I interviewed Christoph Szakowski who discussed Digitalisation and its influence on logistics companies.
1. Introduction, Experience connected to Digitalization
I am Christoph Szakowski, Managing Partner, LogCon East.
I have experienced the digitalization topic from the perspective of a manager in blue chip logistics organizations and later as advisor to the industry for several years. We have been consulting the industry in the German-speaking world, Central and Eastern Europe and in some Asian markets with several change management, benchmark analysis and optimization projects where technology has become one of the core issues, besides of strategy, structure, people management.
I have been in the position to deal with this question always as an important part of major turnaround or development projects for Third-Party Logistics, transportation firms, freight forwarders and different B2B organizations which have been supplying solutions for logistics providers
As we work very closely with logistics companies and they have different level of maturity in terms of digitalization and also they work in different market segments and geographies, I believe we have a very pragmatic view on this digitalization topic in this industry, which I am going a little bit to share with you today.
2. How would you define Digitalization and what is its impact for logistics companies?
Well, as we are always trying to capture a topic from the global perspective as this is a good start for the discussion with companies top management, I also will do it this time.
For me and for business owners and company leaders Digitalization in a very complex topic whereas in public it seems to be gaining incredible popularity but only in some very separate dimensions.
Digitalization means actually a continues change process with permanent impact on the logistics companies results.
This process refers still partly to something we have known and used in the industry for decades like starting from shipments processing and visibility, transportation management programs, EDI tools, technologies for warehouse and distribution center management, track trace programs and tools enabling higher tender efficiency and so on. This process could be having currently and the next years a broader dimension because of the availability of new technologies
The impacts in logistics companies can be summed up in the points
1. Impact on their value creation process by the means of technologies.
2. Impact on business strategies and business models including a redefinition of shipper, client, partner, competitor understanding.
That is something I would like to concentrate on a little bit more today
3. That is the impact on companies needs for talent and qualifications and possibly even on company’s culture.
So this view is an easy to handle way and a kind of instruction for any company to go further in dealing with digitalization.
What is the impact of digitalization on business models in the logistics and transportation industry?
A business model, answering the question practically without a long debate based on the business books and authorities, must give a clear answer to the following question?
“What is it which constitutes my – as logistics company – value proposal I can promise and deliver to customers and which is really compelling and give me a competitive advantage ?”
There and different systems to create this value proposals (just consider a freight forwarders with a complex range and modes of transportation and acting as intermediary between client and carrier versus an asset-heavy road carrier serving a specialized industry, apparently the value proposals are different).
What is the competitive advantage is the logistics industry?
Let us have a future-oriented view as we talk about which impact can have digitalization.
According to some researchers, done in Europe for the large logistics markets, it is the predicted for the period of next 3-5 years, the competitive advantage will be dependent on: 1. flexibility towards clients requirement .2 quality of your service 3. adaptability to changing market requirements 4. attractive pricing 5. direct client contact
So the main question is: “which impact as a company you would like to have in those major drivers of competitive advantage?
“How can you - intelligently, based on your decision and not following any hypes or catchy slogans or popular trends, how you can make the use of technologies to achieve your company’s long terms targets ?”
And last but not least – “ is there anything in your business model which requires change”. Now of course, I am saying a change which does not necessary mean just putting into practice at high expenses any new technology, just to call yourself innovative.
So talking about impact of technology on your company’s business models can be also put as a question to company leaders what is their strategy to use technology for example to ensure a high effective direct client contact which we determined as one of the main drivers of competitiveness For me it could start with simple things which are possible with easy technologies which have been available for years .
So just use the amount of information and date available in open sources know about your client, his company, his values. You can obtain this information easily a lot before any client interactions occur. Simply the amount of the information available in open sources is so good so a sales manager in a forwarding companies you can prepare a good sales process and later a valuable interaction with the customer.
There another important impact is that digitalization has enabled a creation of completely new business models and companies which start acting in the logistics markets like new digital freight interchanges and platforms, network builders, big data players all of the – in the logistics total market or in an niche – trying to compete for the market share. They have in common to be analytics-driven, focusing on the acting as interface somehow between shipper or a manufactory and the carrier and are full of entrepreneur spirit with strong efforts in their promotion.
For all players in the market the question will be to find their position and be able to distinguish between a partner, a supplier or a competitor. For this moment we see that the established players are implementing their digital strategy and they sometimes consider the new players as partners, sometimes as a question mark, not very often as a competitor. Our observation is that in the industry, depending on the region, only 20 % up to 35 % of the players, have clearly answered for them this question and planned measures to cooperate with the new players, which called them “disrupters” or compete.
I think what should be avoided is ignoring these new models of business and it is better to start considering them as a part of competitive landscape.
I was in a discussion recently about a vision for the logistics market. I said that I believe rather that the most important driver in the digitalization is the end customer and that is now and will stay forever a people-oriented business.
The decision who is going to take care of your global or regional cargo flows and the security of commodities in many cases of a tremendous values and the decision about who is going to optimize networks, delivery times and logistics budgets, will always be done by people. So forwarders are not so much to worry about to lose customers to disruptors as long as the forwarders invest enough in people management and customer relationship skills.
As to new business models in logistics, I believe scale matters and will still matter. So, yes they will be new forms of collaboration, alliances, joint ventures for 3 PL providers which have or should have a really customer-driven, operative, solutions-oriented DNA.
This DNA is of a stronger-value than any cost-optimizing platforms as long as they forwarders do they homework which was the homework already decades and years ago. So streamlining operations efficiency by using technology, facing the fact some jobs will become obsolete and concentrate on learning new skills coming for example from technology companies.
So that is what in short I would see as impact on the business models.
What are your recommendations for the logistics industry in view of digitalization?
Yes. I would like to call it a “common sense – manifesto for logistics players” in reference or in contrary to that what is popular and called “agile manifesto” in the software development for example.
5 points there
“Do not be disruptive, be simply constructive with your value proposal to customers.”
“Some people will keep tell you - you need to start digital transformation now. But keep in mind a bad strategy, wrong culture and non-value providing processes digitalized means a bad digital strategy, a wrong digital culture and non-value providing digital-process.”
“To be a learning organization has been always and will remain to be the key in the logistics business. You did not need a start-up company to tell you this “
“Everything flows, nothing stands still. Does everybody in your company understand it?”
“Remember – logistics business is highly competitive. No matter your size, be adaptable, decisive and fast so you will come out as a winner of any revolution or transformation”
About Christoph Szakowski
CEO / COO / MD / VP /Logistics / General and Interim Manager in CEE, CIS, Asia, Emerging Markets