4PL Digital Business Models in Sea Freight Logistics: The Case of FreightHub
Read this case study of a 4PL model.
Introduction
Logistics provides a necessary support for much of
the current economic system. In Germany, the transportation and storage
of goods directly contributes about 7% of the gross domestic product
(GDP), and employs about 2.5 million people. Globally, this sector has
been growing faster than total GDP, as trade has expanded substantially;
supply chains have become longer; and globalization has increased.
Logistics activities have evolved substantially in recent decades, which
has also led to a highly competitive market. Accordingly, there is
pressure to continuously improve the quality of logistics services and
to offer them at lower prices. To relieve cost pressure, freight
forwarders have attempted to break the transport process into multiple
steps and to optimize each of these steps separately, which makes
coordination and integrated cooperation between the parties involved
more difficult. As a result, there is often no central contact with a
complete overview of the entire transport chain. Such separated
operations and shared responsibilities promote "silo thinking" in the
logistics industry. To address such issues, new digital business models
have increasingly emerged, challenging traditional, third-party
logistics (3PL) business models. Particularly, platform-based
business models, such as Uber Freight, enable transparent,
real-time, on-demand arrangements that cut into the domain of 3PL
services. In this line, Hofmann and Osterwalder predict that 3PL
service providers focusing on standard services may lose significant
market shares in the near future. Similarly, Schramm et al. see a
clear trend away from simply organizing transportation and logistics
activities towards the providing of information technology (IT)
platforms and other value-adding services, such as planning, analytics,
and monitoring. Consequently, fourth-party logistics (4PL) business
models are coming to the fore. These 4PL providers are seen as almost
asset-free integrators between their clients and 3PLs to manage global
supply chains. While 4PL concepts and business model innovation
facilitated by digital technologies have been often addressed in extant
literature, special emphasis on sea freight services and maritime
transportation is rather scant. Thus, the analysis of a case study,
which successfully implemented a digital 4PL business model, promises
further insights into the digital transformation of sea freight
services. Against this background, the main objective of the present
study is to assess and compare traditional 3PL business models with
disruptive 4PL business models to better understand how the automation
of informational processes, such as freight brokering, might affect
future operations in maritime transportation. Accordingly, the following
research questions (RQs) guided this study.
RQ1: What are the fundamental differences between FreightHub's business model and a traditional 3PL business model?
RQ2:
What opportunities and risks does the disruptive potential of
digitalization have for sea freight services and maritime
transportation?
To answer these research questions, the authors
applied a qualitative and conceptual approach of abductive reasoning, structuring the present study in the following way. Section 2.1
presents an overview on classifying services in the logistics sector,
with a special emphasis on 3PL/4PL literature. Further, we analyze
conceptual and empirical literature on digital business models to give
an overview on the potential impact of digitalization and digital
technologies on the logistics sector in general (Section 2.2), and on
maritime freight transport in particular (Section 2.3). This literature
review in Section 2 is followed by the case study of FreightHub in
Section 3, highlighting the innovation potential of digitization within
4PL business models. Analyzing the FreightHub case, new constructs and
business model elements are inductively explored, while constant
comparisons with extant literature are pursued in a deductive manner. As
a result, Section 4 links the existing, conceptual constructs of
business model value dimensions with those empirically explored to
elaborate on the effects of automating informational processes in
maritime transportation, also discussing the results within a larger
body of literature. Lastly, Section 5 draws conclusions from the
findings, also showing the limitations of this study and potential
future research avenues. This project accordingly contributes to theory,
by refining business model research in the maritime transportation
context, and to practice, by giving managerial implications about the
opportunities and threats of a digital transition in this industry.