The next frontier

2013 will go down in trucking history as a year of readjustment, prompting industry to dust itself down and finally overcome the chronic GFC trauma. Halfway through 2014, we now see a new, more buoyant business reality emerge as the US recovery is taking shape.

“After six long years of pain and fear, the major advanced economies are finally building momentum,” Angel Gurria, Secretary-General of the OECD, said in a recent statement, and research is widely backing his optimistic prognosis. 

But it’s a fragile optimism only – at least if you trust UK consultancy PwC, which found the rise in confidence about business growth in 2014 is still somewhat muffled. In May, the company’s ‘Global CEO Survey’ showed that many a global executive is still worried about over-regulation and the ability of governments to tackle debt and deficit levels in a world where traditional growth patterns seem to crumble.

Many emerging economies are now diverging in their fortunes as each is facing its own unique set of issues, while advanced economies appear to be on the mend again. For now, though, serious global risks have been averted and the transport equipment industry is thinking about growth again.

The question is, where will that growth come from? According to PwC, those who are focusing on breakthrough innovation, putting disciplined innovation techniques in place and collaborating more actively are prone to succeed in the new economic landscape we are facing going forward.

“[Business leaders] have to chase a moving target, as consumers evolve in different ways in different markets,” the consulting giant says. “They have to address the needs of more diverse – and demanding – customer segments [and] they have to fight off increasingly intense competition.”

One strategy to react to that change is ‘industrialising’ innovation to make it repeatable, dependable and scalable. More than a third of all 1,344 executives interviewed by PwC see product/service innovation as the main route to growth in 2014. And most see the need to change their R&D and innovation capacity, their technology investments and the way they use and manage big data.

In a second new study, logistics powerhouse Deutsche Post DHL attempted to predict how the resulting change will impact the logistics industry – an industry not exactly known for being a hotbed of rapid innovation – and asked whether technology really was the solution.

“It is,” says Dr Markus Kückelhaus, Director Research & Development at DHL Customer Solutions & Innovation, who leads the Trend Research Team at DHL. “In the future, technical innovations that were originally developed for the consumer market will make the transition to the world of logistics at a much faster pace. This in turn will result in rapid changes within international supply chains. Indeed, the application of such innovations will make our business more cost-efficient and sustainable.”

According to the DHL expert, ‘big data’ is the one re-occurring keyword. “Digital tracking along international supply networks is already a daily reality in our business. We track and trace the origin, destination, size, weight, contents and current location of millions of items on a daily basis. Big data analysis solutions translate into both increased efficiency and customer satisfaction – not to mention the development of entirely new business models.”

Mark Patterson, Vice President of Innovation and Product Incubation at DHL Supply Chain, adds, “the challenge for 2014 is how to use this information – which is available in quantities that we’ve never experienced before – to improve end-to-end supply chains, product availability and cost management.”

In the wake of the economic downturn, cost can in fact turn the scale of innovation – both according to DHL’s future scenario and PwC’s management survey. “Controlling cost is critical to achieving success in the future and we’re seeing this desire to control costs shape supply chains across all sectors,” he says – indicating that efficient transport equipment and streamlined logistics solutions are in high demand.

“Our customers are increasingly challenging us to use innovation to add value to their businesses. They expect us … to understand what the future holds and how innovations in all areas can benefit their businesses.”

As a result, collaboration is becoming more and more important – not only between the powerful OEM community and the supplier scene, but also between transport businesses, the vehicle manufacturing industry and the consumer at home, who is becoming more powerful than ever in the digital age. As part of the collective quest to control cost and improve efficiency, more and more companies are therefore looking to form joint ventures that can benefit the customers of more than just one business.

“For many firms, collaboration is no longer just a concept that is merely talked about: it has real meaning and significance,” says Patterson. “Like-minded organisations from different sectors are starting to collaborate together and work through issues that they are each seeing in their own supply chains. The same issues occur for firms in all sectors: efficiency, cost control, resilience and agility.”

On the back of that collaborative approach to push for innovation – driven by the age-old urge to provide customer satisfaction – consistency is also becoming more important in 2014. DHL’s Mark Patterson has found that the rise of big data will help industry understand where differences in key processes are hindering progress, helping it to rectify those issues in an instant – a development that will eventually trickle down to vehicle and component design as well.

“Clear operational methodologies will … enable supply chains to establish consistent processes, as technology, data and leadership will make it easier for processes to be replicated and deployed locally and globally,” he says – effectively taking up PwC’s concept of ‘industrialising’ innovation to make it repeatable, dependable and scalable.

The move to potentiate inventiveness through co-operation to achieve the next efficiency gain may not only be helpful from a business point of view – it can also help companies respond to the growing sustainability trend. “For example, there are limits to how far one company can improve the efficiency of its urban delivery trucks,” says Patterson. “But two or three firms working together – sharing truck loads – can make a real environmental impact, reducing harmful emissions and realising substantial cost savings.”

Building on the post-GFC prudence that became so deeply ingrained in the business world over the past half decade, cost-control, customer engagement, innovation and collaboration are now becoming ‘business as usual’. In that sense, the biggest future trend is arguably the renunciation of Band-Aid solutions for the benefit of a more hard-headed approach to business.

That’s probably why PwC found that nearly a third of the executives it spoke to are now focusing on opportunities for growth in the countries where they already do business, with just 14 per cent planning to explore new geographic markets.

But, that does not mean global trends like the constant need for innovation and collaboration are now invalid. According to Patterson, they can still be successfully implemented – either as standalone measures to tackle a particular problem or dovetailing with one another to make “significant, measurable improvements” to supply chains around the globe.

Yet, the interplay between them and the resulting adjustment of corporate strategy will become more significant than single trends themselves. “Quite simply, everything is now in flux,” says PwC Chairman, Dennis M. Nally – pointing out that companies must go beyond the rearrangement stage experienced in 2013 and be ready to radically reassess how they function.

“In this new world, the very purpose of business – not just its practices – will come into question. [Leaders] will have to encourage innovation that’s both radical and methodical; connect with employees and consumers who don’t look, think or act like them; experiment with new operating models while preserving existing efficiencies; and deliver value without compromising on quality or integrity.”

As a result, we are headed for somewhat of hybrid economy at the halfway mark of 2014, where leadership in both transport and manufacturing has to be comfortable straddling two worlds – drawing on the best of the old while operating at the frontiers of the new.

The cautious optimism we’ve seen recently may therefore be more of a sign of relief that risks like the collapse of the Eurozone have been averted, rather than the starting signal for a new boom. It is, however, indicating that the gun-shy post-GFC period is finally coming to an end.

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