Data and information are critical ingredients to efficient logistics operations. This is hardly surprising, as almost every aspect of life in developed economies is either conducted ‘online’ or has an online equivalent. So it is essential for any business hoping to operate effectively, that they are able to connect and interact digitally with their clients and suppliers.
So why is there still some reluctance on the part of some road freight operators to embrace the use of technology within their operations?
On examination, the primary barriers are culture, cost, lack of tech knowledge and lack of trust and fear of transparency that technology enables.
If we take each of these in turn…
Many small trucking operations were usually founded by a single owner/operator who has provided exceptional service to a small group of customers. These relationships are often based on close personal relationships with the the managing directors/transport managers of the client firms. These bubbles of co-dependency have endured for many years while the basis of the client business required consistent, reliable transportation provision on agreed trade lanes that seldom changed.
They could operate effectively with a minimum of information sharing and when the time came to adopt technology, the email exchange of purchase orders/shipping and delivery instructions and POD’s was seen as the end game.
The owner of the company was able to maintain this approach, one that was relatively low cost (although the preference would always be ‘no cost’) because it did not challenge the basic premise of the business and ensured the predictable cash flows and related margins. The culture of the business from day one was to maintain the customer relationship, watch every penny of expenditure (sensible) and avoid any initiatives that would change this dynamic.
The perception in many smaller trucking businesses has always been that technology always costs and advanced technology costs a lot more. This is understandable but is based on a view of the tech industry from decades ago that is no longer accurate, or relevant. Because of this mindset, there is usually no incentive to keep up with technology trends and appreciate the dramatic fall in costs of technology acquisition and application.
Only when clients insist that technology investment is required to maintain the business relationship, do these small companies respond. But they tend to do so in the absence of any kind of technology strategy and the likely opportunities to transform the operations of other areas of the business. If this was done, they may realise that a more efficient operation may result, reducing costs and providing the opportunity to gain more clients.
The interconnected nature of most logistics operations is a result of the evolution of just in time operating models. The coordinated flow of shipments and the necessary information, requires that each involved party is able to transfer and receive data at any point in the process. Any of the players not able to participate in this ‘network’ are a drag on the optimal performance and are either replaced or penalised financially.
Any small or medium sized truck operation should therefore have members of the management team who appreciate technology and how it should be applied. There is usually a reluctance to either hire these kind of individuals, or encourage and promote existing staff members into such a role. This is a mistake and is usually due to nervousness on the part of the owner providing management responsibilities to someone who has more knowledge and potentially more control, than they do. But this is ultimately unavoidable if the company wishes to remain relevant and competitive in a market where the most lucrative operating margins go to companies able to perform in an integrated information environment.
Lack of Trust:
The time sensitive collection and delivery services that are part of almost every logistics contract can only function if supported by the transparency of information. This operational visibility enables the active (and often pro-active) management of schedules and swift response to problems. The track and trace technology introduced by the global integrators enabled them to respond and re-route shipments in the event of any disruptions. It was also a great sales pitch to customers that they could see the progress of their shipments.
This technology is now commonplace, but for smaller transport operators this operational transparency causes apprehension. The fear is that any mistakes they make will be instantly visible to their clients and operating partners. Simply put, they do not trust their own ability to perform. In addition, they must inherently trust their partners by sharing huge amounts of operating data. This is challenging when the culture for many of these companies has always been not to share any information at all, as it provides a competitor with the advantage.
A huge shift in mindset is required because unless companies are prepared to share large amounts of data and information, they are automatically at a disadvantage to competitors that do.
Every company providing road freight services must now recognise that they are part of a sophisticated network of physical operations driven by information technology. They must adopt and embrace information systems that will not only improve their efficiency, but boost profitability by reducing mistakes and enhancing customer service. They will not be able to hire the best staff members and compete for the most profitable clients.
As a reference point, the necessary information systems and application services no longer require large capital investment as they are provided as subscription services via the internet. This is similar to the operational expense of having a phone system back in the day. More to the point, these systems can easily support the growth of the company by just increasing the monthly cost in line with the required demand.
These systems and services can be operated by a range of mobile devices extending across the company. Indeed, modern trucks already contain huge amounts of processing power that provide data to the owners and operators for enhanced maintenance and performance. Modern transportation management systems are designed to incorporate all of these technologies into an integrated operating platform.
The slow adoption of technology by many smaller truck operators will have to change if they expect to remain a relevant option. The global demand for HGV drivers is another factor putting pressure on the small truck operators. It is interesting to observe that in many other sectors of the logistics and supply chain management landscape, there are young entrepreneurs starting technology companies to disrupt incumbent operators.
The one exception seems to be physical truck operations. This may illustrate that they either have operating models that are too complex and too efficient to challenge (unlikely), or that they will soon be irrelevant as their role will be performed by the logistics companies who use advanced information systems to direct and control single owner operators, similar to e-commerce local delivery models.
Source: Transport Intelligence, October 14, 2021
Author: Ken Lyon
More information about the road freight technology landscape can also be found on GSCi.