Market disruption

Digitization is changing the carrier market

For decades, carriers were the unchallenged architects of the transport industry. But the traditional business model is on shaky ground – that was the clear message at a recent conference.

The attacks on the carrier market and established business models are coming on multiple fronts. Investor-fueled startups are trying to tap into lucrative business fields with smart booking and optimization models. 

Almost more dangerous still, in the eyes of service providers, are the digital activities of current and former customers and suppliers. “Those who do not fully digitize will lose out. The applies to the transport and logistics industry as well,” warned Alexander Dobrindt, Germany’s Federal Minister of Transport and Digital Infrastructure.

An expert roundtable that convened during a transport logistics conference in Munich found that the carrier market is currently a prime target of startups from the digital economy. “Our business model focuses on intercontinental transports,” explains Ferry Heilemann, CEO and co-founder of the freight platform FreightHub. 

The platform developed by Heilemann and his team attacks some of the vulnerabilities of traditional carrier services that they identified during their analysis and validation phase. This includes a lack of pricing transparency, the length of time required to issue a binding quote, the dearth of information during the transport phase, and the failure to make data available for analytical purposes.

Booking freight transport like airline tickets

FreightHub has developed a front end that allows shippers to check container transport prices and connections or even make air freight inquiries in the same way we book flights online. Prices are calculated in just three seconds. The services can also be booked online – including supplemental services such as customs clearance. The strategy is to automate as many of the processes as possible and streamline customer service.

But carriers, especially the big players, are not inclined to simply roll over and let the digital newcomers simply walk away with their core business. Markus Sontheimer, Chief Digital Officer at DB subsidiary Schenker AG, made it clear that his company is also moving ahead at full speed with its digitization efforts – including the development of powerful optimization algorithms. Sontheimer cited the development and control of the customer interface as a key objective. 

“If you have the customer, you have the lead,” he emphasized. Sontheimer expects three types of carrier to emerge over the long term: the e-forwarder that handles simple transports, the solution forwarder that caters to unique customer needs, and the partially digitized forwarder as a hybrid of the two. 

Carriers and e-commerce giants also attack

Joris D’Inca, Director of Transportation Practices for Central Europe at the consulting firm of Oliver Wyman, also anticipates major power shifts. D’Inca believes the market share covered by traditional business models will fall from 95 percent in 2015 to 15 percent in 2030, by which time fully digital providers could occupy a share of 30 percent.

This means that carriers hoping to stay in the game need to get serious about digitization and respond to the imminent threats coming from two fronts: e-commerce giants such as Amazon who hope to extend their value chain to the transport chain, and container shipping giants and freight airlines that could use digital technology to compete with carriers for a direct line to customers.

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