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Digital Transformation

Digital logistics: Here's how to use less paper

2017 will be the year of digitized logistics processes. Today procurement and delivery of goods requires piles of paperwork.

06 Feb. 2017 Melisa Hadzic
Digitale Logistik Pakete

With the digitization of the logistics sector, more and more companies are appearing who want to remove phone, fax and e-mail from the process chain. For retailers this means significantly less burden and new opportunities.

When it comes to digitization, the logistics sector is still lagging behind today: The transport sector ranks tenth in an industry comparison conducted by the Digital Intelligence Institute for D.velop. The information and telecommunications industry, banks and insurance, media and even the electrical industry are all ahead of the logistics experts. But that is now destined to change. If you believe the many startups popping up in the eLogistics sector, the days of telephone pricing requests, fax orders and complex forms will soon be past. For small retailers in particular, who may send only a hundred or so packages per month to customers across Europe, or receive just one container with goods from Asia twice a year, the burden of dealing with transport is often disproportionately large.

New service providers want to eliminate analog processes

Shop operators who procure goods or send orders to customers are constantly faced with a huge variety of requirements: Parcel services and delivery companies have different rules about maximum size and weight, offer different service speeds and of course also differ in their prices. Each one has its own shipping labels and tracking systems, and its own integration into the shops' IT landscape. Depending on where things are being sent, customs formalities and legal requirements in the destination countries also come into play.

This is precisely what Berlin-based startup Freighthub now wants to radically simplify: By its own account the first fully digital freight shipping service in Europe, Freighthub collects all relevant shipping data in a database, such as maritime freight rates, scheduled departure and arrival times, ports visited, port fees, customs requirements, the cost of the final leg (i.e. truck transport from port to final destination) and so on. A retailer seeking shipping transport can log into the platform once they are registered, enter their request and receive all available connections – generally 100 to 200 in all – with their prices, via a search algorithm in real time. They can then select the right offer and have Freighthub process their shipping order with a single click.

Freighthub works with a wide range of partners to provide this service – including numerous shipping companies, haulers, partners for customs processing and insurance firms. The goal is to provide a transparent price comparison in real time, and automated shipping processing with a minimum of manual upstream or downstream steps, via a responsible provider. Naturally this all has its price: Depending on the size and frequency of shipping orders, Freighthub charges the usual commission of 10 to 20 percent of the order volume. This offer is designed for smaller and medium-sized customers who ship one to 500 containers per year. eCommerce companies in particular are grateful for a digital interface.

Digital shipping for more transport efficiency

Many entrepreneurs are currently sniffing out opportunities to make money with digital business models in logistics. For example, the startup Instafreight, also based in Berlin, is another digital shipping provider, but unlike Freighthub it is focused on land transport. Here too, customers request shipping via the platform by entering the details of their order. They are then given a firm cost estimate at which they can book the service directly through Instafreight. Shipping is provided by haulers tested and approved by Instafreight.

Similar services are offered by the German firm Timocom and US companies Flexport and Haven. The latter also have the European market in their sights: Flexport has already opened an office in Amsterdam, Netherlands, and Haven is present in Basel, Switzerland.

A different business model is represented by Parcelone, a startup whose aim is to make shipping abroad easier for small and mid-sized retailers. For example, if a business has two shipments to Italy, five to Austria and three to the United States on a given day, the cost is generally so high that the business is hardly worth it. The concept here is that dealers send their foreign-bound packages in one bundle to Parcelone. The startup collects these parcels in their own warehouse near Frankfurt, Germany, and then transmits them to the corresponding parcel service for each country.

Parcelone already works with 25 carriers, including the United States Postal Service, the Australia and New Zealand Post, Japan Post Service and Spain's Correos postal service. Deals with additional parcel services are due to follow, with delivery available worldwide. The advantages for retailers: They generate a single shipping label, wherever the package needs to go, and receive a single tracking number to enable seamless traceability of their packages. They can also choose which countries they want to deliver to themselves, and which ones they want to use Parcelone for. And delivery speed is comparable to the competition. For deliveries outside the EU, in fact, Parcelone is often even faster, because packages destined for the United States are handed off directly to the US Postal Service.

API interface simplifies integration

Parcelone is also competitive in terms of cost: For example, a 1 kg package costs €6 to send to Austria, €7 to Great Britain and €12 to the US. And users pay nothing beyond the shipping fee – there is no base charge. Parcelone earns its money from the difference between its purchase price as a large customer with the carriers, and the shipping paid by the dealers. The service is connected to shop IT systems via an open API.

These examples show how the sector will be developing in the coming years: Like in other industries, many startups will arise to drive digitization forward with new services. Established players will react and need to adapt their services. And they may also cooperate with startups or buy their technologies and know-how. So things will be exciting in the logistics sector.