February 6, 2023
Why your Digitization Campaign will fail
Nonsense memes, irritating content-marketing videos, over-dramatic motivational posts, and ambitious supply chain digitization approaches. This is my usual LinkedIn feed.
While the first three pieces are annoying as hell (probably fix them easily by unfollowing the respective “distributors”), the latter one draws my attention, though:
a) because “digital” has been a trending buzzword since a couple of years in logistics. That too for a reason; there is huge potential. Continuous high investments in logistics innovation express substantial ambition.
b) because, well… it somehow is my job, so I’d better be interested!
When reading articles, watching videos or listening to podcasts (btw: by far my favorite podcast among many cool ones is Boris’ masterpiece, which you can check out here) about “new logistics stuff”, I got mixed feelings though.
To be honest, most of the time I am not impressed or even think “nice try, but you will fail”. Why?
I believe, there are three major reasons why the large majority of digitization campaigns will fail, or at least why they will not create any value.
Note: To avoid confusion, I do not alone consider an impressive UI, a simple tracking & tracing solution or an online quotation tool a valuable and meaningful digital achievement. It’s rather holistic digital designs, automated workflows and end-to-end visibility that get me excited.
1. Lack of standards (or least missing respect for existing standards)
ISO containers, CP3 pallets, Dangerous Goods packaging – our industry has come up with great standards in physical domains!
In digital ones? Not so much.
Even though it does not appear in Gartner’s Magic Quadrant, my personal experience says: the “market leading” Transport Management System globally is MS Office, preferably Excel, enriched by Outlook. Very professional and advanced companies that are listed on Dow Jones Industrial Average, DAX30 or Nikkei 225 base substantial parts of their supply chain management on individually tailored Excel madness.
The result is a severe fragmentation in communication chains. Here are some tangible examples for you:
Freight Rates madness
A freight rate is a price at which a certain cargo is delivered from one point to another. Simple, right? You would assume that there is a global standard for data structures to determine how freight rates should look like, a framework for how to communicate freight rates. Right?
Instead, this is how our reality looks like:
In fact, commercial agreements, often communicated in free text form (via mail and Excel), are extremely error-prone, miss information and leave room for misinterpretation.
Abuse of EDI message structures
It’s not that the industry has not tried to implement standards. For communication, there is a message standard in place. It may be a bit “old school”, but it suffices; EDIFACT.
Introduced in the 1980s, this EDI standard gives a syntax framework for electronic message exchange between different entities, e.g., “transport order instructions from shipper’s ERP to freight forwarder’s/carrier’s/4PL’s ERP”. The standard is specified well and in such detail that you will find 150+ pages of documentation for the example message mentioned above (for anyone who is as nerdy as I am: this is legit stuff!). But still people manage to abuse the standard and find ways to get around it. Some examples are:
- loading dates are entered in free text / comment fields
- packing list details are entered in free text / comment fields
- references are entered in free text / comment fields
Just for those of you who are not familiar with EDIFACT: there are proper fields for this information, but often times these are just ignored – instead people use comment fields.
2. Horrible data and information quality
Obviously, the lack of standards leads to very poor data and information quality. You can imagine how much manual work is required to fix the issues caused by the examples mentioned above.
But I've got more for you: we ran some analysis on our ecosystem and here are some shocking results:
3. Wrong ownership & mindset
When observing digitization efforts in supply chain management, there is a mismatch between ambition and execution.
I frequently hear freight forwarders complaining that their customers aim to digitize and develop ambitious and extensive lists of requirements – which is nice!
But when it comes to “deploying” those ideas and improvements, the expectation is often that the current service providers must bear the burden of “digitizing” BCO supply chains while reducing the service fees at the same time – which is not nice!
I have never heard about successful investments (regardless of industries and markets) that started with reducing expenses. Also, I would not base my digitization strategy on partners that are, by nature, the weaker part of supply chain ecosystems and have not proven to be innovative throughout the last decades. Of course, there are some very impressive, positive exceptions to that hypothesis.
So, only rainy days ahead for digitally minded logistics experts? No!
I see two ways out of this mess:
I. “The promised land of supply chains”
An industry-wide commitment to certain global standards would unlock massive potential. The moment in which hours, days, and weeks of data validation, data transformation and exception management become obsolete, is the moment when supply chain leaders get to work on value-driving strategic challenges. This scenario requires a steady and fundamental change of our ecosystem, hence it seems to be quite a few miles down the road. Still, it is not unrealistic to enter this “promised land”. I am very excited to follow any progress that is achieved by projects like Digital Container Shipping Association (DCSA) or International Air Transport Association (IATA) in terms of developing standards and creating frameworks. My expectations towards and belief in infrastructural next-gen trade ecosystems like Tradelens or AntChain could not be higher. Unifying all stakeholders involved in global trade in one standardized framework should be any supply chain leader's dream.
But as high as my hopes are, as difficult and challenging those projects will be, global acceptance and alignment are essential to turn these great approaches into success stories.
II. … until then: bilateral alignment on “digital values”
As long as we have not reached the “promised land” described above and have not come to a globally respected, broad and standardized digital framework for our industry, there is only one solution, to choose partners you trust and mutually align on particular digital values.
- Definition of targets: “What do we want to achieve?” Do we just want to impress our shareholders by showing a fancy User Interface with lots of moving airplanes, trucks, and vessels on animated maps? Or do we actually want to create value in particular, well-defined areas? Sometimes what seems to be less is actually more.
- Definition of framework: “What will the investment be?” Are you willing to spend some time, resources, and money? You will not succeed by simply squeezing your freight forwarders to provide value added services # 137 and # 152 – it is very likely that your freight forwarder already does far more for you than you realize. Trust me, I worked in that industry for a decade.
- Definition of responsibility: “Who takes ownership?” From what we’ve seen so far, the most successful digitization campaigns are driven by teams and people that show a holistic and deep process understanding. It helps to assign clear responsibility for “going digital” to a certain person or particular team. Too often we experience complex matrix organizations in which “everyone wants to go a bit digital” while a streamlined and coordinated approach is missing.
Feel free to share some feedback regarding this subjective picture!
Logward is a Hamburg & Bangalore based logistics technology company.
We build software, move containers, and change mindsets.
If you have any questions or just want to say hi, reach out to email@example.com. Or you can book time with one of our logistics experts here.