The emerging platform economy in freight logistics
The ubiquitous business models of e-commerce platforms in the business-to-consumer sector are increasingly being transferred to the business-to-business sector. In the emerging platform economy, an increasing shift to industry platforms in the freight logistics sector can be observed. These business-to-business industry platforms represent a revolutionary paradigm shift, as they offer logistics service providers the opportunity to organise themselves in business networks and carry out data transactions in the supply more efficient and with high transparency. New business relationships are being created and business processes are changing in terms of transport planning and control as well as the provision of information from production to consumption. Decisive here is the use of blockchain technology, which ensures transparency, traceability and security of data transactions between the companies involved.
The COVID 19 pandemic continues to pose a major challenge to the supply chains of globally operating companies and involved authorities (e.g. customs). Securing the supply of consumer and production goods requires resilient and reliable logistics. Supply chains must not be interrupted and goods must continue to be reliably delivered from one place to the next. In this context, based on the availability of the products, seamless transport by the transport service providers must also be possible and the transport status must be transparent for the network members involved in the value chain at any time.
A lack of visibility into the delivery status of urgently needed goods or pre-products showed that within a few days there can be significant disruptions in the production processes of almost all manufacturing industries – such as the automotive or electronics industry with its extensive global supplier networks. The logistics companies, but also the authorities involved, will therefore be required to establish resilient systems in order to ensure the best possible transparency of the delivery status of their shipments.
Industry platforms with IoT capabilities offer a solution for this. The use of Blockchain technology creates the necessary trust between the logistics and transport service providers and authorities involved in the network to exchange digitalised freight documents and data on the condition and localisation of the transported goods in real time. This enables companies to continuously simulate different scenarios as part of their risk management in order to react to changing situations in a timely manner. Blockchain technology can also help to provide proof of origin from certified manufacturers in a secure and trustworthy manner to prevent fraud.
The role of data
Shippers increasingly require more effective and responsive End to end (E2E) supply chain transport services from the logistics industry. Therefore, industry platforms might significantly enhance the E2E process efficiency in this multi-stakeholder environment with authorities from the public sector (customs authorities, port authorities), companies from the logistics sector such as freight forwarders, liner shipping companies, terminal operators and other transport service providers, and companies from the IT sector.
No seamless information transparency
The enormous movement of goods in globalised world trade require efficient shipment tracking to manage global logistics activities. But nowadays there is still a lack of seamless information transparency across the entire E2E supply chain. Even the largest logistics companies do not have the capabilities to achieve transparency and real-time access to information of their complex supply chains in the multi-stakeholder environment of freight logistics. This concerns reliable information in transport management systems on arrival and departure times, information about the availability of port and hinterland facilities and the status of the shipment and its future movements at any time. Furthermore, in this competitive environment, logistics service providers retain their customer and transport data in their corporate systems (data ownership) and make them only available, in peer-to-peer communication, to those companies within the supply chain that require them due to the existing business relationship (data control).
No digitised freight documents
But, to enhance efficiency in the supply chain it is necessary that all mostly paper-based freight documents are available any time. This concerns documents such as the bill of lading, as evidence of contract of carriage, packing lists, letter of credit, insurance policies, orders, invoices, sanitary certificates, certificates of origin. Therefore, there are enormous opportunities for supply chain management, which arise from digitalisation in general, but also from the emerging blockchain technology, in particular.
Low level of automation
The logistics industry is still characterised by a low level of automation. Due to the high degree of standardisation in data exchange between logistics service providers in the horizontal and vertical value chain, it is rather conservative in the application of innovations in its logistics processes. Therefore, freight logistics is a promising field for blockchain-driven platform innovations due to the dependencies between the logistics companies involved in the supply chain and the public sector. However, the degree of process automation in the network depends decisively on the degree of digitisation. Platform innovations also offer the possibility of transferring data from one’s own transport management systems to a standardised industry application, thereby achieving significant cost savings through automated processes.
The role of trust
While in linear value chains the automation of processes within and between the companies involved in the supply chain is been driven by increasing digitalisation, the driver in horizontal value networks is collaboration. However, such a envisaged collaboration is only possible through a new form of trust within the platform ecosystem, since sensitive data in a platform economy leave the company boundaries. The platform owner has to take this into account by designing the business model. Blockchain technology is of importance here, as it creates the necessary trust among data providers and data users to process sensitive supply chain data via protocolled, traceable and tamper-proof transactions. With these transaction types and key features, the industry platform has a respective compelling value proposition from a commercial or operational point of view for all stakeholders and network members. This results in commitment to collaboration rather than rivalry and mistrust within the supply chain. The willingness of the participants to commit to this new form of collaboration in business networks is, however, indispensable for the direct and indirect network effects to occur.
Opportunities for startups in the platform economy
The emerging platform economy is forcing the logistics industry and software- and service-oriented technology companies to implement new business models and innovations. This requires a startup culture and new entrepreneurial thinking to provide upfront investments, create organisational conditions for the development and operation of industry platforms and to implement cross-industry partnership models.
These industry platforms create entirely new markets. Complementors, such as startups, can develop innovative value services (comparable to an AppStore) for the industry platform with its central core application and peripheral components. The value of these innovations increases with the number of users who use the platform and its complementary services, creating strong network effects. The success of an industry platform thus depends on how open such a technology is to complementors and how easily they can co-create platform services for the core application. In such a case, the platform owner manages governance for the platform technically through platform rules or commercially through licenses or transactional user fees.
It is therefore necessary for platform owners to offer development tools and services to motivate startups and developers to develop new features for the platform. This allows platform owners to benefit from third-party innovations that they would not have implemented themselves. The platform owner has an essential role here in building and managing the platform’s ecosystem. As traditional governance models can no longer be used for internal or supplier platforms, ecosystem governance is essential for industry platform competitiveness and performance.
To conclude, blockchain-based industry platforms make it possible, on the one hand, to increase process automation and improve transparency of shipments through increasing digitalisation and complementary services and, on the other hand, to bring about a change in the industry structure through the disintermediation of intermediaries involved in the value chain. This development will accelerate as the willingness to collaborate in the value chain increases. It is precisely this willingness that is the basis for innovations and new forms of data exchange in freight logistics.
About the author
In his role as Business Development Executive Travel & Transport Oliver is focussing on
innovative solutions in AI, IoT (Internet of Things) and Blockchain. He is also a Quantum
Ambassador for IBM.