• Home
  • Supply Chain Trends
  • Women in Leadership
  • About
Sabinext – Digital Hub for Leaders
  • Home
  • Supply Chain Trends
  • Women in Leadership
  • About
Home  /  Supply Chain Trends  /  Digital Freight Platforms and Blockchain: The Future of Road Freight?
06 April 2018

Digital Freight Platforms and Blockchain: The Future of Road Freight?

Written by Sabine Mueller
Supply Chain Trends Change Management, Digital Transformation, Industry Trends 7 people are are discussing. Join now!

Digitalization is affecting every industry, and road freight is next. The business-as-usual is no longer cutting it due to its largely analogue, inefficient nature. Tech companies are capitalizing on this, threatening to disrupt the industry with new digital business models. So, where is the road freight industry headed? One thing is certain: It is inevitably transforming.

Digitalization will fundamentally transform the road freight industry. Yet third-party logistics providers (3PLs) are still relying largely on analogue processes, managing the freight business in a highly inefficient manner. This attracts new market players that effectively leverage digital technologies: Emerging Digital Freight Platforms receive a lot of attention as well as major venture capital funding – approximately 2.8 billion US dollars in the last five years. This shows that investors are speculating on the “uberization” of yet another industry that is clinging to an outdated mindset. The new market entrants, however, do still need to overcome some shortfalls to live up to their promise. Here’s my take on how the industry will likely develop.

Digital Freight Platforms: Tomorrow’s middlemen?

For decades, 3PLs have been planning, coordinating, and matching shippers’ transport demands with carriers willing to take on the loads. But, the way things are moving now, the future might paint a different picture: Tech companies have started to enter the market establishing virtual marketplaces for freight, so-called Digital Freight Platforms (DFPs).

These DFPs focus mostly on small and medium-sized shippers, offering brokerage business, which is based on ad-hoc contracts for specified volumes, at a known time, and for a known origin-to-destination pair. Here, the new DFPs’ disruptive potential becomes clear as they present an efficient alternative to traditional middlemen-activities:  They provide greater transparency on prices, an easy-to-use system, and a faster, paperless process.

However, the larger part of the market is made up of contract-based transport – typically long-term contracts for larger shippers’ volumes, shipped at partly uncertain moments in time for multiple origin-to-destination pairs. So far, traditional 3PLs are better equipped to cater to this market segment.

The new DFPs introduce a valid business model –  but, in my view, it has much more potential than has been exploited up to now.

Digital Freight Platforms aren’t there yet

Scaling and internationalizing a new, digital business model is difficult and only a few DFPs have managed so far. Additionally, DFPs dispose of limited marketplace volume. Because of this, they lack the liquidity and flexibility required for the timely and costly process of establishing contracts.

DFPs also still rely on human interactions to match prices and capacities. Being new market entrants, they cannot exploit large historical data sets for AI-based matching and prognosis. Smart matching of supply and demand works well for Uber, because optimization is done in real time. However, DFPs face several challenges in this regard. Freight transport is typically booked in advance. Moreover, freight cannot be picked up any time, but rather during specific time windows set by warehousing platforms. Also, freight comes in all shapes and weights, and often requires special handling. All of this means immense planning complexity.

So, an industry-wide disruption is pending. But, there is potential to digitalize the freight industry in an efficient, need-fitting way, without negative effects on the traditional players – if they play it smart, and fast. Fortunately, some have already started to take action.

Various pathways to digitalize in the road freight industry

One thing 3PLs are doing in order to get ahead digitally is founding their own DFP startups. One example of this is Deutsche Post DHL Group’s Saloodo. Some 3PLs are taking a different route, acquiring or investing in existing DFP startups: DB Schenker for example invested in Uship, and UPS in FreightEx. These are, in my view, very constructive moves, since 3PLs have two clear competitive advantages over new DFPs: their existing larger transport volumes and logistics industry know-how.

How these measures will play out in the near future depends on how well digital technologies can be leveraged by the different market players.

It could be the new players advancing along their learning curve and managing to acquire large shippers (e.g. FMCG companies) as their customers. Alternatively, digital marketplace technology may become a commodity enabling large shippers to insource their contract-based transport by creating their own marketplace for freight. And then there are the “old loadboards” – portals that have made carrier capacity available online and are now offering to book capacity from those carriers through self-developed marketplaces.

Blockchain: A wildcard for future road freight

An additional unknown in the equation is blockchain technology. Here, I see three possibilities: blockchain could enable direct shipper-to-carrier relationships; DFPs could leverage blockchain and increase their competitive edge; or when 3PLs have successfully found their digital sweet spot, they could utilize blockchain to further strengthen their market position.

But the successful implementation of blockchain for transport is largely dependent on whether a common blockchain standard will be established. I believe that 3PLs are in the best position to do this. They could impose such a standard on many small carriers. And based on the trust they enjoy, they can create acceptance for this hard-to-grasp technology.

If 3PLs embrace digital marketplace technology and maybe even coin a blockchain standard, I am convinced that they will not become obsolete.

An outlook

The role of 3PLs as middlemen in transport has never been challenged as much as today. To overcome market inefficiencies, a digital transformation of the road freight industry is the only way forward. Fact is: Digitalization will be an integral part of the industry’s future fabric.

Whether it will be the new market players overcoming their challenges and disrupting the industry after all, or the existing market players applying digital marketplace technology in the future – it remains to be seen which scenario will become a reality. Blockchain is a wildcard in all of this, able to drastically alter the future outlook.

For now, it is clear that proactively pursuing digitalization is an urgent prerequisite to stay relevant in this industry.

How will digital and blockchain technologies change future road freight? I am looking forward to hearing your views on the impact of these tech trends, here on my blog or LinkedIn account.

Share on:
FacebookTwitterLinkedInWhatsAppEmail

7 Comments

  1. Jordan Blake Reply to Jordan
    April 16, 2018 at 6:32 pm

    Digital freight platforms are the future of the shipping logistics industry.

  2. Aaron Smith Reply to Aaron
    July 6, 2018 at 8:26 pm

    Very interesting article. Looking forward to read more.

  3. Jennifer Reply to Jennifer
    September 19, 2018 at 7:48 pm

    So well informed, thanks for sharing a great post with us.

  4. Pingback: Digital Freight Platforms and Blockchain: The Future of Road Freight? - Sabinext – Digital Hub for Leaders | 247 Customs Broker
  5. Pingback: Self-Driving Vehicles: The New Reality for Logistics - Sabinext – Digital Hub for Leaders
  6. Pingback: Leading in the Digital Age: A Whole New Ball Game - Sabinext – Digital Hub for Leaders
  7. Pingback: Logistics Trends 2019: Looking Ahead - Sabinext

Leave a Reply

Cancel reply

Related Posts

  • Road to Rail: Next Step for Europe in the Evolution of Sustainable Logistics

    January 2, 2022
  • Man side by side with robot digital twin

    Digital Twin: The Next Level for Supply Chains

    August 23, 2021
  • Six Supply Chain Priorities That Should be on Top of Your 2021 Agenda

    January 15, 2021
  • E-Commerce in the ‘New Normal’: New Rules, New Players, New Game

    July 20, 2020

Sabine Mueller

I am Sabine Mueller, the CEO of DHL Consulting. DHL Consulting is an independent strategic supply chain and management consultancy of Deutsche Post DHL Group. I have been dedicated to the logistics sector for close to two decades. My personal blog serves as an exchange platform on the topics of Supply Chain trends, Women in Leadership, and Talent Management. Welcome to the digital hub for leaders.

More about Me Contact Me

Get in touch on:

  • Share on Twitter
  • Share on LinkedIn
  • Share on Instagram

Tags

bias Blockchain Change Management Chatbots covid19 delivery digital digitalization Digital Transformation digital twin Diversity diversity and inclusion e-commerce freight home office Industry Trends innovation IoT Lifelong Learning logistics ML pandemic road to rail RPA supplychain sustainability tebalou technology unconscious bias unconscious biases Women in Leadership working from home workplace bias

Join the discussion!

Impressum               Datenschutzerklärung  
We use cookies to ensure that we give you the best experience on our website. If you continue to use this site we will assume that you are happy with it.Ok