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Logistics Sector Sluggish in Adopting High-Tech Solutions

As much as technological innovations take all sectors by the storm, disrupting how we think about processes down to their cores, the logistics industry appears to be a generally slow adopter of digital solutions. That said, novelties currently in development — such as autonomous driving, for instance — could easily turn the market upside down, although, it will not happen tomorrow. The Budapest Business Journal asked industry professionals about the latest trends.

At the beginning of January, the European Commission put forward a European approach to artificial intelligence (AI) and robotics, to boost both research and the industrial capacity of the European Union.  

Hungary, along with a list of other countries, signed up to this approach. Legislators already appear to be aware of how AI solutions can complement technological innovations to make them more sophisticated and help operations across all the industries.

While we see connectivity popping up in every sector, restructuring the way of work, the logistics sector is still heavily dependent on manual inputs and has been relatively sluggish to adopt new technologies.  

“The freight forwarding industry is slow to adopt new IT tools and is still largely dependent on human interaction and contact. There have also been spectacular failures. Some large multinational forwarders and carriers have turned into a dead-end street by adopting the wrong IT tools, having to shoulder 100 millions of euros worth of damages and disrupting global supply chains,” Endre Gál, deputy CEO of Airmax Cargo Budapest Zrt., tells the BBJ.

He adds that the industry is chiefly focusing on the integration of various transport management systems (known to the logistics world as TMS) to guarantee smoother data flow all across the supply chain.  

“A very successful company to look at more closely is WiseTech; its CargoWise TMS solution is considered by small-, medium-, and large-sized players as a state-of-the-art solution. Big data and AI-backed data analysis should, in theory, greatly add to optimization efforts in the future; however, there are no widespread solutions currently applicable today,” Gál says.

Pain Points

Logistics operations are almost by definition international, depending on a myriad of connections at different hubs all around the world. The number of intersections at which mistakes could occur is vast.

Utilizing technological solutions in order to track loads can ease the mind of all market players. Yet, what could be a blessing, could just as easily be a curse if it does not operate properly. Therefore, once a logistics firm decides to adopt a tech solution, it must make sure it works impeccably.  

“We concentrate on solution design by connecting ocean, air and road transport, warehousing products. The biggest challenge for us is to find the best possible trace and tracking systems to provide our customers with full visibility of cargo movement and stock status,” says Tamás Tanárki, CEO of Yusen Logistics Hungary, which does not run its own trucking fleet.  

“The goal is to provide a single viewpoint across multiple modes, regions and routes so we always know where customer’s shipments are. In the near future, the biggest challenge – and chance to improve efficiency – we will have is in the field of warehouse automatization,” Tanárki adds. Access to accurate and real-time data enables a logistics firm to make informed strategic decisions about freight movements.  

The logistics sector is seeing truly busy times. The rapid expansion of e-commerce is boosting the loads to be handled and increases traffic. European air cargo hubs are filling up, while Budapest Airport is building momentum (see “Budapest Airport Continues to Build Double Digit Cargo Growth”, page 15).  

At the same time, the talent pool in the logistics sector is shrinking, which increases the pressure in the sector (see “Labor Shortage Hindering Logistics Sector” on page 20). The career of truck driver is especially in trouble, with its attractiveness falling.

Eager, yet Skeptical

Dialogue about autonomous driving is becoming ever more meaningful. Elon Musk of Tesla made headlines as early as 2017 by talking about bringing autonomous driving to big rigs. While Tesla is currently working on its self-driving truck, Daimler announced in January it is be looking into its own project — albeit diesel-powered as compared to Tesla’s fully electric concept — outfitted with semi-autonomous technology. Logistics companies appear to be eager, and somewhat skeptical, about such technologies.

“Self-driving trucks seem to be a very interesting area and definitely will be the future,” Gál tells the BBJ.  

“This would be an excellent solution to the problem of missing truck drivers, but I think that this is still a long way off as there are serious safety issues to solve. The market demand is definitely there, the question is rather the technical background.”

The utilization of electric vehicles and autonomous driving trucks appear to be the most obvious options to roll with, especially at a time when there are increasing calls to reduce CO2 emissions and challenges in recruiting more drivers, respectively.  

“I do, however, think that the transportation industry will be last to adopt. The cost pressure is very high on the industry, and customers are only paying lip service to emission reduction by including fancy statements in their procurement policies,” Gál says.

“In reality, it’s all about cutting costs to the bone and robbing the last penny, no matter what the consequences are for the environment. There will not be any change without intense regulatory pressure,” the Airmax Cargo CEO concludes.