Digital logistics growing rapidly

The management consultants at Arthur D. Little are convinced that digital logistics will see significant double-digit growth by 2025. It is true that the market penetration of solutions from start-ups and digital offerings from traditional providers such as C.H. Robinson, DHL, Kühne + Nagel (KN), DB Schenker and Maersk is not yet very pronounced. But the growth phase is only just beginning, reports DVZ, citing the consultancy’s study. The digital business models can be divided into three areas. First, marketplaces with providers such as TIMOCOM, Freightos or Schenker with Drive4Schenker. Secondly, logistics software with players such as Alpega, Transporeon and Shippeo, and thirdly, digital logistics and freight forwarding services such as those offered by Forto, Flexport and KN with Freightnet, according to the study.

The analysis also shows that the revenues from such digital businesses are still manageable in absolute terms compared with the traditional freight business. “Marketplaces in the freight segment still do most of their business with the pure brokerage of third-party services (for example, loads). The revenues behind the brokered transportation services are therefore not reflected in the books of the marketplace operators,” explains Dennis Mikulla, Principal Transportation & Logistics at Arthur D. Little. Instead, customers pay a fixed monthly fee to access the platform’s offerings. Today, he says, this leads to a ‘natural’ cap on revenue potential.

However, digital offerings are expected to grow at a significant double-digit rate per year until 2025, while annual growth of only between four and six percent is calculated for the traditional business. As a result, the combined global market for digital freight forwarding services in sea and air freight as well as on the road is expected to be larger than traditional sea and air freight by the middle of the decade. However, digital alone is not enough to be successful; traditional freight forwarding and logistics expertise is also crucial, the market researchers emphasize. This applies in particular to areas such as sea freight, where volumes and prices fluctuate greatly. At the same time, business models are becoming increasingly mixed, with more and more hybrids of marketplaces, software providers and digital logistics service providers emerging. Mikulla describes the vision of a fusion of the three major business model types into a ‘logistics-as-a-service’ platform. The customer would benefit from a complete, digital and integrated range of services, while the provider would be able to produce its services in a more synergistic and high-quality manner by cleverly linking multiple services. “We already see some players in the market – both digital and ‘classic’ logistics companies taking this route.”

The highest growth rates are likely to be found among digital freight forwarders and the like, i.e., those companies that also organize transports themselves. For the period between 2019 and 2025, the experts predict an increase in revenue from $17.1 billion to $173.9 billion per year. The global market for logistics software is expected to grow by 10 percent annually to $26.4 billion, while business with marketplace offerings for freight and capacity brokerage will increase by 28 percent to $11.9 billion. According to the study, digital logistics is likely to grow much faster than the traditional freight transport market, i.e. sea and air freight and road haulage. Here, growth rates of only between three and six percent are expected over the next five years.