As technology continues to develop and as new software and hardware solutions begin to crop up across various industries, changing the very fundamental ways that they operate in, logistics and in turn, road freight transportation, is no exception to the rule. Undoubtedly, organizing and conducting the carriage of goods on the road with trucks and trailers has developed and changed over time, as the sector continued to grow and as the need to be as efficient as one can be with their assets stuck around as long as the process itself was present.
Digitalization became one of the key buzzwords of the logistics industry, as going digital is seemingly essential for survival, in particular from the point of view of the traditional logistics provider. Companies, whose very own foundation was constructed with digital solutions in mind, threaten the former’s survival.
At the same time, the term became more and more ambiguous, as the scope of digitalization has only grown. While the objective and the benefit could be encompassed under the umbrella of efficiency and competitiveness, the onion is more than the skin, as peeling the layers reveal that digitalizing your road freight transportation process is a complex process that covers several phases of carrying goods on the road.
Nevertheless, the benefits, despite the complexity, should not be overlooked. As an example, a study about digitalization conducted by McKinsey in November 2020, a management consulting firm, concluded that “50 percent of surveyed companies reported moderate to significant impact on realizing new revenue streams, almost 70 percent reported impact on increasing existing revenue streams, and 76 percent reported impact on reducing costs.”
New revenue streams
While the study was not exclusive to the logistics industry, it still does present the positive effect that digitalization can have on a company that specializes in road freight transportation.
Expanding the possible revenue streams is undoubtedly made much easier once digital planning and commercial (sales) solutions are utilized by a company. Although contractual deliveries are a very stable and long-lasting foundation for a logistics company, SPOT and short-notice deliveries can act as the cladding that protects a firm from external forces. Continuing with the metaphor, those external forces could be empty-kilometer driving, overcapacity in a specific region, or from the customer‘s perspective, a sudden spike in the demand for their goods, or an unforeseen circumstance in the manufacturing process could provide a reason to book a short-notice delivery.
Girteka Logistics, for example, utilizes SPOT and short-notice deliveries to reduce the number of empty kilometers that would be driven if there is a gap between contractual deliveries in terms of the distance or the time between an unloading and a loading location. After all, driving an empty truck has no benefit to either the company or the environment, as it would result in emissions without any benefit whatsoever.
Integrating the two types of deliveries into the daily transportation process is much easier if all of the information is presented to three of the most important departments: planning, transport, and sales. Not only the departments can foresee the situation in regards to potential gaps between deliveries, but they also can proactively act and try to mitigate the situation. With digital solutions, simulating various scenarios is much easier, which allows to execute them with little-to-no hassle in reality.
Another trend that is gaining ever-increased attention is the so-called “uberization” of carrying cargo on the road. The software solution providers, whereupon a potential customer is connected to a shipper via an application or a website directly and seamlessly, completely changed the traditional way that a carrier and a shipper make a contact. The nature of the digital-only solution already suggests that in order to be able to offer such solutions, a shipper must have his processes fully digitalized. The future is seemingly predicted to be bright for such platforms, especially as a new generation of business owners look for new and innovative ways to make sure their goods are shipped to their end destination.
Utilization of trucks and trailers
For traditional logistics providers, building their own platform can seem a dauntless task, perhaps sometimes even one that won‘t provide the returns to justify investing money into a fully-independent platform. Yet sometimes simple improvements can go a long way.
“In many industries, companies’ web-based customer interfaces enable seamless, efficient, and fast transactions. But in road freight, such interfaces are generally outdated,” in an article about digitalization in the road freight industry commented the Boston Consulting Group (BCG), a consulting company. BCG noted that shippers have to “put up with lengthy procedures to obtain a quote, cumbersome documentation processes, and a lack of real-time cargo tracking,” as one of the main concerns for traditional logistics companies in terms of the threat they are facing from digital players.
Yet that threat could be translated into an opportunity. While many solutions exist to circumvent the lengthy process of obtaining a quote, a simple form online, which would directly connect a potential customer with sales personnel could become the foundation to further develop digital sales solutions, which in turn, could help a legacy carrier compete with digital platforms. Still, that would only be the foundation – and would need to be improved over time, as digital-based players are much more advanced in terms of their technological development.
Digitalizing sales processes, and in turn, making it easier for customers to receive a quote and finalize a deal, can also help logistics companies circumvent asset underutilization. According to the same article by BCG, the trucking industry in Western Europe lost a huge chunk of income as the players in the industry failed to ensure proper utilization of their assets. In 2016, the utilization of road freight capacity in the region was just 60%, setting back the industry €100 billion, “a significant amount considering that industry sales were €300 billion and its profit was approximately €10 billion.”
Thus, the argument to improve the sales processes is not only a question of competitiveness versus digital-based platforms but also comes back to the question of not losing out on additional revenue when margins are particularly tight. Per the BCG, the average profit margin, or Earnings Before Interest and Taxes (EBIT), was between 2% and 3%. Larger carriers exhibited slightly higher margins, yet at the same time, they were below 5%.
However, increasing the utilization of your assets is easier said than done. Ensuring that a truck and a trailer is able to carry the correct cargo is a complex process that does not involve only the planning or only the commercial department, but rather the joint work of the commercial, planning, and transport divisions that make sure that everything stays in line. The price of the shipment, the availability of the truck, and the abidance to regulations in terms of drivers‘ working and resting hours are all important aspects of the road transportation process.
Planning a truck’s journey digitally
For one, successfully planning a truck’s journey is not a process of mapping out the optimal route between point A and point B, but is rather a process of making sure that every factor is accounted for.
One of the most basic factors could be the time sensitivity of a shipment. While, for example, paper towels carried in a box trailer will not lose qualitative attributes if the shipment arrives later than intended, the same could not be said if a shipment of fresh fruit runs into trouble, as that could automatically mean that the product could lose crucial shelf-life and quality before it is even presented to the customer. Then there are various time factors, like delivering goods just in time for a certain type of contractor to be able to work on them, like at a construction site, or making sure that a driver is able to arrive at a ferry on time.
At first glance, a huge fleet of trucks and trailers could be seen as a double-edged sword.
On one hand, the huge number of vehicles facilitates offering unprecedented flexibility. If a customer has booked a full truck load (FTL) delivery from Cologne Airport, one of the major air cargo hubs in Europe, for end-consumers that have bought e-commerce goods with next-day delivery in southern France, one driver alone could not cover the distance while at the same time adhering to working hours‘ regulations. Thus, the shipper can either choose to utilize a two-man truck or for the carrier to trailer swap, which is much easier with a large fleet of vehicles.
On the other, maintaining and operating a large fleet of vehicles requires additional resources and can put a strain on a balance sheet of a company, in particular, if the fleet is continuously renewed. As a result, ensuring the optimal utilization of the fleet and optimizing processes throughout the whole fleet is a must in order to stay afloat. Doing so with human resources for large asset-based operators would be practically impossible, allowing digital technology to step in and provide a helping hand.
There is little doubt that digital technologies that help with fleet utilization are a must with a large fleet of vehicles. Not only it improves the utilization of trucks with the most efficient assignments, but it also could help with forward-visibility and flexible solutions, including trailer swapping or intermodal rail assignments.
To highlight how digitalization could help to plan a full truck load (FTL) delivery that if planning is done manually, the ability to plan forward could be hindered. For example, if a truck is needed to pick up a shipment from Northern Italy, and there is a truck unloading just a few kilometers north of the border in Switzerland, manual processes could miss that connection. But a digital solution, whether it would be coordinated by Artificial Intelligence (AI) or not, could circumvent that issue and pair the truck that is in Switzerland with the loading in Northern Italy, rather than pairing it up with a truck that is a hundred kilometers, perhaps even several hundred, away somewhere in Italy.
It has to be said, however, that such digital solutions are not yet ready to work independently. Perhaps they will not be ready ever, as a tandem of AI and a human complements each other to make sure that the work is efficient and the margin of error is reduced to a minimum. Yet at the same time, as trends shift in the logistics industry, utilizing digital solutions to plan deliveries is becoming a must in order to remain competitive.
New type of consumers
While efficiency is an argument that can be hardly argued against, the requirements for shippers from modern consumers has also paved the way for carriers to digitalize.
In particular, consumers’ attention to their shipments and the desire to have real-time information about their parcels has grown in importance, especially as the world experienced a generational shift. The people who have grown up with modern technologies at their hands have come with their set of demands.
“Their expectations are high regarding the retail supply chain. Shopping online, globally for the best price and choice, this generation expects same day or rapid delivery either free or low cost, with defined time slots, and demand choices where their goods will be delivered,” noted a paper by Boyden. While the wish for extremely fast delivery times has undoubtedly put a strain on the road freight transportation process, impacting last-mile and truck-based carriers alike, it has also forced logistics companies to provide real-time data.
Akin to the point of much easier planning and transport deployment, the availability of real-time data that a carrier would be able to provide to consumers is only made available through digital solutions that have sprung up onto the market most recently. However, the real-time visibility of cargo can also be used to strengthen a relationship with a customer, as visible proof of the reliability of your services can go a long way in a relationship between a shipper and a carrier.
From the perspective of the planning department, being able to see the work that the commercial department has done and assigning the right trucks to the sold shipment is only one side of the equation. Rest and working times have to be accounted for, especially when working with temperature-sensitive cargo, for example. Outlining the way a customer’s goods will be delivered must be done with a lot of precision. The complexity only intensifies as the planning department looks towards the future and tries to anticipate where and when certain assets will be at, trying to avoid empty kilometer driving. Digital tools can lend a helping hand here, as they provide clarity on where and when trucks will be located at. Thus, the planning department could also provide feedback to commercial personnel and help each other pinpoint regions or areas where a more proactive approach is needed.
For example, the commercial department must make sure that not only the price is right, but that the capacity in your trucks is sold proactively and into the future, in order not to begin bleeding cash from shipments from regions with overcapacity. The main concern for traditional asset-based providers is that with digital tools that are used by their competition, or digital freight forwarders providing that competition directly, being proactive becomes very difficult when your opponents are one step ahead of you.
“Two measures are required for succeeding in the transformation and making better decisions: use common data (either by exchanging it or by using common tools) and ensure continuous cooperation among departments,” highlighted an article by Kearney, a management consulting firm.
Investing in digital tools is just one side of the equation. To make sure that organizational efficiency is achieved, full integration of digital tools and synchronization between different teams is a must in order for every department to respond to the current situation, such as overcapacity in a certain region, and to be able to alleviate it quickly.
That synchronization could also help to improve the relationship between a shipper and a carrier. For example, having a set of data on a certain lane can help both sides fine-tune the details and identify and in turn, rectify inefficiencies that might not have been visible without having the ability to track and then analyze data. Perhaps tweaking the loading or/and unloading time would allow the shipper and the carrier to avoid traffic, or would allow a driver to pick up a load at the start of his shift, rather than the mid-point or the end of his shift. While it might sound like an obvious improvement, without having the proper insight into the processes, the adjustment is much harder to complete if it is shrouded in mist. Thus, a partnership with a forward-looking and digital-focused logistics provider becomes a much more attractive proposition, as the efficiency of a supply chain could be taken to the next level with the help of a digitally advanced logistics provider.
Sustainability and efficiency via digitalization
Another thing that has shifted amongst consumers is that they are mindful of the impact a company, from whom they purchase their products, has on the environment.
According to an article by the Harvard Business Review, a subsidiary of the University of Harvard, 65% of consumers worldwide were “willing to pay extra for sustainable offerings.” The number of millennials who responded positively to the question was even higher – 73%, showcasing just how important sustainability is to consumers. However, the same study concluded that only 26% actually came through with their promise, indicating a very wide gap between their intentions and their actions. “Narrowing this “intention-action gap” is important not just for meeting corporate sustainability goals but also for the planet,” concluded the authors of the article. In a separate survey, conducted in the United Kingdom in March 2021, nearly one in third of UK-based consumers “claimed to have stopped purchasing certain brands or products because they had ethical or sustainability-related concerns about them,” concluded Deloitte. It also reinforced the point that price has to be right, as 16% of the surveyees stated that they are not being more sustainable because “it’s too expensive.”
While consumers are not the typical buyers of full truck load (FTL) shipments, those same consumers can also be business owners or procurement managers of logistics services. Their individual biases could also transfer to their corporate lives and despite the best of intentions to be sustainable, the price can prove to be too high of an obstacle to overcome. After all, there is no circumventing the fact that utilizing HVO, for example, is more expensive than utilizing regular diesel for your logistics needs.
At the same time, consumers are mindful not only of the practices at the forefront of the product (a grocery store) but also what is happening at the back (supplier). The Deloitte survey also indicated that 45% of consumers stopped purchasing certain brands due to ethical/sustainability concerns when grocery shopping, while 42% of the surveyees stopped doing so when shopping for clothing and footwear. Presenting a nice front, yet having trouble at the back could backfire and sway consumers away from purchasing your products.
Still, being truly sustainable when carrying road freight transport is difficult, one part because of the aforementioned cost increase, as well as the fact that no electric or hydrogen trucks are widely available on the market that can truly replace the current diesel-powered trucks. But there are ways to reduce your emissions. For one, utilizing alternative fuels like HVO is a great way to do so. However, small changes also go a long way. The reduction of empty kilometer driving is also a measure that reduces the carbon footprint of the transportation process. While it is possible to minimize them via more traditional means, combining smart planning and transport deployment solutions allows doing so much more efficiently, possibly even completely eliminating empty kilometer driving.
“In the European Union, trucks are empty for around 20% of the distance they travel each year. If the use of digital marketplaces can reduce this by 10-20%, we estimate the industry could save €1-2bn and cut CO2 emissions by 1-2 megatons,” indicated strategy&, a consulting firm and a subsidiary of PwC, in an article about smart logistics.
Another example of being more sustainable with digital solutions could be the monitoring of economical driving. Observing the way that drivers use the gas pedal or brake pedal would be hardly possible without the ability to extract that data without a fleet management solution, which allows such companies as Girteka Logistics to monitor their fleet remotely. However, analyzing the data is just one part of the equation – the other is to act upon that data by proactively training your drivers to improve the fuel efficiency across your fleet with such initiatives as the Eco League.