I have meditated on this long on hard. I have tried to convince myself otherwise. Despite my best efforts, I believe resolutely that the logistics industry will be disrupted in the next 20 years.
When I look at the series of industries that have been disrupted by software/technology, I see a pattern. The industries that produce commodities grow as our understanding of science grows (mining, farming, plastics). Science is still the lowest hanging fruit to pluck for increased gains. On the other hand, service based industries are being eaten alive by software. Look at Uber and AirBnB. AI is on the verge of assisting doctors with prescriptions. Amazon has replaced bookkeepers. Duolingo serves to teach us instead of hiring tutors. There are even AI customer service bots! It’s only a matter of time until software consumes all of the service industry.
The entire logistics industry has three fatal flaws. The first company to fix one flaw will be crowned victor, while the last company will be taken out back behind the shed.
- Lack of Transparency
I can speak from personal experience that the whole industry lacks transparency. When I track a shipment I’ve outsourced to another company (or when a customer tracks a shipment on our website), I’m usually presented with a location and date. This is the absolute bare minimum. If the shipment is late, it doesn’t say why. If the shipment is sitting in one location, it doesn’t say why. The reason it’s late, or sitting, is usually because a human hasn’t clicked the buttons to update the shipment.
This snowballs into catastrophic proportions. Imagine a shipment going from our Chicago office to our San Francisco office that is a day late. The customer calls me and asks where the shipment is. I call the San Francisco office. They call the truck dispatcher who calls the truck driver. Meanwhile, the customer is sometimes a third party, so they’re calling their customer. I do this at least once a week because we don’t technically track shipments. We keep a digital record of where the shipment should be. We don’t even track trucks, just their departure and estimated arrival times. It’s a colossal waste of everyone’s time. This could easily be solved by RFID tags on shipments and GPS trackers on trucks.
- Interchange / Outsourcing
Most logistics companies don’t go to South Bend, Indiana. If I have a shipment that needs to get to South Bend, I have to either tell my customer to give the shipment to someone else… or I could give the shipment to someone else. Most of the time customers prefer the second option. It allows them to have a single point of contact. It’s easier to have a middle man to take care of problems than to micromanage each shipment.
There was a time when the only way to manage your money was by hiring a financial advisor. Remember when everyone either did their taxes by hand, or hired a tax attorney? Now we have digital financial advisors and TurboTax. Middle men were automated away. That is going to happen to logistics as soon as someone clever enough can figure out the TurboTax of logistics.
- Lack of Universal Language
We recently agreed to ship freight for a new customer. For the first four weeks we manually entered 30 shipments per night. For the first four weeks we manually entered 30 shipments per night. WHAT?? Our customer’s software didn’t communicate with our software, so they simply printed a piece of paper for each shipment, handed the stack to the driver, who handed them to me, and I manually entered them into the computer with a punch card (not really, but it felt that way).
That strategy is fine for now, but labor will only continue to get more expensive. I know that this experience is the norm for the industry. I know that highschool students wasted away applying for university after university. Back in my day, we had to apply for each school one by one! Now they have a universal college application. Once there is an industry standard for communication between companies, this problem goes away.
It’s sad to think about the end of the industry you work it. At the same time, I’m hopeful. I’m excited. I can’t wait to ride the wave. This is going to be a wild ride.