What’s driving the demand for automation of freight services?
Whether producer use vessels, trains, planes, or 18-wheeler trailers, to transport their goods to the consumer markets the costs of transshipment, complex trade route and a smaller workforce are increasing costs to the supply chain. In 2018 air cargo companies reported an upsurge in overall movement of goods by 58% in air freight volumes over last year. FHA reports that driver shortages of 51,000 open positions in the United States alone which makes producers face higher hurdles and disruptions that are skewing the supply and demand chains in the market.
Many tech startups and established freight companies alike are experimenting with the new coined concept of on-demand freight for trucking. Instead of dedicated shipping lines, companies using on-demand shipping rely on availability of space when freight is in demand, facilitated by an online platform or mobile application off a line-haul lane.
“Well-known companies such as Uber and Amazon are heavily investing in freight services, with Uber announcing a $500 million run rate for revenue and Amazon working on a new digital freight matching application to go with their current trucking app. Freight matching apps from Convoy and Loadsmart are also investing heavily in expanding their driver networks and technology.”
While these services offer an alternative to traditional methods of choosing a transportation provider, some gaps in execution may exist. Freight rate setting has been a traditional businesses prerogative for negotiating with service providers; however, changing markets are switching more towards information technologies so that a better informed party can make better choices.
Because the concept of on-demand freight is still in its early stages, speculation is a big part of it as how this new carrier option could affect producers supply chain. A review of the current platforms can help understand challenges and opportunities in the supply chain and logistics innovation pipeline as reported by several logistics magazines of current information-provider platforms for on-demand freight:
- “Uber Freight — comprises a mix of manual and automated processes to connect companies with freight transport.
- Amazon Relay — permits delivery drivers to check in at the security gate and gives drivers access to expedited lanes in their facilities in a bid to lure independent truck drivers to their cargo, although Amazon is working on another application to match other distributors to carriers.
- Convoy — automates every step of freight ordering for long-haul trucking, displaying the rate and trucker’s pay for each option.
- Loadsmart — Offers instant pricing and booking for full truckloads, plus machine learning-based algorithms to determine pricing and terms of the load.
- OnTruck — provides instant price quotes to companies for delivery before making the offer to carriers, who can choose to accept or reject a job, as well as creates visibility through a series of digital checkpoints throughout the route.
- Haven Origin — Offers a fully automated, carrier-neutral, and free digital freight booking tool.”
The International Chamber of Shipping reports that there are over 50,000 merchant ships trading internationally, transporting every kind of cargo. “The world fleet is registered in over 150 nations, and manned by over a million seafarers of virtually every nationality. “
Although freight hauling is a very big business current market statistics indicate that only about 25 of major shipping companies worldwide operate over 5,000 ships. For instance Maersk’s 700 ships have almost a 4,000,000 TEU capacity and that is only a small portion of Maersk’s overall freight handling business. In the United States a large trucking company can accumulate 93 billion miles per year. “That’s like driving around the globe 3.7 million times.”
Many new service providers are making a new showing in the market to meet demand for innovative services as indicated by 3PLs, 4PLs and even 5PLs moving in to fill the needs gaps. The net effect is that as new players join the market services become more complicated as complex routes are added to existing trade lanes. The Maersk Triple E-class container ships comprise a family of very large container ships of more than 18,000 TEU. But in 2014, CSCL Globe a container ship owned and operated by China Shipping Container Lines (CSCL) made its debut with a load of 19,000 containers. In 2019 ships are getting bigger as indicated by OOCL Hong Kong 21,000 container capacity and advance naval architectural engineering. The biggest container ships now rival crude oil tankers and bulk carriers as the largest commercial seaborne vessels. According to the International Chamber of Shipping, there are more than 50,000 merchant ships operating in the oceans currently.
A larger size ship would traditionally require more crew to manage however, technological innovation is a manpower multiplier. The Maersk Triple E requires a crew of only 22 crew-members aboard. Notwithstanding these 22 crewmen are highly trained, skilled workers who are also verse in managing a family of computer systems that control the one of biggest ship in the world
As AI and automation increases the robots in the work flows companies can outsource complex calculations to computers, freeing up employees to expand business in other specialized ways. High up on the list would probably be the nightmare of informed judgements employees must make when generating multi-modal, multi-leg quotes or new services that force them to open up dozens of contracts, wait for answers from agents and then add in their own markup. These business methodologies can be best performed by humans with a pencil and paper until computers can be designed to reason and make informed judgement calls.
In 2001 an early market innovator Trade and Ship Net developed an algorithm to make rates more transparent it was well received by shippers but not by carriers and could not get off the ground without both parties support.
In 2019 TSN now rebranded World Commodity Freight is introducing not only a platform for container rates for all modes of transportation but a separate service for bulk commodity trade as an independent platform. The work- in-progress website can be viewed at