All well and goods

Technology has been relentless in disrupting companies, business models and jobs. Although this is true for many industries, it has not been too apparent in the more conservative goods transportation industry. But things are changing.

Tech on the Move

At Lufthansa Cargo, we started thinking about automating processes in 2000. Until then, we still received booking requests through fax, by telephone or even telex. There was no online booking. It was only then that we offered our capacity on e-marketplaces. Today, we are receiving around 60 to 70 percent of our bookings through online processes via platforms, the Internet, or via direct API. This is a very good starting point to be more efficient in our own processes — but there is always room for improvement. For example, the same automation cannot be seen in the totality of what we are offering across the whole supply chain, mostly because our partners are not at the same technical stage. If you’re talking about a global business, you need a global network. In China, in Africa or in India there is not the same technological standard and everybody wants to develop their own system, so we can be forgiven for still managing things the old-fashioned way when it is what our end clients still need.

Most people don’t know but, due to international law (the so-called 5th freedom) airlines generally just have traffic rights to fly direct routes to and from their home market. It means that European carriers can’t fly from an Asian destination to another or from Asia to the United States for example. To do that, local partners and subsidiaries are needed. For a global network to be built, you have to seal a lot of international and complex contracts. Therefore we are very proud that we ramped up several Joint Ventures with Cathay Pacific, ANA and United Airlines over the last years. Companies such as Time Matters, who make extremely fast deliveries (less than 12 hours) of small items from or to wherever and they are also specialized in the transportation of live organs for transplants.

Challenging Conservatism

All that said, although companies in our industry may be open to new developments, and many of us are, we operate in a very traditional industry, wherein many are still fighting to fully automate their core business in their search for more efficiency. So far, we focused on technologies allowing faster booking processes, faster deliveries and more precision in locating freight in real time.

But at the end of the day, it is just a matter of being sure that your freight arrives to the right place, at the right time, and undamaged. The real difficulty concerns the transportation of extremely different goods: to fill a cargo plane with millions of luck worms for the fishing industry is not the same as filling it with animals, zebras and rhinos, or with semiconductors, food, wood, cars and the aforementioned live organs. Each item requires a particular process and a different priority that implies different challenges and risks.

Digitize It

The hidden hand of the technological revolution is always there, however. Machine Learning is being applied to help us develop the right automated procedures for items we have never dealt with before, but that the algorithms have identified as having similarities with other goods we have handled in the past. Big Data is also playing a very important role in making real-time analysis and predicting emerging trends such as increasing or decreasing the demand of certain products from certain areas, helping us to provide the right answer in a market which is particularly volatile.

Volatile because the goods transport industry is a sort of seismograph of the whole worldwide market and is affected by economic or political shifts sooner than other industries. The same happens when the economy enters a phase of prosperity. We are used to such an amplitude. In fact, two years ago we had our worst financial year for a very long time but the following year we had our second-best ever. Technology will play a key role in safely sailing such tumultuous waters.

In an industry where complex international contracts play a very important role, DLT-based technology, such as Blockchain and Smart Contracts, are becoming increasingly important. As far as now, we don’t have a project the agenda but we’re monitoring it closely. We are deeply interested in the huge project brought on by IBM and Maersk, one of the leading shipping companies. Through Tradelens, an open and neutral platform underpinned by Blockchain technology, the two huge companies are trying to digitize the global supply chain. This could be a game changer, solving many of the problems caused by complex supply chains which combine several means of transport.

Further Down the Road

The delivery of such technologies in our industry may be a little late, but in the next 20 years, big developments are expected. We are already investing in new startups like cargo.one a marketplace for airfreight. And we observe new modes of transport, even sponsoring the Technical University of Munich’s Hyperloop team – who last year won the third annual SpaceX pod competition. And we are also closely monitoring teams – but not investing – working on different solutions, such as the flying drones that are being developed by, for example, a German company called Volocopter.

A consequence of the peculiarities of this industry is that technology has yet to displace many manual processes, as it has in other sectors. We are aware that with automation comes the chance to change but it’s also a challenge to get prepared and to take all employees with you on this digital journey. In any case, automation can only ever reach a certain level because the human look and human touch will still be necessary to ensure that many delicate goods such as semiconductors or insulin are properly loaded and that there are no imbalances in the cargo. So for now, all is well and good in the goods transport sector, and we are fortunate to be on the cusp of incredible developments in the coming decades.