Moving the World: The Future of Global Freight Logistics
Along with fire and organized farming, the wheel is regarded by historians as one of the greatest creations of early human history. And for good reason. The ability to move people and goods by great distances using simple physics laid the foundations for global exploration, trade and proliferation of products and ideas.
One of the key levers of global logistics is freight transportation. The ability to move seemingly unrelated items together to common destinations both for cost and time efficiency has been around for a while. Here, we take a look at how 21st-century technology is transforming this age-old problem.
Sub-sectors and Business models
While at the outset it seems to be a unified problem, global freight consists of a horde of individual problem statements, each with its own nuances to take care of. We dive into a few of them.
Freight and Trade Logistics
A little known internal mechanism that holds all of the global freight together is freight forwarding. Without this process, logistics wouldn’t be as efficient as it is today. Freight forwarding is the process of strategic logistics planning and execution for the global movement of goods on behalf of the buyers and sellers of these commodities. Freight forwarding includes a wide variety of individual yet crucial tasks such as freight rate negotiations, container tracking, customs documentation and freight consolidation, and many others.
Interesting spaces to watch for here include:
- Freight forwarding software: Traditional freight forwarders have been adopting technology at rampant scales over the past decade. Newer technologies such as blockchain, enterprise SaaS, etc. have been taking over the industry, allowing businesses to operate freight forwarding using ERPs, freight-forwarding marketplaces, unified tracking systems, etc. Key players in the space include G7 (China) and WiseTechGlobal (US). Apart from these, there are innovative cloud-based freight forwarding providers who have sprung up in the recent past. Flexport is the global leader in this category.
- Enterprise Logistics SaaS: Managing an entire suite of different moving parts is a hassle in itself, and traditionally meant that the e-logistics marketplace, airport/port community systems, shipping process, customs clearance, port procedures, underwriting, financial services such as trade financing, foreign exchange, insurance etc. required a lot of manual effort and took weeks, if not more. Players such as Kale Logistics are changing this by disrupting the entire process ladder by automating & digitizing every action point that a stakeholder may be required to undertake, thus helping in improving the overall efficiency. For instance, Mumbai International Airport (MIAL), one of India’s biggest airports was determined to streamline its procedures to achieve holistic and systematic control over its cargo operations. Kale’s community system platform has put an end to the current manual processes, multiple data entries and improved transparency in the supply chain. The resultant efficiency is, in turn, providing tangible savings in both time and money.
Trucking and Fleet Management
As archaic as it may seem, moving freight by truck is still one of the easiest, and in some cases, the only ways to get shipments to remote places where other mass transportation modes such as freight trains or transportation ships can’t reach. In addition to its ubiquity, trucking also provides employment to a huge section of the population.
Key business models include:
- Relay trucking: Multiple drivers handle a single truck on one particular route. Just like a relay race where each sprinter passes the baton onto the next sprinter, each driver completes his shift and passes the truck on to the next driver after travelling his designated distance. This process ensures that the operations are never interrupted and is carried on till the truck reaches its destination. Key players in this space are Rivigo (India), Relay (US) etc.
- Trucking marketplaces: Similar to traditional marketplaces, trucking marketplaces offer a platform for buyers to bid for seller services in the trucking space. Blackbuck is the industry leader in the space, followed by few other players such as GoBOLT(India) and Emerge (US).
- Autonomous vehicles: Autonomous vehicles need no introduction in 2021. One of the major issues plaguing the trucking industry across the globe is a shortage of drivers. Companies such as Volvo, Uber, and Tesla are developing products to fill this exact gap, while players such as Flux Auto (India) are developing tech to automate vehicular movements in controlled spaces, such as ports and large warehouses. Autonomous trucks are expected to eventually reduce human error that leads to fatal accidents.
Cold-chain logistics refers to the end-to-end process of managing the movement of temperature and humidity sensitive shipments, including products such as perishable goods, pharmaceuticals, industrial equipment, etc. Cold-chain logistics has been around for over a century now with the advent of vapour compression refrigeration. The discovery and harnessing of freon gas boosted the industry in the early 20th century.
The 21st century however brings a host of new possibilities, with technologies such as remote sensing of temperature and humidity, etc., and careful coordination of the movement of these goods using AI optimisation techniques, etc. have opened up new avenues of potential gain with processes such as JIT (Just-In-Time, pioneered by Toyota) trickling down to industries such as food and beverages, pharma, high-tech, semi-conductors and oil-and-gas. Cold chain logistics in the pharma sector came to the forefront during the pandemic with the massive global undertaking of delivering vaccines in temperature and pressure-sensitive shipments to billions of people. This use case is only expected to grow further with key developments in the global preventive healthcare infrastructure.
Key innovations in this space include:
- Remote monitoring: Solutions for logging and monitoring temperature-sensitive cargo on the go and relaying this information back to central systems using IoT devices is picking up speed in recent times. Technology is also moving in the direction of smart devices where an onboard EDGE computer takes this information and acts on it to maintain the optimum temperature and humidity inside the container or storage itself. Purfresh (US) and Coldway (France) are at the forefront of these innovations.
- Supply-chain visibility: Predicting when and where a shipment will reach and in what condition is a great way to ensure smooth operations of logistics. Controllant (Iceland) and TagBox (India) are developing technologies that enable this careful coordination to happen using modern techniques such as artificial intelligence and machine learning.
- Material improvements: Polymer engineering is a major part of constructing these temperature and pressure-sensitive containers for cold chain logistics. Pluss Technologies (India) and Tessol (India) are leading players here.
We’re at the genesis of a new wave of innovation with the advent of Web3, autonomous devices and the Internet of Things, funding for these emerging technologies is expected to pick up.
What does the future look like?
As with any industry, innovations in logistics also comes in waves. We are now beginning to see a new wave of innovation in this space, powered by advancements in computing power and the global internet infrastructure. Some of the industries and business models we talked about earlier are powered by a few key technical innovations that are shaping the future of logistics, and they are going to be the driving force behind the impacts that will be seen in the coming decade.
- IoT / EDGE Computing: From monitoring the progress of shipments to ensuring quality and preventing spoilage during transit, IoT enabled supply chain systems are becoming rapidly popular across the globe. Instead of simply relaying information back to the cloud for processing and wasting precious time and energy, EDGE computing enables devices to monitor conditions and take quick decisions based on inputs from individual local sensors. Applications of these technologies can be found in sub-sectors such as cold-chain monitoring, fleet management, pharmaceutical supply chain systems, etc.
- Blockchain: While the word may inspire a myriad of feelings, there is no denying that blockchain technology is truly revolutionary in many fields, and freight logistics is no different. Blockchains, due to their characteristic features such as public ledgers, immutability, proof of work, etc. make it an ideal input to logistics. Blockchain technologies have a long way to go, but we are slowly seeing these innovations trickle down into areas such as authenticity marking, source verification, distributed supply chain systems, headless e-commerce, etc.
- Autonomous vehicles: Many large logistics companies such as Amazon and FedEx have invested billions of dollars in taking steps towards automating their fleet. While players like Tesla are building fully autonomous semi-trucks along with their line-up of passenger cars, Zoox (acquired by Amazon) is working towards an autonomous last-mile delivery vehicle for smaller freight requirements. While they may seem like science fiction, we may very be getting our afternoon lunch delivered by a little robot or a mini drone soon!
- Integrated supply chain systems: Software offering solutions such as demand prediction, warehouse optimizations, route improvement algorithms, port automation, customs and shipping ERPs, etc. strengthen the foundations of the shipping process and gently lubricating the giant global logistics machinery.
- Robotics: Robots have been part of logistics for decades, but their use has never been more pervasive than now. We are now seeing a fundamental shift in the way logistics infrastructure such as seaports, checkpoints, sorting facilities and warehouses are designed, from being human-centric to machine-centric. This helps improve the efficiency of the whole system to increase by orders of magnitude.
While we are seeing massive leaps being taken in other areas of global trade and commerce, there is a natural bottleneck of physical delivery that we still need to solve. Efficient logistics is the only way to reduce this friction in the adoption of an increasingly digital world.
There is an old saying: Don’t reinvent the wheel. But what if we must? The only way innovation moves forward is by breaking down old problems with new, first principle-based thinking, and these technologies are a shining example of that ideology. This is by no means an exhaustive piece. Technologies are being developed across the world that pushes the boundaries of possibilities inch by inch and fuelling disruption in every sphere of business and life. But it is safe to say that over the next few years, logistics is an exciting scene to watch out for, and we’re all in for the bright lights and wondrous skies!