Traditional versus Technology - How a Paradigm Shift Can Be the Real Game Changer
If you are to engage today’s generation in a conversation, the one reference that will come up repeatedly is technology.
“Millenials” have grown up with technology, are adept at using it and are reliant on some form of technology for everything. By 2020, over 50% of the global workforce will be Millennials — employees born between 1980 and 2000. By their early teens, most of these employees in advanced economies were online. According to logistics providers, 83% of their clients want real-time tracking, and 70% want online booking. Millenials grew up with exposure to e-commerce courier shipping, which provided exactly that. New workers with new expectations are searching for new technology and new platforms.
This article will throw light on the different perspectives about the technological wave the industry is seeing But before we get into this, let us take a closer look at the two aspects that have grabbed headlines and cannot be ignored when it comes to shipping. We will first look at collaborations that the container shipping sector has seen in the past couple of years. Subsequently, we will explore why the blockchain technology is being touted as the most awaited solution for shippers.
The digitalization wave is bringing with it many factors in its wake. These are not just technologies, but also, collaborative mindsets and the need to push boundaries.
This can be seen across the industry in the decisions that are being made by top players. The past couple of years have seen consolidations that have decreased the number of east-west carriers from 18 to 11. These consolidations took place due to the prolonged market downturn weighing the economy down and have helped organizations gain cost-effectiveness by combining their resources without having to face debt risk.
Lars Jensen, SeaIntelligence Consulting CEO, predicts further consolidations happening with the small and medium-sized carriers stating,
“The capacity operated by these carriers have skyrocketed. And it’s not because they were operating more ships. It’s because they were redelivering smaller charter vessels and taking larger ones on. There’s no way they can all fill the ships that way. So there will be a consolidation with these small and medium-sized carriers.”
Blockchain is a technology that is pegged to take the container shipping industry by storm. Through proper implementation of this technology, documentation that takes days will eventually be done in minutes, much of it without the need for human input.
The cost of moving goods across continents could drop dramatically, adding fresh impetus to relocate manufacturing or source materials and products from overseas. “This would be the biggest innovation in the industry since the containerization,” said Rahul Kapoor, an analyst at Bloomberg Intelligence in Singapore. “It basically brings more transparency and efficiency. The container shipping lines are coming out of their shells and playing catch-up in technology.”
The shipping industry has not yet adopted the blockchain technology and whether its traditional practices will be replaced within the next years from such a technology remains to be seen, but the signs are positive. The presence of startups like CargoX, and established companies like Maersk and IBM is setting the course for a showdown over how the post-blockchain revolution shipping industry will look.
While traditional practices in industries served their purpose at a point of time in the past, it is now imperative to shift focus to modern technological solutions. Supporters of the digital approach promise that employing these methods will not only keep your processes current but will also ensure that you have that edge to stay ahead of the competition. However, when it comes to disruption, not everyone is enthusiastically climbing on board the new digitalization bandwagon.
Many industry stalwarts believe that the traditional approach still holds the value that modern-day, online or digital forwarders cannot deliver. This opinion is now echoing throughout the industry and is clearly voiced in forums of importance.
Let us examine the traditional versus technology debate from the perspective of three industry stalwarts that were on the panel at the Multimodal 2018:
Acceptance in part of the digitalization wave
Tuscor Lloyd’s General Manager, Neel Ratti, who was speaking on a panel at Multimodal 2018 stated, “Digital disruptors are whittling away at the skills base of traditional forwarders, without providing a suitable alternative.” This was a loaded statement and has provided food for thought to those who blindly advocate new technology. Mr. Ratti stressed the importance of the human element, especially when addressing non-conventional requirements of customers. For example, an online-only booking approach cannot cater to a bespoke case requirement. While Mr. Ratti agreed that the approach would work for simple shipments, he was reluctant to call the former a “disruption” to the traditional way. Instead, he insisted that this approach would augment the current system.
Full acceptance of the digitalization wave
Freightos Chief Executive, Zvi Schreiber, argued that modern, younger shippers are fast moving and are not concerned with meeting sales team. They want to be able to have a hassle free experience and book their freight seamlessly. Modern shippers do not have the time to deal with various department and would much rather go online and book their shipments with ease. This attitude, that fully embraces the digitalization paradigm shift is radical by nature. It embraces the utilization of technology across all processes in the supply chain and minimizing human interaction. While there are proven benefits of digitalisation and automation, there is also much to learn in terms of skill and handling data in crisis situations.
Refusal to accept the digitalization wave
Another point of view came from SWG Chief Executive, Steve Walker. He maintained that digital forwarders were disrespectful in their attitude towards traditional forwarders. While this opinion is subjective, it points to the sentiment of traditional forwarders who are facing disruptions and having to deal with them.
He likened the current scenario to that of the P&O’s of the 1980’s that wanted to do away with freight forwarding for good. Mr. Walker’s strong statements are valid, because as Peter Tirschwell points out in this article, “Flexport, FreightHub, Twill, iContainers, and Shipwaves are forwarders like everyone else, but they exposed weaknesses in legacy forwarders’ models and attracted, in some cases, huge largely non-industry investment based on the idea that a new technology-enabled philosophy on forwarding represented a significant opening.” However, this is not to say that Mr. Walker exhibits a conservative attitude and having such a subjective opinion — based on sentiment, might not allow one to understand the benefits that digitalization can bring.
Despite the recent technological revolution, shipping still remains a traditional industry and the processes parties follow are still not “modern” in many ways. The fact that shipping accounts for approximately 90% of global trade means that any decision organizations take will have huge implications.
Most logistics providers lack an overall vision and compelling plan for digital adoption. However, various players from across the spectrum (including both traditional logistics players and new entrants) are adopting digital technology to provide seamless, end-to-end services. If these companies’ business models succeed, competitors run the risk of losing direct contact with some of their most profitable customers, primarily small and midsize freight forwarders and beneficial cargo owners (BCOs). Shipwaves, for example, offers a step-by-step approach that keeps customers informed about their shipments during every aspect of the supply chain process. Providing such a platform is a customer-centric approach that offers a level of transparency and ease.
While digitalization is poised to be the way forward for the future, it is imperative to understand how to make that transition. There are traditional factors that need to be retained and new processes that must be implemented. Striking a balance between these two schools of thought is what will prove to be the ideal situation for all concerned.