3 questions about… key forces transforming Transport and Logistics

Hello, welcome to the new episode of PwC podcasts. My name is Jakub Gołębiowski and I invite you to listen to the interview with our experts. Today we’ll talk about key forces transforming transport and logistics in Eurasia.

Today our guests are Maciej Starzyk – manager in strategy advisory team and Tomasz Sączyk – deputy director in transport and logistics team. Hello gentlemen.

Maciej Starzyk (MS), Tomasz Sączyk (TS): Hi.
 

Jakub Gołębiowski (JG): Okay let’s start with our first question, what’s driving digitalization? Which segment of the transport and logistics market will be affected by the digitalization to the greatest extend?

How are companies embracing it and what is the impact on customers?

MS: In terms of the driving factors for digitalization consumer behaviours are always the most impactful. So everyone’s capability and readiness to use services provided through digital channels. On top of that, we also see this moving to the company background, with companies also more and more willingly transforming their processes into digital processes in the areas such as contracting as well as internal activities. There are also a few factors supporting it, such as the talent supply gap which is growing in Europe. The availability of the base tech is also quite important and then changing data protection and labour regulations. In terms of the subsegments of transport and logistics which are impacted by digitalization we see that to a different degree it’s impacting pretty much every area of the sector of the transport and logistics life: from sea freight, through air transport, to road transport, supply chain infrastructure, you name it, there are examples, one could give examples of new digital solutions being applied almost in every of these such subsegments. The most visible once are usually related to the way that contracts are made, with for example the new start-ups providing sales of bus tickets, such as FlixBus for example. Today it’s nothing strange to buy a bus ticket or train ticket online. However, this is also gaining more and more applications when it comes to business so new online platforms are also emerging for B2B transport services.
 

JG: Tomek would you like to add something?

TS: With changing customers’ behaviours and improving technology, digitalization has now become a necessity and integral part of every business. Currently efforts in T&L are restricted by the availability of digital skills as well as outdated technologies that still remain in use. To give an example 58% of the T&L heads in our 2018 CEO Survey indicated the difficulties in attracting digital talent.
 

JG: Alright, so getting back to what Maciej said maybe in the beginning, what software changes seems to be most promising for transport and logistics and what will they change for business and customers?

MS: In terms of software changes, this area is definitely related to digitalization but we are looking beyond basic systems serving the base processes here, so we’re considering this more related to more advanced software technologies such as Intelligent Transportation Systems, such as Distributed Ledger Technologies which are usually referred to as blockchain, Robotic Process Automation, Predictive Maintenance Solutions and Artificial Intelligence. We see, and we expect these solutions to be enabled by the evolution of the base technologies. Which are necessary for such solutions to be applied in business. Of course, Data Protection Acts coming into force will also significantly shape the future of these applications. However, we see the pressure on business effectiveness as the most important factor driving the need for such solutions, so as companies across sectors they reach certain level of effectiveness they will start seeking more and more possibilities to automate their processes, to automate their business with such solutions.

TS: Intelligent transportation systems in cities are getting more and more popular and are already implemented in cities like Barcelona, Montréal, Copenhagen. Traffic lights synchronization and optimization of transportation network make life in those cities safer, easier and more environment friendly.

MS: In terms of blockchain solutions for example, transport and logistics is segment which has huge space for applying it. Since transport is all about movement, it’s all about the movement of goods, it’s all about things changing hands, and in the logistics chains one of the challenges is always to track the origin of a shipment track, the conditions on every single stage of the process. So far it has been quite difficult to implement this tracking at a very detailed, very accurate level. Now with growing computational powers and with the blockchain technology it will be possible not just to record very long history of given activity or given movement but also actually make it safe against intrusion. Blockchain combines these two elements: the tracking with the security measures allowing for really good back traceability. Similarly, robotic process automation finds its way into those segments which are full of administration. And transport and logistics is of course movement on one hand side, but on the other it’s to a large extent about documenting the activities, about processing the documentation, about a lot of administration which can be simplified with Robotic Process Automation. The growth of this software solutions is evident in forecast provided by different institutions. It’s forecasted that ITS - Intelligent Transportation Systems market is expected to grow. Similarly, Robotic Process Automation is expected to grow double digit and reaches of above 30% per annum according to HFS research and the market for predictive maintenance is also expected to reach similar levels of growth, so we’re definitely expecting tremendous development in terms of software solutions in the coming years.
 

JG: Alright, but going digital is not an easy task. I would like to address my next question to Tomek, maybe you can help us with that. What are the largest barriers for machine driven changes, and what changes can we expect to occur first?

TS: Machine driven changes are indeed facing similar changes and barriers. Such as difficulties with customization of machine-driven technologies or lack of regulations in some areas of technology, especially autonomous technologies like drones. While most of the solutions identified by us are still emerging, some of them we can already see being implemented, such as Augmented Reality solutions which offer a change to improve efficiency of logistics and might be used in loading and unloading, order picking, intra-warehouse transporting.

MS: To give an example, there’s a lot of information in the media about different start-ups from all over the world testing autonomous transportation solutions which is also a machine-driven process change. However, in the case of autonomous vehicles they’re always accompanied by the risk of harming someone outside in the street in terms of car or out in the water in terms of see transport. And thereby, even though it’s boasted that a specific number of autonomous trips has already been completed, people usually forget that there is always a security driver sitting behind the wheel, and we don’t see this likely changing in a short period of time. It’s similar for the other machine changes to the processes. They still require more maturity in the development of these technologies, these technologies still need to be developed to be market-viable and in order to find their way into the mass application.

JG:  Definitely we’ll stay tuned and follow the new technological trends in transport and logistics. Thank you very much for listening to this episode and Maciej and Tomasz for an interesting conversation.

MS, TS: Thank you very much.