Logistics businesses: adopt technology or revenue will slide - FreightWaves

Global auditing firm Pricewaterhouse Coopers (PwC) released a report on trends that define the transportation and logistics (T&L) segment for this year, citing technology to be the most significant factor determining the health of businesses in the space. 

An annual survey by PwC with CEOs of several companies within the industry found concerning evidence in the shortage of confidence in the market, with only 29 percent of the executives stating they are ‘very confident’ of their organization’s revenue growth in the space over the next year. Statistically, executive confidence languishes at a five-year low; in 2018 45 percent of the CEOs were confident of the future. 

This apparent lack of optimism puts the limelight on the ecosystem, which seems to be evolving rapidly alongside consumer expectations and the explosion of startups looking to marry technology with traditional logistics processes. PwC contends that this uncertainty with assured annual revenue has pushed incumbent companies to search for revenue streams that are ‘tangential’ to their core business. 

For instance, Deutsche Post DHL has become a manufacturer of electric delivery vans. Though initially intended only to serve DHL’s e-van needs, the company has now expanded its manufacturing subsidiary StreetScooter and plans to sell its vehicles to rival T&L companies, eyeing a secondary stream of income to add to its bottom-line. 

The industry’s fascination with blockchain technology was not lost on PwC; the report highlighted the prowess of blockchain to usher visibility and transparency into often siloed logistics processes. One of the biggest hassles faced by stakeholders within a supply chain is their inability to gain cognizance into the precise location of shipments while in transit. Documentation is also an issue, because missing or incomplete paperwork means delays that potentially last for days. 

“Blockchain has the potential to eliminate most of these roadblocks because it can serve as an encrypted digital ledger tracking the movements of products from warehouse to customer and linking documentation directly to the shipment as it makes its way to the destination,” said PwC in the report. 

However, to tap into the potential of blockchain, it is critical to form consortiums within the space that take the technology forward and standardize its data frameworks, which companies can utilize to spin off blockchain pilots. The Blockchain in Transport Alliance (BiTA) is one such collaborative venture that has about 500 members across the logistics space. BiTA has developed open blockchain standards that companies can use as a platform for their blockchain needs. 

Artificial intelligence (AI) is another defining factor in the future roadmap of transportation and logistics, with digitalization playing a crucial role in data assimilation across different processes in the supply chain. These data sets are pushed through AI algorithms that help businesses to “distinguish themselves from the competition, provide better service, cut costs and enhance day-to-day operations.” 

Despite being a proven technology, AI’s usage in the T&L industry is still not widely prevalent, with 40 percent of the CEOs who responded to PwC’s survey stating they had “no plans to pursue any AI projects,” which is dismal considering that only 23 percent of CEOs from other domains claim non-interest. 

Worker utilization can also be improved with technology, as T&L companies can now hire carriers and warehouse workers based on actual operational activity rather than inaccurate forecasts. “Partnerships or alliances linking startups with innovative technology ideas and established T&L firms may become more routine in the future, especially as a way to recruit talent that is able to conceive new ways to implement advanced technology both in operations and in improving services offered to customers,” said the report. 

There is growing apprehension about the skills of workers, with 55 percent of the CEOs responding that they were ‘extremely concerned’ with the skill levels of their employees, which is restricting them in terms of innovation. A further 53 percent stated that the dearth of skill sets is causing their companies to miss their growth targets, and 49 percent said that it was preventing them from pursuing a market opportunity. 

PwC called the T&L industry a ‘cottage industry’ of sorts, as it remains highly fragmented and is comprised of thousands of small companies that are involved in limited shipping and logistics activities. “As a result, decisions to implement new technologies will vary, depending

on availability of funds to invest in new technologies and R&D,” said the report. “Nonetheless, with the overall T&L arena moving quickly towards adopting more digital functions and capabilities across its value chain, R&D investment and innovation is essential, no matter what size the company is.”

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