SMEs will benefit greatly from digital and technology disruption, enabling them to go expand through e-commerce platforms and to explore new modes of logistics services such as self-driving trucks and autonomous cargo vessels.
Over the next decade, global trade and logistics could be virtually unrecognisable from what we see today. Digital and physical disruption will change the way customers and suppliers connect, and the way supply chains are managed.
Barriers to entry to global trade are being torn down. Technological advances across the value chain are lowering cost and risk of market entry for importers and exporters. By 2035, WTO estimates continued technological progress in trade could potentially boost GDP by 9% in developed markets. The benefits of this disruption are potentially greater for SMEs and regionally-based businesses that still grapple with the tyranny of distance to connect with customers and service providers.
Thanks to digital disruption, the world is getting smaller and global customers more accessible. Growing at 20% per annum, global e-commerce sales are forecast to reach $2.65 trillion in 2016. This will double to $5.3 trillion by 2020 – accounting for 15% of total retail spending. The Australasian region is a hub for this activity, with China making up 40% of global digital sales.
The “cross border” distribution of these goods is where the next major disruption will happen. Fast and free delivery services are driving online shopping. For this reason, companies like Amazon have evolved to become logistics companies rather than pure e-tailers with aims to vertically integrate across the supply chain. The e-commerce company secured an ocean freight licence and purchased 40 cargo planes to better service its 304 million active customers around the globe.
Meanwhile, online platforms like CargoHound are reducing the “smoke and mirrors” of shipping products overseas, enabling importers and exporters to source competitive freight pricing from community-rated service providers with one click.
Apart from digital disruption, technology is playing a massive part in shaking up the physical “nuts and bolts” of ogistics space as well. By 2020, Rolls Royce eyes to deploy autonomous cargo vessels, controlled remotely from virtual decks by land-based crews. In theory, one “captain” could steer several boats with more room for cargo.
And it’s not just happening on the high seas. Six convoys of semi-automated “driverless trucks” recently drove across Europe to Rotterdam in “platoons” of two to three vehicles. This automation could offer up to 25 times efficiency gains in labour costs, fuel efficiencies and around the clock operation.
Meanwhile, Elon Musk of Tesla fame has renewed interest in a pneumatic tube transportation system with his concept dubbed “Hyperloop.” It is a magnetic levitation train in a low-pressure tube that runs parallel to major roads and has the potential to transport freight between major US cities at a speed of 700 miles per hour. Think of the benefits in terms of congestion and safety alone.
Further efficiencies are becoming reality in the competitive courier space. It won’t be long before autonomous trucks are driving to centralised nodes before releasing swarms of drones to complete last-mile delivery. Each vehicle can deliver dozens of parcels simultaneously rather than driving from house to house.
This all won’t come without consequence. Some 280,000 truck drivers work in Australia and about 3.5 million in the US. Jobs and businesses related to the trucking industry would clearly be affected.
Ultimately, history shows there are winners and losers when industries undergo transformational change – but there is no standing in the way of progress.
As Charles Darwin put it, adapting to change matters. And this will be the case for businesses in international trade and logistics.
Ian Smith, CEO, CargoHound
