Spring 2024

Artificial intelligence in logistics and air freight

Artificial intelligence in logistics and air freight

Several factors are driving a new phase of digitalisation within logistics, especially the growing power and acceptance of AI and new sustainability reporting requirements for companies and their supply chains, Lionel van der Walt, chief growth officer at Raft, tells Will Waters. And these developments are likely to have implications for all logistics stakeholders, including within air freight

Logistics technology has clearly been a dynamic and rapidly evolving space in the last few years. But this has moved on significantly in the last 12 months due to a number of factors, but particularly developments and public awareness around artificial intelligence (AI), according to Lionel van der Walt, chief growth officer at ‘intelligent logistics platform’ Raft. So, how does he see this area developing, and what are the implications for air freight?

This greater awareness of AI is certainly helpful for a company like Raft that is focused on using AI to support freight forwarders and customs brokers – by automating as many of their processes and activities as possible, from operations, finance, customs, and sales to visibility and emissions reporting. He says the last few months have been a busy time for a company only founded in 2017 and that now serves around 60 freight forwarders in more than 30 countries, including around 40% of the world’s top 25 global players.
“Right now, our key focus is to make sure our products are aligned with our customers’ needs. And we’ve seen this huge shift, not only in the industry, but globally, where people are becoming more and more aware of AI and the power of AI and automation within organisations,” notes van der Walt.

“This builds off what happened over Covid, where we saw a lot of companies starting to focus on the adoption of technology. But now it’s hitting another gear, with a focus on AI. For us, the key areas we have focused on is finance, customs and operations. And we really want to make sure we are getting a strong return on investment for our clients, making it as easy as possible for them to implement these solutions – and getting the people engaged and adopting once they’ve implemented.”

That process of getting people engaged is talked about a lot in tech implementation, with the rise of AI bringing new concerns for employees.
Van der Walt notes: “In 2023, AI was seen as the scary monster. As we progressed through the year, and especially with Chat GPT and Google Bard and these things coming to the fore, and more people coming to use it, people are starting to realise there’s a lot of value we can get.

“And now we’re starting to see the transition of that into the workplace, specifically in logistics. The solutions are now coming, and people are starting to understand this is not going to take away our roles, it’s here to help us become more effective in our roles.”

Rather than AI taking away people’s jobs, “the real mantra should be that people who are using AI will be taking my job away”, he says. “So, if you’re not keeping abreast of all of these changes, you’re putting yourself at risk.”

Van der Walt says “significant” interest has been building about AI adoption in logistics and supply chain industries, estimating that “about 80% of the major players are very involved in this”. He highlights a study last year reporting that 57% of supply chain companies are already making use of AI and automation, or in the early stages of adoption, and another last year reporting that 82% of logistics companies have increased their technology investments since 2020, and 95% will be increasing or maintaining the current levels this year.

“There’s a clear trend. And AI and automation is not the future any more. This is already deeply embedded into many companies. And we have definitely seen that growth with the organisations we’re working with.”

‘Slow’ air freight adoption
People often talk about air freight being slow to adopt technology, but van der Walt notes that “most supply chain or logistics companies and freight forwarders are multimodal”, adding: “I think you’re going to see no difference on the ocean or the air side in the adoption rates as these companies start bringing in these technologies: they are going to want to do that across their whole business to get the greatest value out of it.”

He believes attitudes within the air freight industry have “shifted since Covid, where people have started paying attention to the adoption of technology, and how we work collaboratively in the industry to bring greater value and the transformation that is needed. So, the momentum is there. I think it’s heading in the right direction.”

He highlights that one of the key challenges air freight faces is how to manage demand efficiently in a business full of peaks and troughs, operationally. “It’s been done mostly manually, with some systems in there. But with the latest technologies and AI, you can start doing predictive analysis, and doing things in a proactive manner to manage that better.”

Another challenge is finding labour to manage the cargo, something that other technologies may help solve, such as via automation or automated vehicles, he highlights.
“Also, when you have this difficulty finding labour, and you have a large amount of churn… there are already companies using augmented reality to train people and getting them up to speed very quickly and certified to be able to work on ramps,” he adds.
“All these technologies are going to become more important, for the industry to survive – and also react. Because in the logistics industry and air cargo, there’s always a crisis.” These crises sometimes bring positive things – such as a shift from ocean to air because of supply chain disruptions. But if what’s happening in the Middle East pushes up oil prices and the cost of operations, “certain technologies can help you be as cost efficient as possible – and to be resilient, to be able to react very quickly to these external forces”.
Driving forces
He believes the biggest freight forwarding and logistics companies and their customers will continue to explore and invest in these kinds of new technologies, and in turn push others further up and down their logistics chains to participate. And once their customers experience those services and visibility, “they’re going to demand that from everybody”.
Another key driver is going to be emissions and sustainability regulations, and the imminent and growing need for companies to report their environmental performance and those of their supply chains.
“It’s really going to hit home this year in the European Union (EU) with the corporate sustainability reporting directive, where companies are going to be forced to report at the end of the year,” van der Walt notes.
The first phase of this requires large EU companies and listed companies – including EU subsidiaries of non-EU companies – to report on the environmental and social impact of their business activities in the 2024 financial year, for reports published in 2025, with similar requirements of smaller companies in subsequent years. Similar rules are being finalised in the US and are expected to be published this year, with other jurisdictions at various stages of introducing regulations.
Van der Walt says this is “forcing forwarders across the globe to raise the standards within their organisation. And it’s really going to require a lot of data and data processing.”

He adds: “So, if you are a freight forwarder in the US, if you’re working with large clients in the EU, they are going to say: ‘I need this information; I need it in this format’. And you are going to have to find ways to use technology to do it – because you cannot do it manually.”

Other types of regulations by governments around the world are also going to force further change, “especially customs regulations are busy changing and evolving, and many of the customs authorities are using AI and different technologies”, he notes. “And that’s going to push companies to adhere to these new regulations.

“So, in my mind, there’s a perfect storm coming. And everybody is focused on becoming more efficient, and using technologies to do so.”

Digital dependence
Van der Walt acknowledges that some, particularly of a certain generation, are wary of going so far down the digital road, for example with AI, that any disruptions to the digital infrastructure may leave people not knowing how to do anything anymore. But he stresses that “the greatest value is combining the human element with the technology”, noting that “ultimately, there is a human component”.

ncern now, to do your banking and all these things using the internet? No, because as the technology evolves, so do all of the businesses that thrive on how to make it more secure. So, I think that fear will be there initially, but as people start using it and becoming more educated in these technologies, it’s going to be the norm.

“Like when IATA was talking about transitioning away from paper tickets to electronic tickets, there was a lot of concern from airlines, governments and users. Fast forward to today, it’s not an issue: you’ve got it on your phone; you’ve got it on multiple devices; and even if your phone goes down, you are able to get it printed out at the airport. So, you have these backstops and failsafe processes that come into play to overcome those challenges. And I think the same thing is going to apply with AI and these new technologies and processes.”

Generational factors
For a generation used to doing manual processes and doing things in a certain way, acceptance may take longer, and decisions about new technology adoption still focus largely around return on investment (ROI). “But if you look at the next generation, they growing up in a world where everything is (digital and) AI driven,” notes van der Walt. “That’s an expectation they have.”
As a result, organisations that still rely heavily on paper and manual processes “are going to have a huge struggle” with recruitment and retention. “I think companies like ours, and others that are using the latest technologies, are actually going to be a catalyst to attracting that next generation,” he notes. “(And) you’re going to need less persuasion for them to adopt (technology) within organisations; it’s going to be more of a requirement from their side; that they expect these technologies to be in place and used within logistics.”

But of course, there is still a need for any business selling a product or service to demonstrate the return on investment for customers – and to investors.

Technology investment environment
Indeed, the logistics technology investment environment has changed somewhat since the rise in interest rates in 2022, with logistics tech companies now having to work harder to secure funding from venture capital and private equity sources.
“The fact that Raft was able to do our series B (fundraising round) in this time period is a testament to the value that the organisation provides to its clients,” notes van der Walt. “For new companies now wanting to get capital, it’s a lot tougher; there’s a lot more scrutiny and the valuations are going to be at a lower multiple than in the past.

“So, you really have to prove you’ve got a strong business model, and that you can be profitable. And that you’ve got very strong scalable processes to be able to achieve the growth that they are banking on – not a 5% or 10% return in a year; they are looking to get 100%, 200%, 300% growth, so they can get the return on investment.”

Implementation best practice
Returning to the challenge of implementation, van der Walt says communication is the key thing. “It’s making sure (employees’) expectations are set (appropriately), and they really understand what the technology is, how it adds value, and how it works. If you can really educate people in advance, the implementation side becomes a lot easier. There’s a lot of responsibility internally in the companies that we sell to; it’s not just from our side.”
He adds: “What we have found to be really valuable is doing a collaborative change management process, working with our clients to ensure that their internal stakeholders are aware of what’s coming, what the value is to them in their day-to-day tasks. Because, ultimately, it’s the end user that’s going to get the value out of this, and that has to adopt and be engaged in using these technologies. You can have the greatest technology out there, but if nobody’s using it to its fullest extent, you’re not going to get the value that you’re banking on.”

Logistics tech outlook
Looking ahead to how the logistics tech environment is likely to play out in the next few years, van der Walt predicts that “within the next three to five years, AI is going to be mainstream – like having an iPhone. Everybody’s going to be using it in some form or other; they’re going to be comfortable with it, and it’s going to be a daily occurrence.”

Other changes he sees include the introduction of cargo drones able to carry ULDs; more robotics on the apron and in warehouses – where “we’re already seeing that shift” – plus further moves towards more-sustainable vehicles, including aircraft and on the maritime side, such as “hard sails, different fuel types, etc. Everybody is becoming aware that we have to be more sustainable, so that shift is definitely coming.”

Other technology-facilitated improvements, innovations and initiatives likely to reach critical momentum over the next two or three years will include further progress on visibility across supply chains, driven by the freight forwarding and logistics sector and their customers. Greater visibility of touchpoints and the use of predictive analytics will mean stakeholders can be “proactive versus reactive”, notes van der Walt – for example, leading to action to prevent delays, or rescheduling planned events, or reallocating resources if a consignment is to be rerouted or delayed.

And more generally, “the interconnectedness of everything is going to become more prevalent. When you bring together all the information, you’re going to have a really smart ecosystem, where you can manage things in a more sustainable and profitable manner. Is that easy? No, it’s not. And that’s one of the challenges, both for companies and clients: building the trust where we can be more collaborative, and we see more data sharing.”

Collaboration between and within organisations
Some progress is being made within air freight in collaborations between companies via initiatives such as cargo communities, while technology platforms like Raft also can pull together diverse sources of data within and between organisations. Van der Walt describes it as “a layer on top of TMSs and other systems, whereby we can bring in and collect all of these different views, so you’ve got a central platform that the clients can use. For example, if you’ve got a large forwarder, they’ve got an ocean division and an air division, and they normally don’t speak to each other; you start bringing these into one platform where you can tie the different elements together. So, you’ve got that visibility across your whole supply chain, and then using that to automate and bringing in reporting, that can give you visibility on trends; and then you can start managing proactively – for example, for multimodal shipments.”

And the impending sustainability reporting requirements will add to the requirement to pull together all these diverse sources of data.

“Exactly,” agrees van der Walt. “When you report on sustainability, especially from a logistics perspective, it’s across your whole logistics value chain – including the downstream and upstream logistics processes.”

And as new sustainability reporting regulations push environmental and emissions responsibilities from CSR departments to CFOs and CEOs – and companies’ increasingly important CTOs – the imperative to comply, and deploy the necessary technologies to do so, is set to gain irreversible momentum, van der Walt and others argue. And that momentum is expected to pick up significantly in Europe from later this year, he believes.

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