Within the next decade, global trade and logistics could be virtually unrecognisable from what we see today. Digital and physical disruption will change the way customers and suppliers connect, and the way supply chains are managed.
The barriers to entry to global trade are being torn down, and technological advances across the value chain are reducing the cost and risk of market entry for importers and exporters. By 2035, the WTO estimates continued technological progress in trade could potentially boost GDP by 9% in developed markets.
The benefits of this disruption are potentially greater for SMEs and regionally-based businesses who until now have had to grapple with the tyranny of distance to connect with customers and service providers. Ultimately, however, technology is improving connectivity for all businesses, and in the process is helping level the playing field.
How far has digital disruption gone?
Thanks to digital disruption the world is getting smaller and global customers more accessible. Global e-commerce sales are growing at 20% per annum and are forecast to reach US$2 trillion in 2016. This will double to US$4 trillion by 2020, accounting for almost 15% of total retail spending and the Australasian region is a hub for this activity, with China making up 40% of global digital sales.
The distribution of these goods “cross border” is where the next major disruption looks likely to occur. Expectations of consumers are ever increasing with fast and free delivery increasingly driving online buying decisions. For this reason, companies like Amazon have evolved to become logistics companies rather than pure play e-tailers as they look to vertically integrate across the supply chain. The e-commerce behemoth recently secured an ocean freight licence and purchased 40 cargo planes to better service its 304 million active customers around the globe.
Meanwhile, online platforms like CargoHound are helping to reduce the “smoke and mirrors” of shipping products overseas. Australia’s first international freight marketplace enables importers and exporters to source competitive freight pricing from “community rated” service providers at the click of a mouse. Since launch in July 2015, CargoHound has signed up over 940 importers and exporters and received aggregate freight quotes totalling more than A$5 million.
What about physical disruption?
Apart from digital disruption, technology is playing a massive part in shaking up the physical “nuts and bolts” logistics space as well. Rolls Royce are looking to deploy remotely controlled autonomous cargo vessels, operated from virtual decks by land-based crews by 2020. In theory, one “captain” could steer several boats and without the need for a bridge, living quarters or life boats, each vessel would have more room for cargo.
And it’s not just happening on the high seas. Six convoys of semi-automated “driverless trucks” recently drove across Europe to Rotterdam in “platoons” of two to three vehicles. Estimates suggest this kind of automation could offer up to 25 times efficiency gains in labour costs, fuel efficiencies and around the clock operation.
Meanwhile, Elon Musk of Tesla fame has renewed interest in a pneumatic tube transportation system with his concept dubbed “Hyperloop”. It is effectively a magnetic levitation train in a low pressure tube that runs parallel to major roads and has the potential to transport freight between major US cities at a speed of 700 miles per hour. Think of the benefits in terms of congestion and safety alone.
Further efficiencies are becoming reality in the highly competitive courier space. It won’t be long before autonomous trucks are driving to centralised nodes before releasing “swarms” of drones to complete last mile delivery. This would allow each vehicle to deliver dozens of parcels simultaneously rather than driving from house to house.
Clearly, this all won’t come without upheaval and consequence. There are some 280,000 people employed as truck drivers in Australia and approximately 3.5 million in the United States. These jobs would clearly be impacted by disruption as would the businesses that service the trucking industry including rest stops, roadhouses and motels.
That said, the “Disruption Revolution” we are seeing may not be too dissimilar to the “Industrial Revolution” that ran from about 1760 to 1840 in terms of the opportunities and associated challenges it presents to industry and our society in general. Ultimately, history shows that there are winners and losers when industries are impacted by transformational change but there is no standing in the way of progress.
As Charles Darwin so aptly put it: “It is not the strongest species that survive, nor the most intelligent, but the most responsive to change,” and this will most certainly be the case for all businesses involved in international trade and logistics.
Ian Smith is the CEO of CargoHound.