The purchase process has never been simpler: Today, just one touch on a screen can send your goods on their journey. It’s now feasible to receive your product the next day—or even within a few hours—no matter where you are or where your product was ordered. This new normal is affecting the transportation and logistics sector more than other traditional industries. Whether delivering goods by ship, by rail, by road, or by airline, the biggest challenge for transportation companies, until now, has been to build the best delivery chains, seamless and secure on a global scale.
Today, the leading transportation and logistics companies face the enormous challenge of sustaining the quality of delivery despite a steadily increasing price war and a constant fight for global market share. At the same time, customers expect more speed, more information, more service. If this is not enough, new competitors are entering the sector and demonstrating that the transportation and logistics business is not only a matter of supply-chain control and infrastructure—it’s a matter of innovation. Companies like Amazon, Google, and Uber are showing up in the market with new transportation solutions.
The increasing complexity of geographic structures—with infrastructures growing in new regions and more megacities globally—is changing how transportation and logistics companies can grow organically. Shared transportation and new digital-technology-related solutions are generating new competition, but also new markets.
Financial analysis of the best-performing companies across all sectors shows that transportation companies underperform in terms of revenue growth and also tend to overinvest in new assets, like new digital solutions that aren’t necessarily a solve-all. To unlock growth in a challenging sector, companies need to make bolder changes and shift their strategies for the future. There are six global paradigms emerging that create distinct opportunities for transportation and logistics companies to accelerate growth.
1. From human-driven to autonomous driving
Autonomous driving will reinvent the trucking industry. For transportation and logistics companies, autonomous driving will increase safety and efficiency on the roads, as well as reduce labor needs dramatically. Daimler’s Mercedes-Benz Future Truck 2025 and Freightliner Inspiration Truck, equipped with the autonomous Highway Pilot system, are already taking on transport duties in Europe and the US. Daimler is expecting that road freight transport will triple by 2050 globally—underscoring the huge growth opportunity for the industry.
2. From expedited to on-demand delivery solutions
Advanced solutions like drones will offer new now-delivery opportunities. Amazon, for example has been pushing to deploy its Prime Air drone, which boasts drop-off times of under 30 minutes. Speed of delivery for certain products in certain areas will increase enormously, advancing next- day deliveries to next-hour drop-offs. Moreover, areas with poor infrastructure—or megacities with overburdened traffic—will become interesting new marketplaces.
3. From efficient processing to smart warehouses
Augmented reality applications are providing additional digital data to optimize picking and processing. Scandit’s Pick by Vision app for Google Glass, for example, makes scanning products for fulfillment. As more digital intelligence enters the delivery chain, better information and new ways of processing will increase seamlessness and efficiency.
4. From closed to open systems
The rise of shared transportation changes the way companies will need to organize and open up their systems in the future. Uber is shaking things up with new logistics solutions like UberRUSH, which turns drivers into on-demand delivery fleets. Collaboration and new modes of cooperation will become crucial to transportation companies: traditional businesses will need to look for smart approaches to change their existing systems, manage new partnerships, and enter new markets.
5. From a global perspective to route-by-route focus
New megacities are rising with an enormous speed in previously undeveloped regions—cities built in a new age of infrastructure. The challenge for transportation companies is to foresee and adapt to these ever-changing geographic environments by making very specific, fact-based decisions about which markets to play in, city-by-city or route-by-route. The complexity of the global marketplace and the sheer magnitude of assets will require companies to make clear decisions about where to invest and how. FedEx, anticipating the growth of global e-commerce, acquired Bongo and TNT Express in 2015 in order to expand its portfolio, particularly in Europe, and lower cost over services in these markets by increasing operational density. Growth opportunities now rest on offering the most relevant solutions and controlling the return on invested capital.
6. From lean to agile management
Agile is the new lean. Transporation and logistics companies have been very good at process optimization and lean management—it’s all about efficiencies. But rising volatility of demand in the marketplace, along with increasing individualization and complexity, requires greater flexibility. The growth opportunity for big enterprises like UPS, FedEx, and DHL is to move away from global, one-size-fits-all principles, and to delegate greater responsibility and accountability to on-the-ground teams. Looking outside of the sector for best-in-class examples, Lenovo has demonstrated how a decentralized organizational structure can drive growth within a totally globalized market. With a product portfolio ranging from smartphones to servers, Lenovo has developed strong sub-brands and empowered business units that can govern themselves while supporting a masterbrand strategy. Agile management means enabling fast decision-making in unexpected situations, based on actual demand and supported by new and relevant technologies.
The true beneficiaries of these shifts in the transportation and logistics sector will be future customers. They will worry less about actually receiving goods than about how their individual needs are understood by transportation companies. These needs are constantly changing, from product to product, from place to place, from today to tomorrow. Thus, the emotional connection between brands and people—based on an inherent understanding of what improves their lives—will become more and more important.