A warehouse full of boxes is viewed through a tablet device

A fully digitised logistics system would allow customers to keep track of their goods in real time

A blacksmith seeing a motor vehicle for the first time at the turn of the 20th century probably had no inkling how profoundly this new technology would affect his own future livelihood and the fabric of society.

Today’s freight operator may be just as unaware of how technological changes in logistics will impact that industry. But they will.

Digitisation allows operators to simplify back-office processes by automating data handling as far as possible while at the same time enhancing customer services, such as providing real-time supply chain visibility.

Increased digitisation can simplify complex processes, eliminate inefficiencies and improve cost performance

The biggest problem impeding productivity in customer-facing systems is the level of manual intervention currently necessary. Eliminating much, if not all, human input could substantially increase profits.    

While the existing freight-forwarding business model may be threatened in the long term, digitisation is as much an opportunity as a threat in the short term. Better technology could transform the industry’s prospects.

Increased digitisation can simplify complex processes, eliminate inefficiencies in a still largely analogue industry and, with intelligent analysis of big data, improve cost performance through better forecasting and the optimal use of assets.

The industry’s many inefficiencies range from antiquated IT systems and analogue-based document handling to more structural inefficiencies, especially in container shipping. Some 40 per cent of container ships are said to arrive in port more than 12 hours late and up to a quarter of invoices contain mistakes.

It makes sense to automate all data relating to the products being shipped, including information about bookings, shipping instructions, conformation, delivery details, service failure updates and invoicing. Once logistics systems are fully joined up, the scope to improve service quality and internal productivity is significant.

Digitisation would offer customers full real-time ‘track and trace’ of their goods, improving exception management – allowing all parties to react promptly when things go wrong. This will include the early notification of delays and alerts when goods are damaged in transit, permitting shippers to order replacements sooner.

Automating the cumbersome flow of information during a shipment’s transit from origin to destination would yield significant benefits for everyone but requires integration with outside agencies and standardisation of documents.

Cloud-based systems enable most processes to be dealt with in low-cost centres, leaving regional offices to focus on customer service. Better data analytics could help predict volume movements more accurately and boost yield management.

Will the existing freight-forwarding companies embrace these opportunities? Or will newcomers enter the market, unencumbered by legacy IT systems, and reap the benefits?

The incumbents face a wide variety of new entrants supported by a high external investment in logistics technology. The large freight-forwarding operators thus face the serious threat of disintermediation as digitisation simplifies currently complex processes, eliminating the need for them from swathes of the supply chain.

The threat may be overstated, however. Existing firms are actively embracing the technology that threatens to disrupt their business model. And the newcomers lack sufficient scale to pose an immediate existential threat. The main concern is the speed at which the start-ups can grow.

This research was first published on 28 November 2017.

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