Solving the global puzzleBecause most high-tech forwarders originally concentrated on the domestic markets of the U.S. and EU, management of shipments was relatively simple. But it’s an entirely different story when they expand into the global arena, observes Albert Saphir, president of ABS Consulting.“Going global involves a very complex and extensive count of underlying moving pieces,” says Saphir. “This puzzle gets even more complicated when you consider all the new and ever growing security requirements and export control regulations now in place.”According to Saphir, there are currently more than 40 U.S. regulatory agencies that have an “interest” or a stake in various commodities managed by today’s forwarders. “When the transaction merely means a simple transit from one port to another in an ocean container shipment, the logistics are not so bad,” says Saphir. “But the compliance piece becomes much more difficult when the supply chain is segmented.”Saphir notes that UPS, FedEx and DHL have been doing this for a long time now with packages, but larger pieces of freight face more restrictions in many trade lanes and across borders. “This presents a whole new set of challenges for both the shipper and forwarder,” he says. “And there are far few choices if the forwarder want’s to keep the logistics ‘in house.’”Technology meltdownAnalysts also recall when Deutsche Post-DHL abandoned its new forwarding environment (NFE) IT renewal program with a $400 million write-off two years ago.At that time, the storied forwarder was trying to integrate SAP “middleware” into its existing system and encountered compatibility problems too large for them to adequately address. However, that doesn’t mean that big forwarders should stop trying to digitize their operations, says McKinsey & Company analyst Dr. Ludwig Hausmann.“The digital revolution has profound and specific implications for the transportation and logistics sector,” says Hausmann. “In order to survive and thrive as they transform into digital businesses, companies in this sector need to consider each step of the value chain, from acquiring and satisfying customers, to increasing operational efficiency.”Hausmann adds that by drastically reducing the marginal cost of acquiring a new customer, digitization has radically increased the speed at which new transportation and logistics players can grow.For McKinsey analyst, Werner Rehm, simpler, safer, and better operational processes are best. “Digitization will transform the back end of any forwarding and logistics business,” he says. “In fact, digital solutions are capable of reducing costs and adding more value to services in all facets of operational processes.”McKinsey found that partial or full automation can reduce freight transportation costs by 25% to 40%, delivery time by 30%, and the number of accidents by more than 50%. Access to new insights through exploding amount of information generated (Big Data) also enables transportation and logistics companies to optimize customer-facing and internal processes.The importance of data as an input is accelerating, enabling new possibilities and information-based business models, says McKinsey analyst Thomas Netzer, who maintains that Big Data lays the groundwork for completely new levels of optimization and easier quality evaluation.“Predictive modeling will, for example, become much more accurate and thus greatly improve capacity planning,” says Netzer. “On the other hand, there will be a growing need for transportation and logistics companies to collaborate with the data providers to gain market insights. Moreover, data security and system reliability will be increasingly differentiating factors for industry players.”Tomorrow: Elephant in the Room
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