Logistics companies can deploy the best technology and still fail if their personnel lack training and experience. Anyone whose been around the industry a while remembers Deutsche Post-DHL’s €345 million New Forwarding Environment (NFE) IT program disaster. And while DPDHL seems to have pulled through, mistakes like that can sink smaller firms. On the other hand, we’re well into an era where it’s impossible not to adapt and adopt new technology, which makes expert advice all the more important.
We talked with TNX Logistics Co-Founder & Managing Director Alex Hoffman, who explained that making the best use of technology is all about finding the best way to leverage the work, insight and experience of each employee. While Hoffman’s take on this technology/manpower dynamic is relatively accepted in theory, many companies struggle when it comes to implementation. In some instances, valuable – and costly – experience is sidelined. Given the competition in logistics for skilled management, companies like TNX Logistics play an important role in striking this balance and allowing firms to take adavantage of all of their assets – both human and technology.
In this edition of Executive insights, we picked Hoffman’s brain about changing attutudes towards technology, and asked him how companies can take a pragmatic approach to onboarding tech, without losing their core relationships and competencies.
One area in particular where Hoffman sees potential is in machine learning, an area where we are just beginning to see the potential. He explained that this new method of unpacking logistics helps companies understand the interaction between carriers and freight forwarders and their respective subcontractors. “It allows us to answer questions like how likely is it for any subcontractor to accept a particular job and at what price. This information permits us to incorporate subcontractors into the planning process, by weighing the choices on whether a particular cargo is better handled by an owned or controlled truck, or by an independent subcontractor.”
Shipping and Freight Resource: TNX Logistics is ostensibly a technology company, which raises the question, how should logistics be divided between human and technological capabilities. Where does one stop and the other start, and what should managers keep in mind when determining what technology to onboard?
Alex Hoffman: Logistics has a long history of finding the right mix between people and technology. The industry has continuously pushed the envelope on what technologies can do to support the goal each company has: move goods as quickly, cheaply and efficiently as possible to satisfy customer needs.
At TNX we see ourselves following in this tradition. We help carriers and freight forwarders to plan their daily work by giving their dispatchers the right tools to make the best planning decisions on every cargo and every truck, every day.
Making the best use of technology is thus an exercise in finding the best way to leverage the work, insight and experience of each employee. Therefore, a manager should evaluate technology with that in mind: how does this technology help my team and my organization get better results than I’m getting now.
Obviously this is easier said than done, so I think the best advice I can give to any manager is to be open to new ideas. Evaluate ideas with a mindset of how they will help your organization. Prepare yourself to be surprised by what new ideas and technologies make possible. Experiment, both internally and by running pilot projects with innovative companies.
How is the industry’s attitude towards technology changing, and what trends are you seeing?
For the last decade, a lot of innovation projects in the industry felt like playing catch up with customer demand. A significant example of this is the emphasis a lot of companies put on warehousing and final mile solutions following the explosion of online retail.
I’m seeing the industry looking at itself more and more today with an aim to improve its internal operations. The big push in autonomous trucks is a crucial part of this, just as the wave we are part of to improve critical internal processes.
For shippers looking to cut costs, where should they start looking, and how has developing TNX’s software and services uncovered inefficiencies that folks might now be aware of?
We’ve been telling shippers, freight forwarders and carriers to “get more truck per truck” for a while. The key to improving efficiency is to improve planning.
Transport planning is where carriers and freight forwarders lock in their profitability. If you have poor plans, you’ll have a very tough time running a profitable organization.
The key though is to have a technology that can help with that. There is still a very prevalent perception within the industry that transport planning for trucking companies is just a bit too fidgety and a bit too reliant on human relationships to rely on an algorithm.
What we are showing together with our customers is that this perception is no longer correct. Modern technology that includes route, trip and cargo planning for a blended fleet consisting of a private fleet, fixed-contracted subcontractors and independent owner-drivers via the spot market can help carriers and freight forwarders improve their profitability.
A lot of developed economies are staring down a serious shortage in manpower, especially in regards to truck drivers and pilots. What role can technology play in reducing this impending disruption?
Our goal is to reduce the number of empty driving going on in trucking. Not only reduces this the need for drivers that are in short supply, but it also lowers carbon emissions and reduces the strain on road infrastructure.
Can you talk about how TNX Logistics incorporates its expertise in machine learning and financial markets into a supply chain service, and how that expands on the conventional approach to logistics way of doing business?
Machine learning has been a game changer technology over the last few years, extending the range of what is possible in a lot of areas.
We are using it, for example, to better understand the interaction between carriers and freight forwarders and their respective subcontractors. It allows us to answer questions like how likely is it for any subcontractor to accept a particular job and at what price. This information permits us to incorporate subcontractors into the planning process, by weighing the choices on whether a particular cargo is better handled by an owned or controlled truck, or by an independent subcontractor.
Further, it allows us to optimize the interaction with the group of subcontractors: which job is being offered to which subcontractor, at what time, and at what price. We call this Smart Tendering and give this powerful tool to our subcontractors “out of the box” without any configuration effort on their part.
Financial markets insight is too be honest a double-edged sword. It is very easy, in particular for outsiders such as technology providers or startups, to conclude that transport markets need some sort of exchange-like infrastructure. I think that view is wrong though, and wrong in a way that is detrimental to any product developed with such a view in mind.
If you are a shipper, your first goal is to find somebody willing to transport your cargo. Only after that has been satisfied are you looking at optimizing pricing.
Financial markets fundamentally operate the other way around. They are incredibly efficient at getting you the best pricing, but they are not designed with execution certainty in mind.
A key feature of successful freight exchanges, for example, is that they very much not operate as a stock exchange. Almost all interaction between the parties is happening bilaterally, and most importantly all price setting is done bilaterally. There is not a guarantee that the price you agree to is the best price, nor is there even any dedicated mechanism working towards that goal.
While there are viable challenges to the business model of existing freight exchanges, I don’t think just introducing more financial markets technology is a solution to any of these challenges.
It seems as if we’re heading into an era of technological disruption just as the United States is trashing trade alliances and moving the world towards a full blown trade war. These conditions are going to test the capabilities of logistics companies in novel ways. What advice do you have for supply chain managers, shippers, and other stakeholders in the months/years ahead?
First, get your organization in order. The best way to be prepared is to have your processes running smoothly. That means taking a look at the size and the management of your fleet, how you procure transport capacity from your subcontractors, and how you best put them to use on a day-by-day basis.
Second, hire and retain the right people. Keep them well motivated and trained. There won’t be much “business as usual” going forward, and you need people that embrace change and thrive when being challenged.