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Global Challenges for business digital: Disruption in the freight transport and logistics sector

written by Sara Sanz Torralba

Introduction

Digital disruption, described as a form of environmental turbulence caused by rapid technological innovation, has dismantled traditional business models across all sectors, fundamentally reshaping the way value is created and captured (Skog et al., 2018).

This challenge is particularly evident in the Freight Transport and Logistics (FTL) industry, which plays a crucial role in the global economy by employing between 3-8% of the workforce in developed countries and contributing 6-12% of their GDP (Awan A. et al., 2022).

As FTL companies confront rapid technological advancements, they must not only keep pace with these innovations but also integrate them into their business models effectively to avoid being left behind.

This essay aims to explore the key aspects of digital disruption in 2024, analyse its relationship with the FTL industry, assess the positive and negative effects of this industry on the disruption, and consider how businesses can respond responsibly and effectively moving forward.

Digital disruption in transportation and logistics companies.

Digital disruption in 2024 is characterized by a convergence of advanced and innovative technologies that are reshaping industries and business models, in positive and negative ways, while also creating new challenges and opportunities.

Some key trends are presented as inherently defining the technology-driven landscape that exists today. Artificial intelligence, one of the trends accelerating digital disruption, is playing a key role in the technological development of the FTL sector.

A study by Geotab Intelligent Transportation Systems (ITS) analysing commercial freight data from five key U.S. bridges examined the broader effects of potential closures to help organizations improve transportation planning using real-world data (Geotab ITS, no date).

Artificial Intelligence applied to the refrigerated transport industry

However, the use of artificial intelligence may not always be beneficial. The cold chain logistics sector consists of keeping fresh produce or medical products at the right temperature during their distribution to maintain their original quality (Xu Sun et al., 2019).

This sector has integrated artificial intelligence to the task of “promoting real-time dynamic feedback of product information” (Xu Sun et al., 2019), clearly an extremely valuable insight when dealing with temperature-sensitive cargo.

For instance, a vaccine’s cold chain begins when it is manufactured and ends when administered and the temperature must remain within the 2ºC and 8ºC range to maintain its effectiveness (Australian Government Department of Health and Aged Care, 2023).

It would have grave consequences however if logistics companies responsible for dealing with vaccines or similar product were to rely solely on artificial intelligence with the task to acquire this information, as it could be inaccurate and lead to the loss of effectiveness and value of an important resource.

Businesses are key drivers of digital disruption in the freight transport and logistics (FTL) sector. The business’ strategies, actions and investments contribute to the pace and nature of the disruption. However, while they often aim to harness digital technologies for competitive advantage, efficiency, and innovation, businesses can also create challenges that negatively impact the industry and society.

The impact of AI on employment

While AI is revolutionizing sectors like cold chain logistics by providing real-time insights, its role in automation also raises concerns regarding employment in the broader FTL sector. As more businesses in the industry adopt automation technologies like artificial intelligence and robotics, worries have been raised about potential job displacement issues. Groshen et al. (2019) estimates that 60-65% of long-haul driver jobs will disappear due to automation and the implementation of autonomous vehicles, while Viscelli (2018) calculates that up to 300,000 jobs in the refrigerated and dry van transportation field could be destroyed in the next decade.

Even if both studies are informed approximations, the alarmingly high number of estimated displaced jobs should indicate the looming threat automation and artificial intelligence pose for jobs in the mentioned fields. While most companies may argue automation is introduced to relieve workers of repetitive tasks (The Guardian, 2023), it is still undoubtedly a form of job displacement caused by the implementation of new technologies, which will inevitably increase unemployment and deepen the digital skills gap. University of Twente professor, Jan van Dijk, defined digital divide as “a division between people who have access and use of digital media and those who do not” (Van Dijk, 2020).

This concept can be applied to the ongoing digital disruption in the freight transportation and logistics industry. Beyond the jobs lost to automation and artificial intelligence, the digital divide highlights that many workers may not be replaced by robots, but rather by individuals with advanced technological skills.

These new roles will be available only to those with the necessary digital competencies, which many may lack or struggle to attain. Although digitalisation has been proven to increase efficiency and reduce costs (Melinda et al., 2024), many businesses value these benefits over the welfare of their workforce when deciding on the implementation of new technologies to their business models. Amazon reportedly developed a new way of detecting the inactivity of their workers: a wristband which tracks the amount of time a worker stops moving (The New York Times, 2018). According to Conley (2021), workers in Amazon warehouses reported physical and mental health crises due to such pressures, as going to the bathroom also counted as “inadequate breaks”.

In terms of business performance, this can only give rise to the decrease in efficiency and loss of motivation of the workforce, which will inevitably give cause losses for the company. Furthermore, it may be argued the use of this kind of technology violates the protection of privacy of the workers and can seem ethically and morally dubious.

For instance, UPS’ ORION (On-Road Integrated Optimization and Navigation) system, first deployed in 2012, was reported to have saved “approximately 100 million miles per year between 2012 and 2020”, which equals to “a reduction of 10 million gallons of fuel used and 100,000 metric tons of carbon dioxide emissions released” (Agnihotri et al., 2023).

Technology and Environmental Responsibility

By embracing digital disruption, businesses take responsibility for reducing their environmental impact and responding to the global need for sustainable logistics solutions. The freight transport and logistics sector contribute to a large part of CO2 emissions compared to other industries (Kwilinski et al., 2023).

Mullholland et al. (2018) evidenced that, with the implementation of the right policies and procedures along with the integration of innovative technologies, 56% percent of the CO2 emissions could be reduced between the year 2015 and 2050. With rising consumer and regulatory demand for sustainable solutions, businesses are increasingly adopting digital tools that make their operations eco-friendlier.

The Internet of Things (IOT) “reflects the need to process and fuse data generated from interconnected devices, as well as store them in a single massive network” (Gazis, 2021) which will provide better, more functional services than a single device or system would be able to offer on its own (Kopetz et al., 2022).

DHL has applied this innovation and has reduced its energy expenditures by 40%, creating a system that “maintains facility temperatures within a predetermined range based on anticipated weather conditions by using intelligent heating, ventilation, and air conditioning” (Gupta et al., 2023).

Effects of Globalization

Lastly, globalization plays a significant role in enhancing the positive effects of businesses on digital disruption by fostering innovation, collaboration, and expansion on a global scale.

The interconnection of markets and economies enables businesses to leverage this disruption more effectively and create value in several ways. Freight transport and logistics companies are now able to collaborate with international partners to improve coordination of operations and expand innovation.

One example of globalization being leveraged in the industry is DHL’s Resilience 360. The software monitors global disruptions and their effects on key routes, automatically triggering mitigation strategies when necessary (Zandi, 2023).

Though managing threats like port strikes and airport closures may not seem like an obvious use of IoT, advanced analytics seem to be increasingly able to predict and respond to these challenges.

Conclusion

After evaluating how negatively and positively businesses are in driving digital disruption, these same businesses must adopt new strategies and models that not only embrace this growing phenomenon but also mitigate its negative effects.

First and foremost, businesses should consider investing in workforce reskilling and upskilling to address job displacement. In offering this kind of programs such as digital literacy, companies ensure that workers remain relevant in the developing job market and capable of handling new technologies that may be implemented.

A survey conducted by Polydoropoulou et al. (2023) across different transport sectors revealed that over 50% of respondents in all sectors considered workforce upskilling to be at least «moderately important”.

Bridging the digital divide should also be considered one of the top priorities. This could be accomplished by providing the workforce with all the necessary resources to develop their digital skills.

For instance, companies like Siemens have invested in ‘digitalization academies’ to upskill workers, ensuring they remain competitive in the face of automation (van Giffen et al., 2023).

It has been evidenced that the implementation of innovative technologies has contributed to not only increased operational efficiency, but also reduced energy consumption, improved fuel efficiency and the lowering of carbon dioxide emissions, as seen with UPS’ ORION system.

Efforts should be made to promote the developing of similar systems and software that prioritize both sustainability and performance. One way this could be achieved is to collaborate with startups and innovators specialized in emerging technologies.

These partnerships can help established logistics businesses adopt disruptive technologies faster and more effectively. Startups like Anyware Robotics, which develops robotic delivery systems focused on trailer unloading (Ackerman, 2024), demonstrate how integrating new technologies can optimize supply chains while supporting sustainability goals.

Finally, businesses should consider working closely with regulators to create responsible and ethical policies regarding new technologies.

Above all, these policies should advocate for regulations that protect workers and consumers and promote sustainable policies.

In conclusion, digital disruption has had a profound and multifaceted impact on the Freight Transport and Logistics (FTL) sector, reshaping business models and creating both opportunities and challenges. While emerging technologies such as AI, automation, and IoT drive efficiency, innovation, and sustainability, they also present significant concerns related to workforce displacement and the widening digital divide. It is imperative that businesses in this sector adopt a balanced approach to harness these technological advances responsibly. By investing in workforce reskilling, prioritizing sustainability, and fostering partnerships with innovative startups, businesses can mitigate the adverse effects of disruption while maximizing its positive outcomes.

Furthermore, collaboration with regulatory bodies will ensure that the integration of new technologies is not only ethically sound but also aligned with the broader goals of sustainability and social responsibility. In this way, the FTL industry can continue to evolve in a manner that benefits both the economy and society at large, while safeguarding the long-term welfare of its workforce.