Logistics Industry 2.0

 
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Logistics Industry 2.0

Since the arrival of today’s most well-known technology companies, most industries have undergone a technological revolution.

Netflix in Entertainment, Airbnb in Hospitality and Uber in Transportation are few examples of companies that have transformed their industries by changing the paradigm of how these industries work. On the other side of the table, sits the massive $4.3 trillion dollar Logistics industry that has been on the slower side, making it one of the few industries with no notable tech-transformation. As massive as it is and as notable as the top players are (DHL, FedEx, UPS, to name a few) this industry is just now entering the initial phase of a digital revolution.

What exactly is happening to the Logistics Industry?

It is often to experience on mature industries, the appearance of new players taking advantage of the multiple inefficiencies and weaknesses of the already existing players. One way were startups are being disruptive is by drastically changing and enhancing the technology being used. On this end, technology companies have taken a two-way approach. They have focused their efforts on building new “systems of records” or “back-end systems” to automate processes and generate efficiencies inside their client’s business. Additionally, they have revolutionized the way that end-users behave by creating “customer facing” or “front-end” solutions to offer an innovative customer experience.

One of the up and coming leaders is Flexport, a company founded only 5 years ago, it’s the first international freight forwarder and customs brokerage built around an online dashboard. The company has raised over $300 Million dollars and was named the 8th fastest growing private company in the US in 2017. It has become an important competitor to giants such as FedEx, DB Schenker and Panalpina due to its use of technology, making it an easy-to-use option for customers while offering competitive rates.

According to Ryan Petersen, CEO of Flexport Goldman Sachs stated that if Flexport continues at 1/10th of its 2016 growth rate for 5 more years it will become the largest forwarder in the world. Flexport is without a doubt the Netflix of Logistics, forcing traditional logistic providers to either adapt their technology offerings or perish.

As expected, logistics companies are fighting back. Market leaders such as Kuehne+Nagel, Agility and other major players are creating their own digital solutions on the front-end. Other companies such as Maersk, have begun building solutions to optimize back-end processes through connectivity.

At the end of the day, however, logistics companies are not technology companies; making it very difficult for them to build adequate and scalable solutions.

Thankfully for traditional logistics companies and freight forwarders, some technology companies have emerged in an effort to help them adapt to this changes . Call it the technological un-disruption of freight. Some of these companies have focused on optimizing and fueling the existing back-end systems.

Project 44, Fourkites and Freightos, amongst others, have raised hundreds of millions of dollars to power the existing logistics framework. On the other hand, Logixboard and companies like it, have emerged to power the digital interface and experience that these logistics companies offer through software. Effectively allowing them to bridge the gap with their customers while increasing sales and minimizing costs.

In a nutshell, it is better to be safe than sorry. It’s no longer a question whether Logistics is entering a technological revolution, a “Logistics 2.0” we might call it, it’s a matter of how fast this changes will affect completely the way this industry used to work.

What remains to be seen is how existing companies can adapt and shift through the use of technology, not against it. Those that implement tech-friendly and customer-friendly solutions, will remain relevant. Those that don’t adapt will continue to lose market share and eventually cease to exist. Because in business as in life you must adapt in order to survive.