Over the past few months I’ve been looking closely at the UK’s road transport industry (transportation of goods, not people) and how technology is changing this vital but highly-challenged sector.
I’ve found the sector to be fascinating, with some great early-adopter examples of technology-enabled services, but overall it’s extremely fragmented and characterised by competition rather than collaboration between companies in the industry such as truck manufacturers, hauliers and fleet management providers.
This is a difficult industry to be in; fuel prices, congestion, driver shortages and changing consumer expectations of delivery times, combined with tight margins (just one or two percent for a lot of haulage companies) combine to create huge challenges, and it can be difficult to focus on the strategic direction of a business and its place within an industry network when faced with these day-to-day operational challenges.
However, this kind of strategic change is exactly what’s needed, from a ‘fragmented’ industry into one of business networks, characterized by growing interdependencies between the different stakeholders.
An example of this kind of model is MAN’s pay-per-use provision of a truck as a service. This requires a tight interaction between operators and the OEM. Only through close collaboration do both service partners get the most value from their service interaction.
The same applies to the use of telematics to collect and use data about things such as driver behaviours, route management and planning and vehicle performance, and the digitizing of trucks and parts. To get the most value from data the different data resources need to be integrated, requiring a tight collaboration between different OEM’s, technology providers and operators.
For the companies, acting like network partners, giving priority to the long-term strategic interest, is critical to make the most of the opportunities servitization and digitalization provides for them.
Now, the opportunities of telematics and new service models puts a pressure on companies to change their strategies.
In spite of this, there are several reasons why these new technologies, and the new ways of doing business that they enable, are not being fully-embraced. I’ve been part of the research team from The Advanced Services Group working with the road transport industry to identify what’s holding back the wide-spread capture of these benefits.
Among the important challenges for the road-transport industry are the organisational and industry culture that hold back the adoption of innovative service models. The growing interdependence of a service based model is at times rejected as a threat and the significant cost and operational benefits are therefore not realized.
The established forms of transactional sale instead of contracting for services are perceived as being the easier route to obtain new assets and the Total cost of Ownership (TCO) benefits that a service-based interaction provides is not fully recognised.
Our research at ASG, released in a new whitepaper, has provided us with important insights into the opportunities servitization and the use of digital technology can provide for the road-transport industry. Our future research in the area will focus on helping a wider range of organisations to best capture these opportunities. Road-transport is one of the most critical enabling industry for the wider economy. Helping this industry to become more efficient and profitable through advanced service models is an important contribution of the ASG.
Next week (18th May) I will be at the Microlise Transport Conference, along with my colleague Honorary Professor Des Evans, former CEO of MAN Truck & Bus UK, talking about our research and what The Advanced Services Group is doing to help this industry. I hope to see you there.