• Roland Berger study: 95 percent of logistics players firmly believe that digitization will change the face of the industry
• Loss of important data is the biggest perceived risk
• Companies see lack of digitization know-how (69%) and poor internal support (54%) as complicating the process of digital transformation
• Booking platforms are gaining importance and changing the traditional transport company business model
• Four business models will likely become established in the logistics industry

Munich, October 27, 2016

Digitization is giving company bosses across all industries plenty to think about. Some sectors, such as retail, have already been transformed. The logistics industry can also expect massive change. In their extensive "2016 logistics study on digital business models", experts from Roland Berger take a look at which digital business model may emerge in the future and what actions companies need to take. The study findings are drawn from the responses of 300 logistics companies and service providers across 19 countries.

Almost all study participants (95%) agree on one thing: Digitization is going to change the logistics industry at least partly, if not completely. And that is a process which is sure to bring advantages and risks combined. Around half of respondents believe that the digitization of data and processes has the potential to jeopardize data security. "The biggest worry for companies is the potential loss of sensitive data if they collaborate with competitors or IT firms," said Klaus van Marwyk, Partner at Roland Berger. And forwarders in particular fear losing competitive edge if digitization forces them to cooperate with rival firms.

When it comes to the implementation of actions toward digitization, study respondents consider a lack of know-how (69%) and a lack of support from management or staff (54%) to be the key challenges. In spite of certain fears the industry remains optimistic, only about one in three participants being of the opinion that their business model will completely disappear from the market. But the Roland Berger experts see a risk of that very thing happening if the experience of disruption in other industries is anything to go by.

Four business models will shape the future

The logistics sector is under considerable cost pressure from the customer side. Added to that is the fact that 70-80 percent of a forwarder's business volume is standard business. "Gross margins are about 20 percent here, so customers perceive this as an area with cost-cutting potential. Logistics companies will therefore need to drive their own digitization to avoid putting the survival of their business at risk," warned Sascha Treppte, the study's co-author. Some digital business models in logistics already exist and others will follow. The Roland Berger experts believe that market players will likely fall into one of four groups in the future:

1. Booking and optimization platforms will dramatically change the traditional business model of transport companies. Online platforms will mean that simple shipments can be handled much more efficiently and cost effectively. "Handling and transport capacity can be optimized when customers are directly connected with logistics service providers; freight costs will fall as a result," said Klaus van Marwyk. Logistics companies should therefore examine cooperation models to enable them to act as an impartial shared platform.
2. Carriers & terminal operators will continue to be a crucial link in the value chain. They will need to exploit economies of scale and cutting-edge technologies to optimize capacity utilization and costs. They should also put together special freight packages to avoid being solely dependent on orders from the booking platforms. Firms with simple logistics chains like those involved in transporting recurring standard shipments could save themselves the platform booking fees. It might also be an option for them to establish their own online platform in cooperation with other carriers and terminal operators.
3. Supply chain specialists will continue to handle complex supply processes that demand industry-specific know-how. To make the increasingly complex supply chains more efficient and transparent, even these specialized niche providers will need to have more highly automated processes. This is a major challenge given that firms need not only to be innovative and able to keep up with technological leaps but also to remain competitive on price. Collaboration with digital service providers could make sense here.
4. Service providers supply the software products and solutions used for collecting and systematically analyzing large volumes of data and other digital services. Their offering ranges from online payment systems to GPS tracking to automated customs clearance. "Service providers are at the heart of digital logistics. Their innovative products are what make it possible to do business digitally in the first place," said Roland Berger consultant Treppte.

Set the digital agenda and decide what actions to take

It remains to be seen who is going to take on which role in the future. The decision on whether to operate as a carrier, terminal operator or supply chain specialist depends largely on the company's current business model and market positioning. Logistics firms are therefore well advised to quickly develop a digital roadmap to enable them to seize the opportunities presented by digital transformation. They should start by calculating the size of the potential loss of revenues and profits that new digital business models could cause them. Then they can determine their future strategy on that basis and define the actions they should take to achieve it. Over and above that, the digital transformation will necessitate a rethink both in the management of IT projects and in the company as a whole. It is especially important for companies to clearly define their positioning with respect to the online platforms and potentially to seek partners with whom to establish a platform of their own.

Furthermore, against the backdrop of potentially lower margins, firms should initiate a company-wide performance program and put a sound business plan in place. They should bring financing partners into the process at an early stage too. "It will take the combined effort of all industry stakeholders, with everyone seizing the opportunities of digitization, for the digital transformation to be driven forward successfully. And that will require players to be open to new trends and technologies coming in and affecting their business," explained Klaus van Marwyk.

• Photos Nerthuz / iStockphoto