Driving digital transformation in the transport and logistics industry

September 17, 2019 Jon Vass

Digital Transformation in the Logistics and Transportation Industry

The transport and logistics (T&L) industry is undergoing a period of rapid change. And it’s happening as a number of disruptive trends converge, reshaping the competitive landscape and changing customers expectations.

It’s an exciting time for the centuries-old industry. There’s never been a better time for T&L players to leverage new tools and disruptive thinking to drive transformation in their business. 

Or at least it should be. The reality is many established T&L players are struggling to keep up with the pace of change. In fact, a recent study by PwC found that 55 percent of T&L CEOs are extremely concerned that a lack of technological expertise in their business is preventing them from innovating. While 49 percent say it's preventing them from pursuing a market opportunity. 

Their concern is understandable. CEOs know that if their business cannot innovate and capture new opportunities, somebody else will fill the gap. And this is one of the main reasons that the confidence CEOs have in their organization’s revenue growth over the next year is at a five year low. 

Doing what's needed

In some respect, we shouldn’t be surprised that T&L companies feel this way. The industry doesn’t have a great track record of supporting and pushing ahead with digital transformation initiatives. For example, in 2010, the International Air Transport Association (IATA) introduced electronic air waybills to promote the digitization of the air cargo supply chain. Nearly a decade on, market penetration has only just broken the 50% mark

When large scale transformations have occurred, these have often been forced upon the industry by the regulators. Like after the tragic events of 9/11 when regulators pushed through a raft of new regulations designed to tighten security and mitigate the risk of such an event ever happening again. These measures forced T&L companies to adopt digital tools to more easily comply with new security and customs legislation. 

And it’s fair to say that in most cases, T&L companies simply treated all this as a compliance matter—doing the bare minimum to meet the regulatory requirements. 

Current drivers of change

This time is different, however. The real driver of change isn’t coming from the regulators.   Change today is driven by new entrants into the industry and a number of established players that are using technology to transform their business.  

Take Flexport for example, the San Francisco based freight forwarding and customs brokerage startup is currently valued at over $3 billion largely because of it’s digitizing the paper-based industry.  Its solution allows global companies like Sonos to reduce costs and get more visibility and control into their supply chain without any paper in sight. 

First steps forward 

The good news is, many CEOs have are taking action. A study by EFT shows that 78% of firms are increasing IT investments. The large proportion of these investment dollars are going towards AI and the Internet of Things (IoT) technology. 

While these technologies are certainly interesting, T&L companies risk trying to run before they can walk. You can implement AI and IoT all you want, but unless you digitally transform your underlying business first, it won't make much difference.

And it often makes sense to digitally transform accounts payable (AP) first. A report last year from Drewry suggests that today’s antiquated invoicing and payment processes are costing the industry $34.4 billion annually. While The Boston Consulting Group estimates that automating manual processes now can reduce certain back-office and operations costs by up to 40%. 

Digitizing AP does more than yield quick returns, however. It's a foundational aspect of any company's digital transformation efforts. And once this foundational aspect is in place, businesses find themselves perfectly positioned to drive further innovation through their supply chain. Enabling them to be more agile, adaptive and take advantage of new opportunities when they arise. 

Turning challenges into opportunities 

The pace of change in the T&L industry isn’t abating and the competitive landscape will look very different in five years. Changemakers in the industry can harness new technologies and innovative thinking to digitally transform business, make it adaptive and capture new opportunities as soon as they arise. 

Download our new whitepaper to learn more about the state of digital transformation in the T&L industry.

About the Author

Jon Vass

Jon Vass is Tradeshift's Global Account Director for Airlines & Logistics. He joined Tradeshift in 2016 having been immersed in the world of cutting edge enterprise software for the past 15 years.

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