Is The Transportation Industry Ready To Digitally Transform?

Konstanze Werle

You could argue the transportation industry has been using digital for some time. For close to 20 years, railroads have been tracking railcars using automatic equipment identification (AEI) along the track. Also, Qualcomm started GPS fleet tracking in the late 90’s. Electronic messaging has been around for decades. What is different 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 an influx of investments. 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 rather stable and, while the players changed, the ways the industry conducted business seldom did.

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 too early a concept due to cost. But while sensor technology was maturing, delivery expectations were increasing.  By 2017, embedded sensors and two-day delivery were expected.

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 – is enabling us to converge operational and information technologies. In turn, this makes machines smarter and drives end-to-end digital transformation, which allows companies to gain value sourced from data and turn insight into action.

These changes established the next critical step: investment.

Customers are demanding a greater level of service from their transportation providers, driving a substantial transformation from investment. The industry is recognizing the need to change or become obsolete. The examples are plenty:

  • XPO has been on an acquisition binge since 2013 and has grown into one of the 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 in the delivery market, e.g., Target acquired Grand Junction and Walmart acquired Parcel
  • Uber Freight rose out of a broker-experienced leadership team that recognized that freight capacity can be better managed through technology
  • Railroads are now providing customers a menu of holistic transportation service options, which 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:

“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 making the possibilities endless. The industry must be ready.

Digital as an innovation engine

How should the transportation industry prepare? First, by including value-focused goals into the corporate strategy and mindset. Then by adopting an integrated technology platform approach for all your business functions (e.g., customer experience, asset, and workforce 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 technology to create efficiencies and new business models. These include embedded sensors, 3D printing, drones, autonomous vehicles, and blockchain.

For example, UPS provides 3D CAD and 3D scanning services at more than 50 UPS store locations. Also, 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 white paper, “Accelerating Digital Transformation in the Transportation Industry,” to get a deeper 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.

Konstanze Werle

About Konstanze Werle

Konstanze Werle is a Director of Industries Marketing at SAP. She is a content marketing specialist with a particular focus on the travel and transportation, engineering and construction and real estate industries worldwide. Her goal is to help companies in these industries to simplify their business by sharing latest trends and innovation in their industry.