A Moment of Change – Making the Case for Visibility in Trucking

A Moment of Change – Making the Case for Visibility in Trucking

Opinion Editorial by Wolfgang Lehmacher, Anchor Group, and Mikael Lind, Research Institutes of Sweden (RISE) and Chalmers University of Technology

Supply chain disruptions have become the daily business of supply chain professionals all over the globe. Many experts and practitioners believe that higher levels of visibility would help to manage or even resolve the current bottlenecks causing congestions and delays, logistics costs and freight rates. This article is focusing on the trucking sector and it’s ability to digitize for visibility.

In 2021 Transporeon has conducted a survey involving 255 carriers and 111 shippers that showed that the trucking industry still lags behind in innovation and visibility. The survey also confirms that customers exert the highest pressure on carriers to innovate as cargo owners and transport buyers are coming with an increasingly unified voice requesting to open the black box of transports in the interest of everyone.

Low adoption of technological solutions

It is common knowledge that the adoption of innovative solutions is low in the transportation and trucking sectors. The survey sheds some light on the reasons.

On the one hand shippers and carriers flagged visibility as a key area of innovation and both groups say they are conscious of the benefits and the need of large scale digitalization in the interest of system-wide visibility to solve supply chain issues.

On the other hand shippers and carriers consider as main driver for innovation improvement of efficiencies and the reduction of costs, with 86% and 73% of mentions in the Transporeon survey respectively (figure 1).

Figure 1: Objectives driving innovation by shippers and carriers
(Source: Transporeon road transportation 2021 shipper and carrier survey)

Financial considerations

Barriers to innovation for shippers are a short-term focus and expectations in respect to the return on investment (ROI). Additional hinderances are the reluctance of operations to make radical changes and the shortage of funds together with low margins and a risk averse company culture. Carriers consider the shortage of funds and low margins as the biggest drawback, followed by a short-term focus and also the ROI expectations (figure 2).

Figure 2: Barriers to innovate by shippers and carriers
(Source: Transporeon road transportation 2021 shipper and carrier survey)

Technological solutions for the trucking sector and other parts of the supply chain network need to come at the right price. Furthermore, supply chain professionals have little margin for error and therefore prefer to implement mature technology. Both is sometimes challenging for new solutions usually not fully tested or yet financially viable.
But the funds should be available for some risk-taking and innovation. Despite many challenges and continuous disruptions over the last years, the sector performed well. Maybe too well to feel the pressure to innovate. The large road carriers have fared well in times of Covid-19 and overall Brexit has turned out to be a minor disruption for the road transport sector.

Unlocking the value of increased visibility

Supply chain and logistics experts and practitioners know that it is not about visibility in parts of the chain but intelligence across the system. Achieving innovation and visibility in an industry that is highly fragmented and distributed among a broad range of different players that are pursuing their business in the self-organized ecosystem of transports requires collaborative innovation to significantly advance.
But joint innovation efforts are rare. Standardization to improve efficiency is missing. The 2021 Transporeon survey shows that there are surprisingly few initiatives that utilize the combined force of multiple players engaged in the road and trucking industry to drive digitalization and standardization which are both key enablers of visibility. According to the survey many of the innovation initiatives are internally focused. The good news is that collaboration has significantly increased during the times of supply chain disruption brought about by Covid-19.

Turning the tide

With rising maturity and margins it may be time to take action and align with others to turn a laggard into a leader in digitalization. What are the drivers and signals of change to look at?

1. 1. Suppliers delivering “price attractive” innovations: we see consolidation of visibility providers that can bring cost and prices down
   2. Customers, i.e. shippers exerting pressure on carriers or provide incentives to innovate and change behavior: this will happen in the area of carbon footprint calculation and transparency
   3. Competitors that digitize or digital carriers and digital forwarders that are entering the market taking business from incumbents: Flexport seems to be such a challenger
   4. Regulators supporting initiatives that drive collaboration and innovation or set new standards of operations: higher security standards may emerge

Every stakeholder can contribute to digitalization. The indicators show that the digital transformation with data sharing as prerequisite for visibility across supply chain networks is accelerating.

Final thoughts: Capturing the value of moment

Rightly executed higher visibility improves financial results through better synchronization of flows across modes driving down costs and carbon emissions. We can also expect that pressures from the consumer side will increase while regulators will force companies to innovate to meet CO2 reduction requirements. Shippers will be asked directly or indirectly for a contribution to reducing their carbon footprint. This also creates opportunities for trucking companies that wish to operate more sustainably (figure 3).

Figure 3: Green visibility enabling sustainable transports (Illustration: Sandra Haraldson)

Visibility adoption has been accelerating without a deep discussion on the ROI of such adoption. Instead, the expectation is that visibility will eventually deliver a “higher order” business value that relates to correcting divergences from plans and eventually improving decision making and aligning actions across supply chain stakeholders.

Time seems to be right for innovation and investments in visibility in the trucking industry. Extracting the economic value requires at least full coverage visibility at a single site (e.g. a warehouse) or along lanes. But also this can only be considered as the first step before broad network digitalization across multi-modes will bring the visibility, intelligence and base for automation that everyone is waiting for as this unlocks the true value of visibility.