifies this. We manage over 200 million freight data points, and can provide instant insight into optimal pricing, routing and carrier selection, This means better, more accurate freight quotes – without changing the core foundation of how goods are moved.
The On-Demand Economy The future is less about owning assets. We are already adjusting to this in our private lives, going to the market for short-term apartments (Airbnb), and getting around (Uber).
The shipping industry is currently caught in a nightmare of falling rates, excess capacity and record scrapping of ships. But there is a better way.
Here again, more transparent data management means the ability to proactively identify spare capacity. Airliners have been using real-time pricing for years in order to fill empty seats. It’s starting to reach the freight world as world, especially “last mile delivery”. There are over a dozen companies vying for the title of “the Uber of trucking”.
Visionaries are betting big on this; Convoy is one example, having raised investment capital from executives at Uber and Amazon. This model isn’t limited to freight transportation either. Flexe is a US-based startup that is taking excess capacity in warehouses and renting it out to retailers and distributors that have varying capacity needs. Combining physical capacities with real-time data is a force-multiplier with the potential to drastically change global supply chains.
Automate … Everything Amazon is famous for building the world’s largest online superstore. But a lot of that success is due to a lesser known part of its business model. In the early ‘00s, after selling successfully online for years, Amazon began to offer its platform it to other companies, to sell online. A few years later, Amazon enabled sellers to leverage their warehousing for fulfillment with their FBA platform.
More examples? Amazon develops software for internal use, and once it is working well, releases it to the public as a service. From online payments to cloud web hosting, this has happened time and again.
Which is why when Amazon filed as a freight forwarder at the end of 2015, it got a lot of logistics providers’ attention. Given Amazon’s track record of relentlessly leveraging scalable technological patterns to improve operations, if they are successful, it seems likely the e-commerce giant will branch out into providing logistics as a service.
And it’s not just Amazon. Other giants, like Google and Uber, have the capital, vision and technology to dominate other industries. Uber’s foray into driverless cars last month, using drone truck technology, is an omen of what’s to come.
Smaller technology players are changing logistics too. uShip recently partnered with DB Schenker to offer online trucking quoting and booking in Europe. Freightos’ online freight marketplace connects large and mid-sized forwarders with shippers around the world. Companies like Windward and Xenata are pushing data visibility into overdrive for large-enterprise retailers and distributors. There’s a veritable flood of new logistics technology.
What It All Means Logistics has never been this exciting. For the logistics industry, better technology and new players shouldn’t have to mean disaster. Logistics technology companies are their key partners to stay relevant. Bringing newfound efficiency through better data movement means reduced operating costs, more potential customers and more efficient operations. It also means securing their future in the on-demand economy – partnering with the right companies, finding the perfect balance of experience, personnel and technology to shift freight from Zero to One.
Eytan Buchman is the Head of Marketing at Freightos, the online freight marketplace. An evangelist of the future of digital freight and the LogTech (logistics technology) sector, Eytan is also passionate about digital marketing, hummus and communications. He is based in Jerusalem, Israel.