The importance of increased digitisation and transparency in the transport sector
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I have received questions about why I do not write more about transportation. It certainly is a critical part of successful logistics. Therefore, here are some of my thoughts about transport.
Like warehousing, transport efficiency is growing in importance. The main reason is e-commerce flow with a lot of packages, but also low fill rates in transport and bigger focus from government agencies because of climate change. All in all, road transport encompasses around 20% of the total carbon dioxide emissions in Europe, with heavy-duty vehicles contributing to a quarter of these emissions (EU Climate Action).
Both government agencies and scientific communities agree that a large portion of heavy vehicles could be removed from the road network with more efficient planning that increases fill rates (Piecyk & McKinnon 2010).
Efficiency depends on how resources are utilized
It is almost impossible to write about the transport business in general and global terms. Every market has its own unique conditions, mostly because of geographical and political reasons. In Sweden, where I live, 80 percent of transport routes are shorter than 200 km. A significant part of the transport is roadwork and construction material (Swedish Association of Road Transport Companies 2013)
The efficiency of a transport system is dependent on how resources are utilized. In Sweden, the freight transport sector is fragmented, composed mostly of small operators affiliated with intermediary companies that handle sales and contact with customers. Most innovations in the transport business have been of technical nature like better engines and fuel types for example. We have not seen organizational developments leading to changed behaviour in the business. One important reason for that is the transport buyer’s ambitions in the procurement of transport.
E-commerce and its special features
For companies that work with e-commerce and omnichannel, transport is a very “heavy” financial budget post. Transport is one of the most important competitive tools for e-commerce companies both regarding costs and service to customers.
Information, transparency and digitalisation
To get transport with the right service at a competitive price, the most important factor is by far the actual procurement. It is critical you have a tender that contains the absolute right data and that you are completely transparent to your presumptive suppliers of transport. The most common challenge in transport procurements is the lack of information. If you want the best prices and the best service to your customers, an unconditional requirement is a digital information in all stages of the supply chain.
Work closely and accurately with the transport company
You as a buyer, need to work very closely with the transport companies. Build trust and exchange information in the very early stages of the supply chain. You need to get the statistics right. Don’t use “estimates” if it is not absolutely necessary. Facts are a must, otherwise, you will have prices that make room for all uncertainty in your information.
The most successful companies collaborate with transport companies very closely, make situation analysis and often use route optimization programs to simulate most cost-efficient routes with the best service. It is very important you as a customer, are at the forefront regarding digitization and have systems that collect data and can exchange data with transport companies in real time. In that way, you can make trustworthy tenders and procurements in transport.
The future is about complex collaborations
I am sure, we, in the near future, will see more complex collaborations between transport companies. The freight transport sector is so complex with countless senders and receivers using a large variety of vehicles with different ownership. The freight transport sector lacks a unified business model for transport services with general applicability where the business model affects the transport system in general.
I believe we will see disruptive business models connecting different transport networks and companies to increase fill rates and decrease the number of heavy vehicles. In that way, we will have higher cost-efficiency and positive environmental effects. The challenge is the lack of digitization right now regarding both transport buyers and transport companies.