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Understanding the magic of IoT in transportation for the truck industry

Times of crisis are painful reminders of how much we depend on well-functioning supply chains. The truck transport industry is currently facing significant challenges. These include high fuel costs, lack of drivers, increasingly strict regulations, and disruption from new business models. IoT in the transportation industry enabled by cellular IoT connectivity can address many of these challenges and create significant business benefits.

IoT Client Principal at Ericsson

Product Marketing Manager at ZF CVS System Solutions Digital EMEA

Category
IoT transportation for the truck industry

IoT Client Principal at Ericsson

Product Marketing Manager at ZF CVS System Solutions Digital EMEA

IoT Client Principal at Ericsson

Contributor (+1)

Product Marketing Manager at ZF CVS System Solutions Digital EMEA

Category

The magic of logistics

As consumers, when we order something in a store or online shop, we expect the delivery chain to do magic. We want the product to be delivered if not already today latest tomorrow. Furthermore, we want to know precisely when it will be delivered or be able to re-route it if our plans change.

If companies order supplies for production, the materials or products should arrive just-in-time (JIT) and just-in-sequence (JIS) to optimize production flows. In addition, we expect the material or products to be secure and undamaged during transport (we may even expect documentation of conditions during transport, e.g., if products need to stay at a certain temperature level). Of course, we want the deliveries to be carbon neutral.

Organizing logistics flows based on these high expectations is extremely complex and often underestimated. It may require experts in parts of the logistics chain and collaboration between different payers. A number of incidents ranging from accidents and traffic jams to unexpected weather conditions and theft require a quick and agile response. And all of it with minimal operational costs.

A surprisingly large number of truck transport companies still work primarily with phone calls, even paper, pen, and eraser. It’s kind of hard to do magic under such conditions.

But there is a way to do (perceived) magic in this industry, and it comes with three main components, described well by Jan Höller at Ericsson Research.[1]

  1. Global connectivity, as seamless as possible 
  2. Embedded sensors in all elements of the supply chain, from warehouses to vehicles, as well as in goods to be delivered 
  3. Artificial Intelligence (AI) and Machine Learning (ML) based systems to understand what’s going on, optimize flows according to key performance parameters, including minimizing the environmental impact, and responding to challenges if things go wrong somewhere 

And I would add the packaging of the above into advanced digital services, as delivered by industry players such as ZF. 

Still, from the perspective of most of the over 1 million road transport companies today, much of the above may sound like visions of the future while they must wrestle with daily challenges.

Daily challenges of a truck transport company

 

The daily challenges of a truck transport company

Between 2021 and 2022, diesel costs increased to a staggering 42%. [2] Imagine the commercial impact on a truck transport company. The driver shortage is currently a major issue. A friend of mine running a small truck transport company in Germany recently told me that he could currently easily triple his business. But he can’t because he does not have enough drivers, and every order counts for a small company like this one. Unplanned truck downtime due to technical failures is another daily challenge that seems to be unavoidable. The daily cost tag for a truck out of operation can be up to 760 USD. [3] Increasingly strict regulations require truck transport companies comply with various rules ranging from driving hours to fuel tax reporting. Such regulations typically have a good purpose, but they create additional operational challenges. 

On top, we see disruptive pressure from companies entering the market based on new business models such as crowd-sourced delivery services or tech giants leveraging their digital capabilities to build tightly integrated end-to-end logistics chains. 

There is technology available to address many of the above challenges today, and IoT in transportation and logistics enabled by cellular IoT connectivity is one answer. However, the hurdles are rather related to how to implement things and secure the corresponding business case. The best way to answer these questions is to study how market leaders in this segment are doing things, and that is what we have done. 

The business value of IoT use cases in logistics

ZF is a global technology company supplying systems for passenger cars, commercial vehicles and industrial technology, enabling the next generation of mobility. With its Transics portfolio, ZF is one of the largest fleet telematic solution providers connecting over 200,000 vehicles with over 1,600 fleet customers in 23 countries.

Two of the most important IoT use cases behind ZFs’ extensive range of digital services for the transport industry are IoT-enabled truck and trailer monitoring and truck driver assistance. While the functions of these two use cases are already implicitly explained in the naming, the commercial impacts are not that obvious. In partnership with ZF’s Transics product group in Belgium, we have therefore quantified the business benefits and came to the following insights:

For a mid-size European truck company operating a fleet of 50 trucks and with annual revenue of approximately 15 MEUR, the deployment of truck and trailer monitoring can have a business potential in the range of 600 kEUR. This is due to the reduction of costs related to downtime and unplanned repairs, but also insurance cost reductions and others. Truck driver assistance can add another 260 kEUR based on reducing administrative costs, fuel cost savings, and others. This adds up to 860 kEUR annually, which is a highly relevant cost-saving for a company of this size in such a highly competitive industry segment. These are just two of many use cases; the overall business benefit potential of introducing IoT in transportation and logistics with cellular connectivity enabled IoT use cases is, in fact, substantially higher. And truck driver assistance will increase the attractiveness of the workplace in the ongoing fierce competition for drivers as well. 

The detailed business value analysis of the above can be found in our Connected Truck Transport report conducted in collaboration with ZF, Orange Belgium and Arthur D. Little.

Some reflections and conclusions

It’s a "no-brainer" that robust, resilient, and efficient supply chains are vital for us, but it’s sometimes worth it to remember what it takes to get there. However, ensuring that our supply chains are or become even more robust, resilient, and efficient is not a “no-brainer.” The challenges are massive, and digitalization is (as in any industry) the key to success. However, the digital transformation in this industry is still at a very early stage compared to its full potential, and IoT in transportation and logistics can play a crucial role.  By implementing IoT, it reduces fuel and insurance costs and automates administrative work such as filling in reports and time-tracking. 

The digital future in transport and logistics will evolve towards digital models of logistics flows, digital twins of transported goods and transporting vehicles. This includes on-demand warehouses, autonomous vehicles, digital platforms enabling the collaboration between all the specialists within the ecosystem of the logistics industry, predictive and self-healing logistic chains, and more. [4], [5] 

Much of that is vision, but many of the immediate, pressing pain points in transport and logistics can be addressed through cellular connectivity enabled IoT use cases such as truck and trailer monitoring, truck driver assistance, and others. And if done in a strategic rather than "ad-hoc" manner, this also lays the foundation for the future fully digitalized supply chain logistics. Some of the cornerstones of a more strategic approach to this are a consistent digital process design, ecosystem thinking, selecting well-established, highly standardized, and open technologies, and ensuring scalability in all layers of the solution architecture. The latter needs to include a scalable solution to manage cellular connectivity for trucks, trailers, and goods in real-time and around the globe, which is often taken for granted but not at all trivial in the highly fragmented cellular connectivity market. 

Sources

  1. Logistic challenges and the impact of a pandemic 
  2. YCharts. US Retail Diesel Price 
  3. Menzies, Frank. "Dealing with Downtime." Truck News. 1 February 2013. Retrieved 23 January 2022
  4. The future of logistics is predictive. Here’s how. 
  5. Pre-emptive logistics – the road ahead 

Read more in the Connected Truck Transport report 

 

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