Towards Digital Fleet Ecosystems

Article by: Asst. Prof. Suwan Juntiwasarakij, Ph.D., MEGA Tech Senior Editor

As online shopping has momentously gained popularity among consumers, orders and items are and expected to be delivered as soon as possible. How transportation and logistics providers are coping with the pressure—and preparing for the future of the movement of goods is a profoundly difficult question. Tomorrow’s consumers will not be interested in what behind package delivery windows slimming down form days to hours and minutes, and they may not spend much time marveling over their ability to effortlessly coordinate delivery locations, times, and returns with busy schedules, or track a specialty product mile by mile as it makes its way from overseas. As with moth tech-enabled convenience, novelty quickly faces to expectation. And considering the innovation gaining momentum in transportation and logistics, consumer expectations will only continue to rise.

Mobility Ecosystem

According to KPMG, the mobility ecosystem has shifted from disconnected verticals to an interdependent ecosystem. Historically, the transportation industry has operated along largely linear value chains; this is all changing since various sectors are converging, eager to seize revenue opportunities in a new mobility ecosystem. The result is a complex web of interconnected value chains, and a multitude of new entrants is expected to take a share of this new market, with unprecedented levels of partnership and collaboration in the search for new solutions.

The Pillars for New Freight Ecosystem

The foundations of a next-generation global movement-of-goods network are actively forming. We are already seeing progress across the three pillars that will underpin the future network: connect community, the ability to collaborate and connect with partners to see across the network; holistic decision-making, the ability to harness and harmonize traditional and new data to continuously learn and predict; and intelligence automation, the ability to utilize the right human or machine for the task at hand and automated digital processes.

With limited physical infrastructure, new digital infrastructure and processes are needed to increase throughput, reduce friction, and improve transparency and coordination. According to Deloitte analysis, three pillars are drawn from the emerging movement of goods ecosystem: pillar one, driving end-to-end transparency through connected community; pillar two, driving agility through holistic, data-driven decision making; and pillar three, automating the network. Of course, opportunities are located across all three of these dimensions.

Amazon’s Implementation of Connected Community

Amazon’s connected community is an example of implementation of pillar one. Amazon has built an end-to-end infrastructure that allows them to meet and exceed the very expectations they have had a hand in shaping. However, legacy incumbents are evolving to provide the counterweight, driving investment and innovation at the core pillars of a new freight ecosystem.

Completing in the Future of the Last Mile

According to Deloitte, Data-driven decision-making will likely be critical success in the future of the last mile. A swell of startups and traditional players are racing to introduce new last-mile solutions in what is often the most unpredictable, congested, and costly leg of the goods journey. Aiming to capitalize on gaps in customer speed and flexibility demands, venture capital is pouring into the space. Investment in innovative last-mile startups exploded from USD390 million in 2014 to USD3.9 billion in 2018. The injection of smart money hints not only at imminent change but at the enormous convenience and flexibility coming to consumers through new last-mile channels. While investments concentrate on crowdsourcing, investors are also looking at ta mix of collection-point networks, smart lockers, connected courier fleets, autonomous droids and drones, and green fleets to meet new demands.

Deloitte analysis reveals that an evolving last-mile landscape brings important implications for traditional logistics provers and retailers, along with even more questions. Considering the potential distribution power and speed from the blend of new channels, the battle for the customer may play out not in the last mile but among providers competing to provide the best service in the last 1,000 fleet. How will logistics providers with millions invested in traditional last-mile transportation assets navigate the years ahead? How do traditional players leverage a mix acquisitions, partnership, and organic innovation to build out profitable last-mile capabilities at global scale, or partner with municipalities to drive success in cities with cities transportation infrastructure and variation in autonomous regulation?

Freight Forwarding Platform

The freight forwarding industry is susceptible to dis-intermediation, with many players aspiring to realize its platformization potential in recent years. According to McKinsey’s analysis, fundamental intermediary function between carriers and shippers was the main reason freight forwarders were forecast to become extinct as a self-contained business in the future. Digital connectors may have the potential to reduce the need for freight forwarders to organize shipments for multiple parties manually. Direct interaction between shippers and carriers is technologically feasible with digital connectors and makes economic sense if a certain platform is able to bring together a critical mass of players in its realm. Consequently, the intermediary function of freight forwarders is threatened by dis-intermediation and suggests that they are the predecessor of a multi-sided industry platform without transport liability. A paradigmatic comparison of today’s analogy intermediary function of forwarding vs potential platform model that allows for direct interaction between carrier and shipper is depicted in the figure shown here.

What to Watch

Upon digital transformation arrival, platform-operated companies prove to be digital disruptors. In the blink of an eye, digital platforms dis-intermediate entire industries in many industrial sectors, especially in transportation industry, where many players aspire to disrupt a market of a multi-billion industry worldwide. Forwarders as intermediaries were expected to become redundant and a bare platform model was expected to allow for direct interaction between carriers and shippers. Despite numerous efforts, all platform wannabes have failed to generate game-changing effects and the market is highly hyper-fragmented than ever.