Why Do Logistics Finds It Hard to Implement Digital Business Models

Every industry is experiencing a global seismic shift in the way they do business as a result of digitalisation, and the logistics industry appears to be effected more than any other.

A recent report by Roland Berger titled ‘2016 Digital Business Models in Logistics’ examined the global problem by surveying 300 logistics companies worldwide. The report (www.rolandberger.com) examined the global problem by surveying 300 logistics companies worldwide. The report attempted to look at the immense changes happening to the logistics industry, as well as examining the barriers to logistics providers making changes with digitalisation.

The report found that 59% of survey respondents cited digitalisation as changing the industry completely. This, therefore, suggested that industry leaders aren’t ignorant of the changes. However, throughout the report, it became apparent that there is an issue with implementation. So, why is implementation difficult for logistics companies?

Digital Business Models – Implementation Barriers

The report outlined four business models in which they believe failure is more likely:

• Booking and optimisation platforms
• Carrier and terminal operators
• Supply chain specialists
• Service providers

It also found that within these business models, there were inherent issues of:

Data Security

89% of survey respondents listed their primary concern about implementing digitalisation changes as being due to concerns over data security. Logistics strategic decision-makers can see the importance of making changes, but they are worried about the effect this will have on sensitive data as a result of collaboration either with IT firms or with competitors. In an industry where the competitive edge is vital, this concern needs addressing.

Lack of Digital Thinking and Know-How

Furthermore, logistics businesses are hindered by a workforce typically digitally shy. With the huge changes that digitalisation brings, it’s important to ensure systems are in place to implement the technological changes with strong leadership and adequate training. When the changes are happening rapidly, keeping on top can be difficult.

Competition Complexity

Competition within the logistics industry is far from straightforward in the digital age. For many in the business your competition could come from anywhere, at any time, and have a radically different business model. Take for example Expedia compared to traditional travel agencies, or Amazon’s effect on traditional premises-based retail businesses.

Lack of Shareholder Support

Shareholders are unlikely to be able to keep pace with the changes happening in the digitalisation of logistics. Therefore, resistance occurs as changes need to happen – but can’t happen at the rate needed – due to lack of shareholder backing. This takes highly-complex strategic decision-making and shareholder and stakeholder management to master.

The Future of Implementing Digital Business Models

Only those logistics businesses that embrace the fast pace of change as a result of digitalisation will still be in the game in 5 years’ time. Inevitably smaller companies are going to find this a tougher storm to weather. However, for those who are able to align themselves with digital business models the future will be increasingly profitable as a result.

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