BUS606: Operations and Supply Chain Management

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.