Is The Transportation Industry Ready To Digitally Transform?

Paul Pessutti

One could argue that the transportation industry has been using digital technology for some time. For nearly 20 years, railroads have been tracking railcars using automatic equipment identification (AEI) along the track. Qualcomm started GPS fleet tracking in the late 90’s. Electronic messaging has been around for decades.

What is different today, and why is the recent rise of digital technology having a profound impact on the transportation industry?

The industry is experiencing a collision of transformative technology, higher customer expectations, and the influx of investment. Traditionally, the industry provides shippers with cheap and reliable service using established product and performance definitions and metrics. There has been little initiative to innovate or invest in technology. The industry was quite stable, and while the players changed, how the industry conducted business seldom changed.

You could also argue the status quo changed in 2005 with two separate events: Walmart pushed RFID and Amazon started Amazon Prime. At first, RFID was considered a concept too early due to cost. But while sensor technology was maturing, delivery expectations were increasing. By 2017, embedded sensors and 2-day delivery were considered normal.

With the emergence of smart products, assets, and always-on “things,” we now have access to unparalleled amounts of information. This – along with the evolution of connectivity, Big Data, analytics, and cloud technology – enables us to converge operational and information technologies, which in turn makes machines smarter and drives end-to-end digital transformation. This allows companies to gain value sourced from data and turn insight to action.

These changes established the next critical step: investment.

Customers demand a greater level of service from their transportation providers. As a result, there is substantial transformation arising from investment. The industry is recognizing the need to change or become obsolete. Here are just a few examples:

  • XPO has been on an acquisition binge since 2013, growing to become one of the top 10 largest logistics companies in the world, focusing on all modes
  • UPS bought Coyote Logistics, a non-asset-owning, technology-focused brokerage operation
  • Big box companies made acquisitions to the delivery market: Target acquired Grand Junction, for example, and Walmart acquired Parcel.
  • Uber Freight rose out of a broker-experienced leadership team that recognized freight capacity can be better managed through technology.
  • Railroads are now providing customers a menu of holistic transportation service options. This better leverages their extensive rail networks.

Innovation is leading the change

Innovation is also helping rewrite the economics of the transportation industry. For example, according to PwC’s 2017 commercial transportation trends article:

“It will soon be possible to integrate trucks into logistics data across the entire supply chain. Advanced telematics will enable transportation companies, through cloud-based analytics, to track and check such factors as truck location, the health and fatigue of the driver, the temperature and barometric pressure of the freight, and so on. Telematics will also ease automated freight matching. The truck trailer, relying on sensors, will be able to determine available space and weight, route, and ETA, and send this information to software that can generate the most efficient and cost-effective scenarios for moving loads.”

As you can see, innovation is creating countless possibilities, and the industry must be prepared.

Digital as an innovation engine

How should the transportation industry prepare? First, by including value-focused goals into the corporate strategy and mindset. Then, adopting an integrated technology platform approach for all business functions. (customer experience, asset and work force management, operations, invoicing & billing, and finance). In other words, for organizations to achieve these goals, they must embrace the latest technologies to reimagine business processes and business models.

Companies can set themselves up to succeed with the right digital platform. The industry has started applying technologies such as embedded sensors, 3D printing, drones, autonomous vehicles, and blockchain to create efficiencies and new business models. For example, UPS provides 3D CAD and 3D scanning services at more than 50 UPS store locations today, and Covenant Transport utilizes driver performance data from sensor information to improve driver retention and safety.

At the end of the day, you need to provide the 7Rs of business logistics—the right product, in the right quantity, to the right customer, in the right condition, to the right place, at the right time and right cost.

Download our “Accelerating Digital Transformation in the Transportation Industry” white paper now to get an even greater look at the importance of innovating and digitizing in this high paced industry. And learn how SAP Leonardo can help your company make the move to digital.

Turn thinking into doing at Mobile World Congress 2018 in Barcelona February 26 – March 1, 2018. Learn more!

Paul Pessutti

About Paul Pessutti

Paul Pessutti is Senior Vice President and General Manager of the Travel, Transportation, and Hospitality Industry Unit at SAP. Applying over 20 years of experience in this area, Paul is responsible for establishing and maintaining key customer relationships, ensuring customer success, enhancing the solution portfolio, growing the partner ecosystem, and acting as the brand ambassador worldwide. The industry consists of nine industry segments including airlines, airports, passenger transport, hospitality, travel service providers, freight forwarding and third parties, rail cargo, liner shipping, and trucking.