Logistics 4.0 Might Change Dramatically in 2-3 Years

TELS provides comprehensive services for international freight transportation by all modes. Experts have been sharing their experience in transport logistics for 16 years following up important events and giving their comments, analyzing the TLS market, making forecasts of its development.

Karachun.jpgBased on the experience received from participation in 2 logistics trade fairs that took place in Germany and Poland in 2017, Vladimir Karachun, Head of Groupage Services Department, speaks on a marked trend in the logistic market, namely the rapid development of IT products in logistics. More on what it involves and what changes it brings to logistics in the interview with the expert from TELS Group of Companies.

Vladimir, speaking from the general to the particular, how could you describe the development of IT services in logistics? What are the trends discovered during the trade fairs?

TRANSPORT LOGISTIC trade fair in Munich and TRANSPOLAND in Warsaw have revealed rapid development and aggressive marketing of the companies offering IT products for logistics. The trade fair in Germany had a larger number of participants, discussed complicated issues as well as presented a wide range of IT-solutions for logistics.

Three major development trends include: 1) transport exchanges, 2) IT-products for logistics automation, 3) digitalization of logistic machinery and equipment used at all stages of logistic chains. There is another trend involving technical development of communication between customers and contractors, but this is a general trend developing across business communication in different sectors.


What are transport exchanges offering for the market and how are they developing?

Transport exchanges are evolving from simple platforms offering cargoes and transport to active market players. The services on the platforms are becoming better and broader – route development and financial calculations are automated… Certain transport exchanges start developing cargo transportations, while large logistics operators are acquiring and developing their own transport exchanges.

All the exchanges are advancing aggressively in the market aiming to develop market power by getting as many orders and carriers as possible. They offer free access to their platforms with possible monetization of services in the future.

Currently only a few transport exchanges have significant competitive advantages. I would single out two-three exchanges from the whole range – one is developing package cargo offerings with automated route planning; the other is offering good terms of financial guarantees. However, none of them can realize their potential fully as there is no mechanism that can guarantee the availability of cargoes for bidders by the acceptance time.

How quickly and how much will transport exchanges change the market of international logistics?

Primarily, exchanges affect the market in those regions where they operate in their full capacity, most often within the same country and on certain international routes. They are developing gradually – as they open more regional offices, the importance of exchanges in the new region grows (starting from a simple tendering platform without special features or advantages end ending up being full-fledged service partners).

Currently there are no preconditions for any exchange to reach a fundamentally new level allowing to realize their potential fully. Today the largest company in the field is widely present in 12 European countries, while the others are working perfectly in domestic markets of one country offering transportations to neighboring countries from time to time. They are just trading platforms outside their regions.

For large transport exchanges, access to EEU market is not a priority – first, European market is much bigger offering more development-friendly conditions; second, the development of eastern routes is curbed by the shortage of specialists and experts that could supervise the projects in EEU and Asian countries.


What can you say about further development of IT-products necessary for logistics automation? How important and much in demand will the outsourced IT solutions be for logistic operators?

Managing international freight transportations performed by all modes of transport implies a complex of intricate processes. That is why a global product automating logistics and satisfying a greater part of market participants is hardly expected in the market. Niche products automating certain parts of logistics processes have far better prospects.

Automation of all the processes in a large international logistics company on their own is an extremely difficult task that requires unreasonably large resources along with the risk of low-quality results. We regularly communicate with trade colleagues from large European logistics companies, and all of them all talking about the acquisition of niche IT-products with their integration into a single system. Personal experience of studying the proposed IT-products confirms the prospects of this.

For example, I liked a software product that works well with our transportation processes for groupage cargoes and requires relatively little customization. The product also has a CRM. Developers present their product as a comprehensive automation solution. However, it is clear their CRM does not exactly suit us – if we take the product for transportation automation, we’ll have to integrate the CRM software developed by someone else.

How secure will the system be if it’s made of several products developed by different companies?

At the same time, IT companies understand the situation clearly, so they switch to common communication protocols, which allow them to integrate their solutions with other IT-products.

Thus, IT-solutions in logistics are developing in a way that allows using released products to: a) create company’s own platforms for working with customers and contractors; b) integrate with partner systems; c) integrate with the existing transport exchanges.

Judging by the speed IT sector is developing and the interest of market players to IT-products, I can assume that an evolutionary leap in logistics automation will take place in 2-3 years.


What does digitalization of machinery and equipment mean?

The development of science and technology results in active integration of new inventions into logistics equipment. Smart containers and trailers are equipped with sensors that measure environment and cargo parameters, read information from surrounding objects.

Along with real improvements in customer appeal of goods and services, the process has certain “marketing noise”. Marketing requires the emergence of new products promoted by newsbreaks. This, in its turn, drives changes in demand as customers and buyers start including some of the “blown” products in the list of important conditions required for the purchase of goods and services. If a semitrailer lacks certain technical parameters, it will be more difficult for the company to sell it despite the fact that the new feature might not be yet applicable.


What are the real changes taking place in communication between customers and contractors?

Many companies see older generations replaced by young employees evaluating the purchase of logistics services by other criteria. Figuratively speaking, for such an employee a good contractor is not just a reliable carrier, but also a beautiful application on a smartphone, the transport order is placed with “Transport” button in the application, minimal communication on business issues, on-line information and an automated financial statement.

In Germany, HR Directors of the largest companies are already debating how to build relationships with the employees from “Y” generation, ensure their loyalty and efficiency at the same time. This generation communicates in a different way, so it is necessary to create comfort communication environment to attract and retain them.

All this motivates market players to automate their activities and enter the common information environment with their contractors.

The emerging neural networks in logistics are participating in creation of efficient logistic chains, rate forecasts and information analysis in global space. Robotic technologies can are already read incoming information in any format (text, voice, picture), process it and make offers for the customers. However, business in general is not fully aware of how these technologies can be used in production and logistics processes.

What will logistics look like in a few years?

To be continued…

The second part of the interview will cover the inevitable increase in transparency of logistic operations resulting in cost reduction of “ordinary” transportations, changes in sales engineering, deficiency of specialists required for market development, etc.