Insight: Digital Transformation in Logistics for Major Shippers

Why are major shippers across industries increasingly investing in the logistics sector as part of their digital transformation efforts?

01   Over the past two years, why have various large shippers… Are digital reforms ramping up efforts in the logistics sector?

There are four main reasons for stimulating enterprises’ endogenous motivation:

• In terms of policy, The Central Economic Work Conference held at the end of 2023 and this year’s Government Work Report both underscored the need to reduce logistics costs across the entire economy. However, in the bulk‑goods sector—where transport distances are long, payloads are heavy, modes of transport are diverse, and market participants are numerous—the overarching issues of “high costs and low efficiency” remain particularly pronounced.
• Economically, we believe that Since 2021, market competition has grown increasingly fierce. Price transparency for bulk commodities has risen steadily, while revenue and gross margin margins have reached their peak; at the same time, Freight costs account for a significant share; for some large‑volume enterprises in sectors such as petrochemicals and steel, freight expenses represent a substantial portion of the selling price. “1/5 – 1/3,” compelling shippers to undertake digital transformation in the logistics sector, with the aim of reducing costs and improving efficiency.
• In terms of management, vehicle turnover efficiency is low. In the fast-moving consumer goods industry, the average monthly mileage per vehicle is… Around 30,000 kilometers, but Only the bulk commodity industry 9,000–10,000 kilometers, of which performance mileage (the effective distance traveled under load, from the loading point to the unloading point) accounts for only one-third; the remaining two-thirds of mileage is wasted on “pre‑load routing and empty return trips.” The average time at both ends of loading and unloading is 5–6 hours, with slow turnaround, a lack of continuous task management, and extremely low vehicle utilization efficiency.
• Technologically, continuous advancements enable users to more easily monitor the entire upstream and downstream value chain extending from their own operations, thereby building end-to-end process‑driven capabilities to reduce costs and boost efficiency across the full value chain.

02  In the process of digital transformation, What are the core issues and bottlenecks that have surfaced first?

• Significant business barriers and severe data silos: The bulk logistics industry features a long value chain, high systemic and organizational barriers, and severe data silos, making it difficult to achieve integrated business functions. To address this challenge, many shippers opt to procure standardized products. TMS systems, whether off-the-shelf or custom-built, often lead to two major drawbacks: standard‑off‑the‑shelf TMS platforms suffer from severe structural rigidity and a relatively closed architecture, making it difficult to keep pace with the ever‑growing demands of diverse business processes and user roles, and thus only able to support an enterprise’s 3–5‑year development cycle. Meanwhile, in‑house development and iterative upgrades are costly, and optimizing workflows by addressing only isolated functions—such as capacity management, warehouse operations, and transportation logistics—leaves little room for further scalability.
• Multi-ecosystem collaboration constrains digital transformation: Large cargo‑owning enterprises often comprise multiple ecosystems: within the group, there are manufacturing‑oriented industrial companies that generate profits; from a corporate perspective, there is a digital information department, a logistics management center or supply chain operations department responsible for setting standards and building systems; and, in addition, logistics companies with a certain scale of transport operations. These three entities differ in their perspectives and… Differing KPIs lead to coordination challenges.
  • In the past, during the phase of scale expansion, the Group, its industry subsidiaries, and its logistics arm shared aligned interests, and their business collaboration was harmonious.

• • Today, growth momentum is slowing, corporate profitability is weakening, and the group’s digital transformation urgently requires identifying pathways to cut costs and boost efficiency while unlocking a second growth curve. As a result, logistics companies—previously burdened by high costs incurred to maintain supply‑chain resilience—have emerged as a key leverage point. However, at this juncture, these logistics firms still lack the foundational capabilities in terms of positioning, mindset, and operational expertise needed for rapid transformation.
• The ideal state of internal multi-ecosystem collaboration:
  • Logistics Management Center: Standardize business processes, governance rules, and data capabilities; establish a unified capacity pool to aggregate order data and enhance overall operational efficiency.
  • Logistics Company: Establish a logistics organization and operating model driven by business planning, define logistics service offerings, procure transportation capacity with precision, and deliver more cost‑effective logistics services.
  • Industrial Company: Enhance the effectiveness of logistics planning and establish a digital carrier management and evaluation system, ultimately reducing the Group’s overall logistics costs and improving external customer service experience.

03  For logistics companies, What is his difficulty right now?

For logistics companies, the group and industry-specific subsidiaries require… Logistics companies must possess the capabilities of professional service providers: they must not only meet the supply‑chain requirements of the group’s core business, but also maintain strong market competitiveness—enabling them to sustain operations and generate profits through external orders. However, based on the following three points, we find that the transformation of logistics companies remains quite challenging:

• Positioning adjustments and a mismatch between expectations and capabilities: Logistics companies are unable to swiftly transition from a mere supply‑guarantee role to that of a market‑competitive service provider—capable of competing on both freight rates and service quality—and thereby achieve market‑oriented operations, effectively evolving from corporate logistics providers into full-fledged logistics enterprises.
• Fine-grained operations are challenging: To achieve profitability, logistics companies must abandon their previous operating model of excess capacity, adopt a data-driven, agile logistics operating framework, leverage automated scenario-based scheduling to boost dispatch efficiency, and establish digital connections with industry partners to enhance collaborative productivity.
• Limited internal resources: Achieving positioning adjustments and refined operations fundamentally amounts to a transformation of the logistics sector. However, current resources and driving forces are insufficient to enable logistics companies to evolve from standalone logistics‑operation organizations into digitally driven, end‑to‑end operating entities. They lack integrated hardware‑software capabilities, end‑to‑end design expertise, and the ability to connect with broader ecosystem resources, necessitating external support to unlock greater efficiency and empowerment.

04  When logistics companies serve as the linchpin of transformation, What are the essential attitudes and capabilities?

• The stance of a logistics digitalization service provider: Driven by digitalization, it can meet industrial companies’ core product supply‑chain and transportation needs in a low‑cost, highly efficient manner while remaining fully competitive in the market.
• The core possesses three capabilities:
  • Internal–external and upstream–downstream collaboration: Leveraging an integrated platform to address data silos and data gaps, enhance coordination across roles and processes, and leverage digital capabilities to meet the needs of both internal and external stakeholders as well as upstream and downstream partners.
  • Digitalization for Enhanced Efficiency: By procuring and allocating transport capacity in line with business plans, we can accelerate order response times and improve operational efficiency. While meeting the needs of our core business, we can also take on external orders, ensuring market competitiveness.
  • Differentiated competitiveness drives growth: By leveraging capabilities such as shipment‑order visualization, productized logistics services, and new‑energy operations, we can deliver distinctive, value‑added logistics solutions to both industrial clients and external customers, securing a competitive edge while empowering a broader base of companies and clients with upstream and downstream expertise.

05  Drive cost reduction and efficiency gains across the entire group, What is the next key step for the logistics company?

Expert advice: Possessing the three capabilities mentioned above is a long-term strategic initiative that requires… A 2–3-year cycle, with sustained investment and long-term development. We believe cost reduction and efficiency gains can be achieved through three phases:

• Step 1: Three Determinations
  • Define the logistics strategy: Clarify the group’s logistics strategy and design the solution framework in alignment with that strategy.
  • Define the logistics entity: Clearly identify the logistics entity, which should transform logistics operations into a new growth driver for the group.
  • Establish logistics standards: Only by integrating and standardizing logistics processes on a single platform can the Group enhance operational and collaborative efficiency.
• Step 2: Sanjian
  • Building an integrated capability that spans from direct procurement of transport capacity to end-to-end capacity management: covering everything from eligibility screening and tendering to outsourcing, performance evaluation, and ultimately, the creation of a comprehensive transport‑capacity profile—this is an integrated platform centered on transport capacity.
  • Building integrated end-to-end capabilities, from order fulfillment to multimodal transportation: segmenting and breaking down incoming orders into the smallest operational units, efficiently assigning tasks to various carriers; and leveraging large-scale orders to optimize service‑capacity matching.
  • Building integrated capabilities spanning contract reconciliation to operational planning: breaking down, executing, and reconciling logistics enterprises’ operational plans—including shipment volumes and revenue—while providing clear visibility into profit margins and enabling performance measurement from a corporate management perspective.
• Step 3: Three Lifts
  • Refine logistics offerings: By defining highly specialized logistics service products, enhance the customer experience.
  • Elevating the ecosystem: Accumulating high-quality transport capacity, integrating after‑sales resources such as insurance and finance, and delivering comprehensive after‑sales services to build a leading digital transportation‑capacity ecosystem.
  • Enhancing Intelligence: By leveraging data intelligence, we strengthen connectivity and aggregate business value across multiple products and platforms—such as risk mapping—ultimately elevating the overall level of intelligence.