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Digital disruption through the forgotten long tail of the cargo industry

30/05/2018

When it comes to digitalisation, the long tail within cargo industry is still largely forgotten. Is this where the next paradigm change will take place?

AUTHOR: TERO HOTTINEN

Digital disruption typically arises from two different directions. One is that someone comes up with a solution that enables asset-light business operations (like AirBnB). In the other, someone finds a way to offer value for the underserved long tail of the market. Amazon is an epic example of the latter (or both, actually).

The digital wave in shipping - or even tsunami if you may - has so far mainly focused on major container carriers and global terminal operators. To simplify things a bit, activities here have mainly focused on cutting out inefficiencies here and there. That can hardly be called disruption.

However, there is a significant long tail in shipping, through which the highly inefficient chain of global cargo flow can truly be disrupted. Digitalisation is the key in this.

Digital services to small players will make a difference

What does long tail mean in shipping? Well, more than 85 percent of vessel operators own less than ten vessels. Also, over 80 percent of terminals can be classified to be in the long tail; they are either small container terminals or small to medium-sized mixed, or other types of cargo terminals.

When talking about digital services, most industry players have totally overlooked these segments and players. A big reason for this is, of course, that the existing solutions by incumbents are often too complex (and hence pricy) to serve the “low-end” needs of the long tail.

The situation has changed quite a bit with modern digital technology, and cloud and SaaS-based solutions. These enable lean but sophisticated and user-friendly solutions, designed to fit precisely the needs of those long tail players that cannot have their own dedicated digital expertise and development teams.

The beauty of the long tail

Digital services for the long tail can be very healthy business as such, and a clear increase can already be seen in the startup activity when it comes to such services. Good examples are innovative new companies like Octopi and Portchain, just to name some examples.

But it is not the business only. The beautiful thing about serving the long tail segment is the amount of cargo that flows through the long tail - at the very end of the chain. During its journey, a single cargo can visit several small terminals with various small carriers (in addition to the obvious deep sea terminals and major carriers). This cargo can also be handled by a vast amount of other small stakeholders around the value chain.

When it comes to information flow and efficiency, these end parts of the chain are critical. The efficiency of the overall process is, however, quite similar to what it was in the 70s: faxed messages are still flying around in various places, information is being fed manually into multiple systems, and coordination of simultaneous and sequenced activities is on a very low level. This is exactly what also our CIO Soili Mäkinen was discussing previously in her blog post.

And this is also where digitalisation can truly show its worth. By making the end parts of the cargo flow process efficient, one can impact the whole chain significantly. This would take place with increased transparency, information flow, and timely end-to-end activities.

All this benefits directly the end-customer through significantly better service, and at the same time it would save quite a lot of money for them. And better yet, as shipping is one of the largest CO2 emitters in the world, making that process efficient makes also a meaningful environmental impact for the precious Mother Earth. One could even call this disruption.

What are your thoughts?

Recognising the impact of shipping to the global economy and environment, we at Cargotec are committed to make the cargo flow more efficient and sustainable. What do you think, what we can do to serve the long tail of shipping better and preferably be part of the disruption rather than be disrupted?

All you innovative new players and other stakeholders throughout the cargo flow chain, I welcome your thoughts and contributions to this topic. Together we can make it happen. Join the discussion below, at Twitter with #smarterbettertogether, or contact me directly at tero.hottinen@cargotec.com.

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