The logistics industry is changing with tremendous pace – and technology is the main driver. IT departments are no longer associated as mere data hubs, but have become key to employing new innovation into the market and staying competitive.
At the same time, a generation of IT driven companies led by tech giants Uber and Airbnb is sweeping across all industries and has now reached logistics. Over the past two years, more than 40 online startups highly represented by US-based businesses have entered the industry trying to disrupt the market.
‘Automation of data’, ‘digitising manual processes’ and ‘online platforms’ are key phrases used by these logistics startups who believe they can do logistics smarter, better and cheaper than the existing forwarding companies. The question is can they?
So far, logistics startups have primarily been held above water by investors and VCs with the five biggest startups constituting a net sum of over $400 million in funding. Now the real struggle begins as capital has to come from internally, and they have to prove to the market that they don’t just offer superior technology, but superior service.
Though often treated as another B2B industry by the outside world, logistics is not that simple. It is a very expert-driven industry that relies heavily on strong networks and agile fixes. A lot of startups are bound to fail as they find themselves unprepared to match the expertise and experience of existing forwarding companies, but there are those that will succeed and eventually pose a big threat to the market.
At this stage, we cannot know who will prevail, but it will be the ones that manage to utilize technology the right way without forgetting that logistics remains a physical process.
How and when are these startups actually threatening the business?
Customer needs are growing rapidly as they take their experiences from other industries and aspects of their businesses and relate it to the logistics industry. At the same time, there is big potential in automating a lot of the processes that have been done manually for decades. With their very agile and relatively small structure, logistics startups have the advantage that they can easily adapt to market needs.
The forwarders’ strength is the network and expertise in an industry that will always remain physical. Why they have nothing to fear:
Logistics as an end-to-end service entails more than booking, documentation, and customer service. Without the commitment to know your every move when rendering logistics services, one cannot build trust and remain competitive.
In return, as logistics is entering a new era in which technology-driven forwarders are becoming market leaders, i.e. FLEXPORT, one cannot fully ignore what is happening around us.
There are many ways to stay ahead of the market. But all of them will require a better service for the customer, be it more flexible, more extensive, quicker or cheaper, or all of it. Being closer to the shipper will be essential, no matter what happens in the market.
”We have to learn a lot more from shippers so we can tailor our services.
It’s up to us to learn and see how we can add value. We’re all in this together.”
Jonathan Clark, Regional Director Africa, Cargolux