Air cargo facing death by super-digitisation
AIR CARGO is on target to lose out on billions of dollars of revenue generated by super-digitisation over the next decade, a major report warns.
A share of US$1.5 trillion is at stake for logistics and airfreight players as a result of the oncoming digital transformation through to 2025, reveals a special report conducted by the World Economic Forum.
The missed opportunity is because logistics and air cargo companies continue to introduce digital innovations at a slower pace than most other industries, it notes.
“This slower rate of digital adoption brings enormous risks that, if ignored, could be potentially catastrophic for even the biggest established players in the business,” the report asserts.
It points out that other industries with close links to logistics, such as retail, have been ‘revolutionised by digital technology’, and the chances of digital disruption engulfing the logistics industry are increasing, writes Thelma Etim.
One example is the rise of e-commerce leading to new digital entrants in the last-mile delivery market.
Digital logistics industry
“Digital platforms will become increasingly important in the logistics industry, allowing small companies to have a global reach and compete with the sector’s established giants,” predicts the report whose contributors include Kuwait-based logistics giant Agility, Swiss Air Lines, UPS and Kuehne + Nagel.
“Over the next few years, the race to build a dominant global platform will transform the customer’s experience of logistics and will be the central issue in determining which enterprises will be the winners and losers in a truly digital logistics industry.”
Research also shows that emerging markets are likely to be the nexus of future growth. New economies are expected to fuel the growth in the number of people using smartphones, for example (predicted to double to four billion by 2025) and will, crucially, be the source of air cargo’s much-needed revitalisation, lifting air cargo volumes by more than one million tonnes by 2018.
The prediction is that the fastest growth will be on routes between the Middle East and Asia, the report notes.
Despite incontrovertible evidence of the wide-ranging ramifications that disruptive technologies are already having on all industries, transforming the fortunes of many sectors, some airfreight and logistics businesses remain unfathomably reluctant to embrace innovation.
They behave as if they still have a choice: Optimise your business to increase productivity, efficiency, speed, customer satisfaction, revenue and profits, or not?
Find more statistics at Statista
Advances in cloud computing
While some operators continue to deliberate, the World Economic Forum report warns: “No longer is it enough for firms to deliver a consignment on time; they now also need to offer a multiplatform service to both personal and business customers.”
They may also need to invest in specific services, such as a ‘cool supply chain’ for temperature-sensitive goods, it adds.
The Internet of Things (IoT), which connects/communicates with any device, has been underpinned by recent advances in cloud computing so that cheaper data storage and increased computational power now mean big data streams can be collected, stored and analysed much more efficiently. “This is enabling logistics providers and customers to conduct a real-time analysis of supply chain data,” the report explains.
“Insights from this analysis allow logistics firms or their customers to predict events more accurately and react more quickly if they do happen.”
The revolutionising of logistics through super-digitisation
It also notes the emergence of giant Internet platforms such as eBay, Amazon and Alibaba, as one of the biggest digital trends of recent years, and 3D-printing in manufacturing is still in its infancy and autonomous vehicles (driverless cars and drones) are two other technological developments with the potential to revolutionise logistics over the next decade, it insists.
With these and other technological advances, the report identifies five areas that are crucial to the digital transformation of logistics. Four outline the source of the $1.5 trillion estimate, whilst the fifth details the holistic customer and societal (green) benefits.
They are: data-driven information services; crowdsourcing; digitally-enhanced cross-border platforms; new delivery capabilities, along with shared logistics capabilities; and customer and societal benefits. (Source: World Economic Forum, Accenture Analysis)
- Data-driven information services offer an $810bn upside to the industry.
Operators will use analytics to optimise routes, reduce maintenance costs and improve utilisation.
The big players will implement so-called control towers that gather data, which can be organised in the cloud for monitoring and automation purposes.
Cloud-based technology can then analyse the data to detect and predict problems and to optimise decision-making.
The report cites Kuehne + Nagel, which uses “a logistics control tower to maximize cost efficiencies, while adhering to time constraints and complying with standards in security and document accuracy.”
It also highlights that analytics as a service could add $600bn of operating profits to the industry and the control tower could add $210bn of incremental profits.
- Crowdsourcing is considered a potential game-changer for the industry, making the sector more competitive. It is about getting what one needs from an undefined group of people – typically an online community – instead of from traditional sources (employees or suppliers, for example).
In logistics, crowdsourcing can reduce the environmental footprint by helping businesses make more efficient use of available capacity and thus lower total driven miles, says the report.
It cites UK-based Telogis, which runs a cloud-based software platform that collects route data from driver reports and fleet movements, helping surface logistics firms improve route planning and execution.
“Major trucking companies could be at a risk of losing $310bn of operating profits to players enrolled on crowdsourced platforms.”
- Digitally enhanced cross-border platforms will increase trade flows by simplifying import-export processes. These platforms could earn $120bn in the form of commissions. Logistics companies could earn $50bn in additional profits as a result of this increase in trade.
- Long-term new delivery capabilities: Autonomous trucks and drones will increase the industry’s efficiency and bring significant societal benefits once the regulatory hurdles are overcome and mass adoption becomes feasible.
However, over the next 10 years, they will have a relatively smaller contribution to the tune of approximately $50bn, concludes the report.
Autonomous trucks will reduce cost to the tune of $30bn as a result of savings in fuel costs, maintenance costs, employee costs and insurance, whilst drones will cut costs by $20bn from faster and cheaper last-mile delivery services in both rural and urban areas, the document predicts.
- Customer and societal benefits: The greatest impact from digital transformation in the logistics industry will come from societal benefits, which include lower carbon emissions; less traffic congestion; lives saved through reduction in accidents; increase in cross-border trade as a result of platforms simplifying trade processes, and discounts to customers due to increased utilisation levels.
Finally, super-digitisation could assist in reducing logistics-related emissions by as much 10 to 12 per cent by 2025, the report concludes.