A featured contribution from Leadership Perspectives: a curated forum reserved for leaders nominated by our subscribers and vetted by the Construction Tech Review Advisory Board.
Gogoro
Technology: A Game-Changer for the Fleet Management Industry
Kaushik Burman
Globally, the mobility and transportation sector has witnessed tectonic change over the last five years. As a result, sweeping changes continue to embark in the fleet management business—technology has emerged to be a great leveler creating opportunities to disrupt and innovate at a rapid pace.
• Fleet management in traditional format was fragmented, leaving value on the table for both the supplier and customer. Technology adoption driven by artificial intelligence continues to:
a) develop distinct service differentiation,
b) empower procurement teams with tools to monitor asset integrity and utilization management, hence, operational excellence
c) transparency in the decision-making process
• Technology has broken down the traditional silos of the fleet management industry. Today, there are new models and platforms evolving at the confluence of fintech, mobility, logistics, and AI. The integrated play will enable higher velocity of transactions on the platform; embed long term customer loyalty leading to a 10-15 times more customer lifetime value for a fleet management company.
2. What according to you are some of the challenges plaguing Fleet Management today and how can they be effectively mitigated?
Intense competitive activity and overcapacity buildup in the traditional fleet management business has led to the commoditization of services, with pricing as the only differentiator in offers. This has led to margin and value erosion for the industry players. In the new world, customers demand value stack pricing models, modular pricing as opposed to opaque pricing models in the legacy fleet and freight management business.
Taking cue from price optimization platforms in the airlines industry, there are freight marketplaces which are operated by meta-search algorithms, which scan the customer demand-freight cargo supply envelopes combined from offline and diverse marketplaces and are able to provide the best pricing offer to the customer. Further, some of these platforms are developing predictive pricing range to customers enabled by machine learning, factoring in seasonality, latent capacity, over short-haul and long-haul routes.
Digital marketplaces have disrupted the logistics industry by their scalability potential, where the marginal costs of customer acquisitions is minimal, whilst customer lifetime value is in higher multiples.
3. Which are a few technological trends influencing Fleet Management today? What are some of the best practices businesses should adopt today to steer ahead of competitors?
In the near future, technology adoption and commercialization in a few key areas would be a game-changer for the industry. They will help boost operational and profitability ratios.
• Digital marketplaces backed by AI continue to punch above their weight in improving capacity utilization of fleets, innovative pricing models which maximize customer willingness to pay, and develop new revenue lines for the supplier
• Autonomous vehicles powered by electric power-train will usher in a new paradigm of mobility with second order and third order effects on productivity standards, and the entire ecosystem which includes employers, employees, drivers, and policymakers
• Connected vehicles and industrial assets, as distributed nodes of the lattice, will have a significant impact on asset performance management, create ‘data transportation’ highways with a long-lasting positive impact on industrial productivity. Higher benchmarks of safety and operational excellence will be created, leading to lower loss of lives, lower downtimes and higher profitability margins
• Adoption of distributed ledger (permissioned ledger) either on blockchain or otherwise by fleet management firms, customers and their downstream ecosystem partners will unlock immense value. The use case of permissioned ledger brings the benefits of trust protocol, where customers, suppliers and financiers will be able to exchange data, through smart contracts, and close transactions seamlessly, with lowest transaction costs. For example, Marco Polo blockchain is one of the largest trade finance initiative on Corda platform
• Technology adoption will have an impact on organizational productivity, including human capital. It could potentially create a schism between technology adopters and laggards. Hence, collaborative networks are critical between industry, technology providers, and governments
• Integration of digital logistics platform with innovative fintech models will add momentum to the revenue flywheel—expand the base of merchants and acceptance, which will lead to higher velocity of transactions on the platform. Fintech integration has the potential to double down on customer loyalty programs.
Digitalization has created logistics 2.0, with new value pools for the customer and the service provider and has reduced inefficiencies in the value chain
4. Do you have any suggestions for our reader segment which comprises of industry veterans and young entrepreneurs from the Fleet Management space?
There are many frameworks and innovative models in the fleet management space, but in particular, I am inspired by a couple of them which I’d like to share.
First, is to embrace an ‘Amazonian’ model of customer obsession, even if it takes a slightly longer runway to profitability. A good starting point would be to observe the customer’s buying and decision-making process and dovetail the design thinking principles to map out the end-to-end customer experience journey. Stay focused on the friction points experienced by the customer and look at applying different technology solutions to help customer expand their profitability—this intent with rigor in execution will ensure customer loyalty. Second, the ‘flywheel effect’ from Jim Collins is an excellent tool to reflect on the core flywheel of one’s business model. And to continue reflecting on the gears of the flywheel which add momentum to the flywheel. Digital platforms are good examples of how innovative and creative thinking continue to add gears to the core flywheel, thereby generating higher momentum effect.
