This reconfiguring of supply chains inside countries and regions could have significant consequences for transportation companies as they are forced to rethink their footprint, infrastructure, and relationships. Current supply chains are based on decades of work by executives who built their careers establishing operations in Southeast Asia, developing the supply lines needed to move products, across the ocean, through ports, and into major consumer markets such as France, Germany, India, Japan, the United Kingdom, and the United States. This new moment carries with it the burden of forging new, interconnected shipping networks inside countries and regions. But it also carries the promise of reduced supply risk that comes from widely distributed freight networks, along with reduced labor and transportation costs.
Different impacts, different strategies
Any significant shift in production geographies will impact companies across most modes of transportation, but the degree of impact, and the nature of the most effective response will vary from company to company. For example, if nearshoring takes place at the rate projected by our survey respondents, ocean carriers like COSCO and A.P. Moller-Maersk would require a far different response than a carrier focused on intra-European or intra-US trucking.
Maersk, for instance, has acquired digital fulfillment firm Visible Supply Chain Management LLC, which specializes in parcel delivery, along with a California-based warehouse distribution company, to strengthen its position in the United States.6 The Denmark-based container logistics company has built a strategy to simplify global logistics by integrating each step of the supply chain from factory to doorstep. With customers increasingly demanding simplification and reliability, Maersk seeks to deliver that by supplementing its large fleet of vessels and terminals with new assets in land-based transportation, warehousing, and logistics solutions.
Supply chain companies like DHL and XPO Logistics face different challenges. Newly established manufacturing plants would lead to a redistribution of warehouses and fleets in North America and Europe, raising the prospect of winding down operations in markets where these companies operate, while ramping up in others. This reconfigured map of plants and warehouses would carry through to the location of workforces and company-owned or leased fleets.
The great data unlock
For decades, the transportation industry has generated massive amounts of data, but until now it has only been able to unlock a fraction of it. Today’s transportation companies have access to not only far higher-resolution data, but they can also take advantage of cutting-edge data science to perform analytics in near-real time.
In a modern, fully digitized parcel company, every package delivery both embeds and generates data. For a company that ships upward of 17 million packages per day, across 200 countries, the data points add up quickly, offering enormous predictive power for companies with the ability to harvest and contextualize it.
Still, there are challenges to making this information truly valuable for decision-makers. Our research and experience point to four key friction areas:
- Information within transportation companies is often organized solely to meet the needs of its functions, business units, and regulators. The insights shippers seek often require another layer of specialized analysis that ingests and takes into account data from all areas of the business.
- The advent of data warehouses and data lakes offers the potential to tap wide swaths of data, but the tools and technologies to analyze them are still evolving and leading practices are still emerging. Companies are investing in data scientists, but are often at a loss to know when they have enough, or whether they are pointed at the correct targets.
- Many of the largest transportation companies have established free-standing information services units. These structures often place chief information officers and their teams in the position of making trade-offs due to finite resources. They face difficult choices: invest in contemporary information assets or allocate resources to maintain and improve legacy systems. This dilemma can impede the fast progress customers and company leaders expect.
- Like other highly regulated industries, transportation companies commit significant resources to fulfill the constantly evolving demands of regulators. For example, in the United States, the Surface Transportation Board requires Class I rail carriers to provide details as varied as demurrage and accessorial charges, carload waybills, and agricultural contract summaries. In May 2022, the Surface Transportation Board issued a decision requiring detailed weekly reports on service performance.7 At the opposite end of the government action spectrum, companies in the industry are still awaiting the Securities and Exchange Commission’s final guidance on environmental, sustainability, and governance (ESG) reporting requirements. These new reporting standards place additional demands on technology resources, which can place added demands on scarce resources.
Undeterred by these constraints, 78% of our respondents intend to (or already do) monetize data as a value-add service or capability (figure 4), as they now have inhouse data scientists. Survey respondents told us they expect data to provide the most value in visibility of their end-to-end logistics, customer relationship management, demand planning, and workforce management.