The Automation "Leap of Faith"
Welcome to the 118th edition of The LogTech Letter. TLL is a weekly look at the impact technology is having on the world of global and domestic logistics. Last week, I compared the payroll headaches experienced by some SVB and Signature Bank-backed startups to electronic enablement in the logistics industry. This week, I’m examining the extent to which investments in efficiency are a leap of faith.
As a reminder, this is the place to turn on Fridays for quick reflection on a dynamic, software category, or specific company that’s on my mind. You’ll also find a collection of links to stories, videos and podcasts from me, my colleagues at the Journal of Commerce, and other analysis I find interesting.
For those that don’t know me, I’m Eric Johnson, senior technology editor at the Journal of Commerce and JOC.com. I can be reached at eric.johnson@spglobal.com or on Twitter at @LogTechEric.
This story, built from comments made by speakers at TPMTech in late February, posted to JOC.com yesterday. Essentially it focuses on the idea that speculative investments in technology that a forwarder could make during the heady days of 2021 and early 2022 - where spot rates skyrocketed and forwarders were constrained by capacity, not demand - are harder to justify in the current low volume, low rate market. The margin just isn’t there to support peripheral investments.
What was (hopefully) implicit in the story was that there are different forms of speculative technology or data investments. There are ones that are made without a clear ROI, the ones that could potentially deepen existing customer relationships or open new channels of customers - the build it and they will come investments. Then there are the operational ones where the ROI is clear and demonstrable.
It can be easy, but too simplistic, to conflate the two as part of one generalized buckets of “investment” concerns. In truth, most should view investments in automation as less of a leap of faith than the ones made to expand sales opportunities. Automation at this stage is less about a leap of faith and more like a ticket to ride. We’ll come to think of robotic process automation (RPA) as we now do computers - “what do you mean we used to do that process without a computer?” Don’t believe me? Think of the last time you read about someone in logistics doing something “manually.” They rarely mean the person actually did the thing manually, as in physically executing a process that a computer could do. They usually mean the person used a spreadsheet to figure a complex process out, or an electronic document was emailed rather than the data sent directly from one system to another.
What can be automated will be automated. That should be the base assumption going forward. And if forwarders are thinking about the things that can be automated as translating into operational costs savings, they’ll not only be ahead of their peers, they will have a relatively straightforward ROI calculation to make. Based on the chatter in the last two months among forwarding software providers about how they are internally using generative AI to accelerate their own product developments, we should expect the pace of this to pick up.
The actual leap of faith is in investing in the tools with presumed, but unknowable outcomes. The products that make the customer experience better, that highlight service levels and data points that - superficially - seem super important. But there is no guarantee, in a tight margin market that is historically price sensitive, that these will translate into ROI, or that the timeline for that ROI to appear will be satisfactory. Sure, things worked out for Ray Kinsella, but it’s no sure thing they’ll work out for every forwarder paying a subscription service to augment its value to shippers.
I am not suggesting that those leaps of faith aren’t worth it. The market will eventually turn, and a forwarder that has understood which investments drive more business and which don’t - and has lived to tell the tale - will be in a fantastic position when volumes rise again and margins expand.
My larger point here is to suggest that automation, which is seemingly more fanciful than sales-focused service products with which forwarders are more familiar, is more of the sure thing than it might seem from the outside looking in. That’s because most people are just not in a position to delineate between “good” and “bad” automation, never mind “good” and “great.” In the years ahead, the forwarders that put themselves in the position to define bad, good, and great automation vendors will be light years ahead of the ones still deciding if investments in automation are even worth it.
Here’s a roundup of recent pieces on JOC.com from my colleagues and myself (note: there is a paywall):
Lots of activity on a granular, but highly painful aspect of container shipping - billing of demurrage and detention when terminals for drop off and pick up of containers are shut. A handful of carriers have now committed to not charge on those days - aligning themselves with what they believe new rulemaking by the FMC will mandate - but not everybody (namely ports and terminals) is happy.
I’ve written often about eBLs, and more progress came Thursday, with the GSBN facilitating an agreement between three of its shareholders - Cosco Shipping, Hutchison Ports, and PSA International - and a Saudi chemical shipper. This is particularly notable because Cosco was the one carrier not part of the DCSA’s announcement in February that major global carriers would move completely to digital bills of lading by 2030.
And here are some recent discussions, reports, and analysis I found interesting:
A great Logistics Tribe podcast between Ken Adamo of DAT and Jonah McIntire.
Worthwhile post from the profilic Grant Sernick on data acquisition and centralization.
Some upcoming events I’ll be involved in:
My guest next week on LogTech Live is Gaurav Bajaj, CEO of Solvo, which (applicable to this week’s newsletter) focuses on automation for forwarders. Make sure you’re subscribed to the show to get updates on upcoming episodes and an archive of past episodes.
I’ll be leading two sessions at the Journal of Commerce’s Breakbulk and Project Cargo Conference April 19-21 in New Orleans. The first is a session on understanding what the energy revolution means to breakbulk and project cargo shippers. And the second looks at technologies helping to make the industry more efficient through automation and AI. Check the agenda here. And register here. New registrants can use the code ERICJ25 to get 25% off registration.
Our Journal of Commerce webcast on the future of freight procurement has been moved to May 23, so mark your calendars now. Details on speakers TBA, but you can already register for the free event.
Disclaimer: This newsletter is in no way affiliated with the Journal of Commerce or S&P Global, and any opinions are mine only.