Digitization key to forwarders ‘reaching the next level’

By Mike King Aug 5 2019 / Lloyd’s Loading List

Forwarders with aspirations to be modern businesses must embrace the services and efficiencies available via digital platforms, according to Wolfgang Lehmacher, leading logistics consultant and the former head of Supply Chain and Transport Industries at the World Economic Forum in Geneva and New York.

“Performance and profitability in forwarding depends on capacity availability, capacity purchasing prices and utilization, operational efficiencies on route and in offices, product pricing, and resilience against supply chain disruptions,” he said.

“Platforms offer tools in all these areas – for example to match supply and demand, increase purchasing power, apply dynamic pricing, anticipate disruptions or provide other insights about the market with the help of artificial intelligence, big data and predictive analytics, just to name a few.”

The main potential danger when forwarders consider which platform to engage with, he insisted, was not engaging at all.

“Rejecting the platforms appears to me to be the biggest pitfall,” he said. “Winning in forwarding is to a large extent about efficiencies – digitization is the key to reaching the next level.”

He also warned that companies attempting to develop their own platforms internally would face many challenges.

“Large forwarders can incubate such platforms, but it is hard to imagine that they can build them,” he said. “A better way is probably to tap into the wealth of platforms and functionalities to support and uplift the existing business model.

“Some forwarders might be able to build digital tools supporting their business. Kuehne and Nagel and Agility have launched their portals, with Agility also operating their digital forwarder, Shipa Freight, that builds on the logistics capabilities of the company.

“But the core competence of forwarders is to manage the flow of goods, which includes handling, transport and storage, as well as a broad range of value-added services, like packaging and quality controls. Forwarders are not technology companies.

“Building a platform might result in a broken system and just another marketplace in an already very crowded space.

“Most forwarders face two options – either to turn their services into platforms or work with the platforms that exist on the market. Forwarders can certainly mitigate risks by instead partnering with platforms.”

He also argued that facilitating digital transformation was often not only about technology but also about human capital management and governance. For larger businesses seeking control over new digital platform solutions, maximising human capital was best achieved by either incubating internal start-ups or partnering with them.

Both strategies, said Lehmacher, were in line with the logic of Patrice Caine, chairman and CEO of Thales, who argued there would always be more“ground-breakers outside of your company than within.”

Some incumbents in the transportation industry, including Maersk, are already partnering with technology partners such as IBM and Oracle while others are seeking solutions via start-ups.

 “Deutsche Post DHL is following both strategies,” he said. “The logistics giant incubated the freight platform Saloodo and works with many start-ups in different fields  – for example with Roambee, a data-driven internet of things company.”

He also said those attempting to adapt legacy systems to modern platforms and digital technology would face an uphill battle.

“Today’s technology struggles to integrate yesterday’s services,” he said. “Traditional companies like Oracle, Descartes, Macropoint and DAT have built their supply chain solutions on legacy systems with previously available means and languages, such as electronic data interchange (EDI), emails or even phone calls.

“But, today, application programming interface (API), cloud, AI and application (APP) based solution offer faster and regular exchanges, more service options, convenience and higher flexibility.

“The winning forwarders will possibly be those that are able to integrate towards a whole product with the option of customization and legacy integration. Forwarders might be well advised to seek collaboration with platforms and technology providers to upgrade their offers, rather than to be driven by fear of the disruption of their business.”

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