3 minute read 1 Mar 2018
Airplane flying over container port

How transportation and logistics can position itself in a new world

By

Randy Miller

EY Global Automotive & Transportation Leader

Champion for women and diversity & inclusiveness in the Automotive & Transportation sector. Passionate about cars, mobility and disruption.

3 minute read 1 Mar 2018

The volume of goods shipped will quadruple by 2050. But competition is coming from all directions, and digitalization will drive big change.

Technology innovation and digitalization are disrupting almost every process across the transportation and logistics ecosystem, including the methods of shipment, content and cargo management, and supporting administration activities, such as documentation and payments.

As global population will increase from 7.4 billion to 10.6 billion by 2050, the volume of goods shipped will quadruple by 2050, driven by urbanization, increases in disposable income and internet penetration, and ease of access to new technologies. Document and paper-based shipments are expected to decrease significantly as digital document management evolves.

Given the accelerating pace of change, transportation and logistics (T&L) companies need to transform themselves for a world where they are no longer protected by entry barriers, competition comes from all directions, and digitalization will become the major agent of change.

Business and individual customers expect the transparent digital experience from T&L companies today
Jim Doucette
US Corporate and Growth Strategy Leader, Ernst & Young LLP

The global trends in play

We have identified six industry-specific change drivers that will impact the T&L industry over the next decade:

  1. Global uncertainty: Disruption in the global supply chain cost US$56 billion in 2015 in Europe alone. Economic turbulence, protectionism, and geopolitical instability are forcing transportation and logistics providers to adopt new business models and new alliances.
  2. Urbanization: With the rise of megacities, T&L providers need to cope with the challenges of urban logistics, including congestion, difficulties in loading and unloading, and last-mile delivery.
  3. Digitalization: Digital technologies will transform the industry, with new efficiencies and new visibility. However, technology is a double-edged sword that also creates rising customer expectations and security challenges.
  4. Technology innovation: Business model disruption is coming from established companies and a host of new entrants who are harnessing the latest technology innovations. This will lead to horizontal and vertical integration across the value chain, and networks that are real-time optimized.
  5. Need for new talent: New technologies require new skill sets — including design thinking, data sciences and robotics. Hiring costs will rise, and innovation will be a key competitive factor.
  6. Sustainability and transparency: Stakeholders, government agencies, and consumers are keenly interested in the practices that guide T&L companies, including sustainability, labor conditions, and environmental compliance.

A leading online grocery retailer uses a 5 GHz radio control system to manage autonomous robots moving around a grid, storing and retrieving stacked crates. The company can control 1,000 robots from a single base station, communicating with them 10 times a second. The company also uses a cloud-based fulfillment and logistics smart platform.

Looking ahead: three waves

We believe that companies will need to embrace innovation and encourage new ideas. Fail fast, fail often. Respond with agility and take advantage of regulatory changes. Companies need to prepare for technologies in three waves:

Wave 1: Exploit the opportunities provided by technologies that are past the tipping point, such as analytics, digital collaboration, the Internet of Things and robotic process automation

Wave 2: Swiftly embrace emerging technologies such as blockchain, connected vehicles and drones as these will disrupt the industry within the next five years

Wave 3: Prepare for technology disruption of deep learning, augmented or virtual reality and 3D printing

An e-commerce company developed an app to connect across all the modes of transport, eliminating the third-party middleman. It utilizes excess capacity of vehicles already on the road and analyzes drivers’ travel patterns to provide a more efficient shipping alternative. Launched in 2015, the app currently has over 25,000 registered drivers.

Be equipped for agility

For some time, the T&L industry has been evolving, with consolidation of players and companies seeking to provide an integrated portfolio of logistics services to address shipper needs. Companies need to think and act as challengers.

We recommend that companies scrutinize their purpose and corporate strategy, enterprise operating model, and functional enablement to identify areas that need immediate attention or change in the near future.

Summary

For some time, the T&L industry has been evolving, with consolidation of players and businesses seeking to provide an integrated portfolio of services to address shipper needs. Companies need to think and act as challengers: fail fast, respond with agility and take advantage of regulatory changes.

About this article

By

Randy Miller

EY Global Automotive & Transportation Leader

Champion for women and diversity & inclusiveness in the Automotive & Transportation sector. Passionate about cars, mobility and disruption.