CASE STUDY

THE LOGISTICS
MARKETPLACE
Saloodo! digitalizes the
transport industry

Author:
Axel Uhl (ZHAW)
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SUMMARY
With the startup Saloodo!, Deutsche Post DHL Group has launched a digital
marketplace for transport orders. This creates a new, additional business
model for Deutsche Post DHL Group. Instead of carrying out many
transport orders itself and competing with low-cost providers in the
market, Saloodo! acts as an intermediary between shippers and carriers –
without having its own trucks or warehouses. In order to attract both
carriers and shippers to the marketplace, Saloodo! consistently uses digital
solutions that the carriers themselves could not afford. This not
only makes transport cheaper and more efficient, but also reduces the
environmental impact.

THE SECOND OLDEST TRADE IN THE

WORLD IS A BOOMING INDUSTRY
The transport industry is one of the oldest and most global industries and
few of us are aware of its importance. The transport industry is the force
behind globalization and has become a driver of employment in the world
economy.

Increasing globalization, leaner and more agile logistics processes, the rise
of e-commerce and just-in-time deliveries are some of the reasons why the
transport business is booming. More and more consumers expect the goods
they order today to be delivered on the same day – regardless of whether
they are shoes, electronics or furnishings.
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Another reason for the boom in the transport industry is the growing world
population. This is expected to increase to over 9 billion people by 2050
[1]. This means further growth in e-commerce, because the consumer-
oriented middle class is growing and even remote rural regions in
developing countries have access to the internet, order goods online, and
have them delivered.

The growth in the logistics industry means that hundreds of thousands of

often very small transport companies want to benefit from this boom.

This has not only positive effects:

•   The growth of the logistics industry leads to an overload of the transport

infrastructure. The consequences are massive traffic jams, accidents, and
high repair costs for the infrastructure.

•   The increase in the transport of goods also affects the health of the
population. Road transport causes more CO2 emissions per km than any
other mode of transport [1]. Road freight transport is even responsible for
about 17% of the total CO2 emissions worldwide[2] [3]. As if that wasn't
bad enough, 40% of people in the European Union suffer from traffic
noise (> 55 dB). [4]

[1] World Economic Forum (2016), Digital Transformation of Industries: Logistics

Industry, World Economic Forum White Paper, January 2016.

[2] European Environment Agency (2016), Transport in Europe: key facts

and trends, 06.12.2016, https://www.eea.europa.eu/signals/signals-2016/articles/transport-in-
europe-key-facts-trends.

[3] PBL Netherlands Environmental Assessment Agency (2016), Trends in

Global CO2 Emissions: 2016 Report, PBL publication number: 2315, The Hague, 2016.

[4] WHO (2017), Data and statistics, WHO Europe, http://www.euro.who.int/en/health-

topics/environmentand health/noise/data-and-statistics, retrieved 20.07.2017.
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•   All this is also due to market inefficiencies. About 21% of all transport
journeys in the EU are carried out [5] empty and about 30-50% of truck
loading capacity remains unused. [6]

•   The intense competition between the transport companies leads to

average annual sales of 400,000 euros. Therefore, many transport
companies are not economical and often save at the wrong end, such as e.g.
in the acquisition of low-emission trucks (HGVs).

These developments are at odds with the EU's sustainability objectives. The
EU has set itself challenging climate and energy targets as part of its 2020
strategy. The EU wants to achieve a 20 percent reduction in greenhouse
gases (compared to 1990 levels), 20 percent energy production from
renewable sources, and a 20 percent improvement in energy efficiency.[7]

In order to achieve the objectives, appropriate targets are set. The transport
industry must therefore focus on reducing traffic, CO2 emissions, and noise
in order to achieve the EU's sustainability goals.

However, the transport sector is a very heterogeneous and highly

fragmented market. It is mainly operated by small and medium-sized
enterprises (SMEs), 90% of which have fewer than 50 employees and fewer
than 10 trucks.[8]

[5] See Eurostat (2017), Freight transport statistics,

data extracted April 2017.

[6] See Tagesspiegel (2015), "A quarter of all trucks drive around
empty", Logistik, 28.10.2015,
http://www.tagesspiegel.de/wirtschaft/logistik-ein-viertel-aller-lkw-faehrt-leer-durch-
diegegend/12505110.html.

[7] EU Commission (2017), Europe 2020 Strategy,

https://ec.europa.eu/info/strategy/europeansemester/framework/europe-2020-strategy_en,
retrieved 20.07.2017.

[8] Ti (2016), European Road Freight Transport 2016, Transport

Intelligence Ltd: Bath (UK).
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Even the 10% largest transport companies together have only about 10%
market share. This makes it difficult to coordinate the market participants
and achieve the climate targets.

The greatest potential for optimization lies in improving the utilization of

transport capacities. Up to 20 % (equivalent to 2.6 million tonnes of carbon
dioxide) would be saved in this way. However, SMEs lack the necessary IT
support to improve transport capacity utilization. Many of the SMEs use no
or outdated IT systems and cannot communicate with each other
electronically.

Manual processes, the telephone, and fax machines determine the

communication between all participants. According to a study by Tech
Crunch, 67% of carriers today still rely exclusively on printed documents.
[9] This means that important data on transport capacities, transport
requirements, and transport demands between the parties to the
proceedings are not exchanged. As a result, transport capacities cannot be
used optimally.

Nevertheless, the industry is destined to change from offline to online. The

digitalization of processes, the exchange of real-time data, digital solutions
of start-ups, are creating new capabilities and replacing the analog business
processes.

[9] Techcrunch (2016), The present and future of trucking, our

country’s broken, inefficient economic backbone, Nov 2, 2016 by Jake Medwell
https://techcrunch.com/2016/11/02/the-present-and-future-of-trucking-ourcountrys-broken-
inefficient-economic-backbone/.
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HOW DIGITALIZATION IS CHANGING
THE TRANSPORTATION INDUSTRY
The transport business is still a very down-to-earth business –
usually not for graduates of elite universities or technology
freaks.

But that is changing and the opportunities offered by new

technologies are finding their way into the transport industry.

One of these technologies with high potential for change could

be 3D printing. The technology has existed for about 20 years
and was initially only used for the development of prototypes. In
the meantime, however, the technology has made great progress.
More and ever more complex products can be printed, meanwhile
even foodstuffs, whole houses, and car bodywork. This means
that goods can be produced where they are needed – and
transport is no longer necessary. The first companies are
beginning to switch their spare parts supply to 3D printing.
Amazon, as one of the largest online retailers in the world, now
wants to use 3D printing trucks to produce goods themselves and
then deliver them to the customer.

Even greater potential for change is attributed to the Internet of

Things (IoT). Machines are connected to the internet and can
send and receive information. This enables the exchange of
information between all actors involved in a supply chain
process. This results in improved planning, monitoring, and
control for the benefit of companies and customers. Information
is therefore becoming a decisive production factor in logistics.

Google, for example, is taking advantage of this with its

"connected wearable devices" and revolutionizing the way
logistics employees interact with their environment. Required
goods on the shelves are displayed, scanned, and automatically
booked using "Google glasses".
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Drones may also play a role in logistics in the future. Amazon
hopes that the use of "connected" drones will significantly
reduce delivery times in cities (PrimeAir). Rolls Royce is
developing "connected drone container ships" and Google the
"self-propelled and connected" car.

Cost and competitive pressures will continue to drive

digitalization. The value chain will change dramatically and the
importance of data-based services will continue to grow.

It is becoming increasingly clear that mobility and transport are

relatively easy targets of the digital economy. This will bring
established logistics companies into direct competition with the
tech giants. The many established logistics companies are almost
helpless in the face of them. In the "old" world, they knew their
competitors and their strengths and weaknesses and were able to
assess developments to a certain extent. But in the digital world,
the "new" top dogs now come from another world – that of high-
tech.

DIGITAL STARTUPS OR DIGITAL

TRANSFORMATION
The digital transformation therefore poses a major challenge for
the transport industry and many companies are wondering how
they are going to manage this.

In principle, the digital transformation must distinguish between

the development of a new digital organization (digital start-up)
and the digitalization of the existing analog organization.
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There are several advantages to setting up a digital startup. For
example, they are usually faster, more innovative, and less
expensive as far as the exploitation of digital opportunities is
concerned than traditional organizations. This is partly
because there is no need to deal with legacy systems and
structures. Just as important is that long-established habits
among the workforce do not need to be changed. Instead, it is
possible to recruit highly qualified and specialized employees,
establish flat organizational structures, and work in an agile
manner. Technically, you can rely on the latest technology –
often IT solutions from the cloud – and thus create efficient cost
structures.

On the other hand, digital start-ups often lack the necessary

industry know-how, partner organizations, and a sufficient
customer base at the beginning. As a result, they initially have
only a small source of income and have to invest a lot of
money in raising the company's profile.

DHL: WITH MACH 1 INTO THE

DIGITAL WORLD
These considerations also apply to DHL's freight business.
Originating from a multitude of takeovers and mergers, it is one
of DHL's problem children. The margin is far below the average
for the concern and the transformation program established
years ago is making only slow progress.

It is therefore high time for DHL to react. Under the name

Saloodo! the Bonn-based concern is building a digital
marketplace for logistics services. The goal of the start-up is to
attain market leadership in the freight business through an
innovative digital platform.
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The idea is as simple as it is good. With the help of a digital
marketplace they want to position themselves between logistics
service providers and customers. In doing so, three central
problems of the freight business are to be solved:

•   The logistics market is not transparent because there are so

many different market participants. Many shippers therefore wait
several hours and days before they receive offers from carriers.
In addition, there are huge price differences of up to 40 percent
between the cheapest and most expensive offers. Saloodo! wants
to create transparency through the digital marketplace.

•    The profit margin of the transporters is very low. Saloodo!

wants to ensure fair prices. And it also wants to speed up the
payment of the carriers. Today, they wait an average of 40-60
days for their payment – at Saloodo! it is only 14 days at most.

•     Inefficient logistics processes cause high administrative

costs. The reason for this is often insufficient IT support.
Saloodo! therefore wants to provide carriers with free IT
solutions that automate and digitalize many of the paper-based
business processes. And also the load capacity utilization is to be
improved through IT. Currently, 30-50 % of the loading capacity
of the trucks is not used. The aim is therefore to optimize
transport capacity utilization and reduce the burden on the
environment and infrastructure.

In summary, Saloodo! wants to improve the quality of logistics

services that reduce congestion in the transport infrastructure,
increase the profitability of logistics service providers, and
reduce environmental pollution.
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HOW IT ALL BEGAN
One of the first decisions you have to make when launching a
start-up is to fill the management positions.

DHL chose a top manager from its own ranks as CEO. The former
CEO of DHL Freight Business had experienced for years how
difficult it is for established organizations to deal with the
digital transformation. That is why it was particularly important
to him to develop a corporate culture that promotes innovation
right from the start.

For his "start up" he therefore defined some guidelines for the
work culture:

•   Speed, speed, and speed again. Founded in 2016, the

marketplace has been live since the beginning of 2017.
 
•   Error culture: If you want to be fast, you must be allowed to
make mistakes – because the biggest mistake would be not to
build the marketplace.

•   Customer centricity and an intuitive user guidance for the

users are the most important prerequisites for acceptance by
the marketplace.

So far, these principles have worked very well. Saloodo! has

created its own culture, which is much more reminiscent of the
"Googles" or "Facebooks" than a logistics company. In the
meantime, other DHL divisions are also interested in how
Saloodo! operates.
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THE IMPLEMENTATION
One of the biggest challenges in establishing a marketplace is to
find enough market participants on at least one side of the
marketplace so that the offer is also interesting for market
participants on the other side. By immediately submitting an
offer from DHL Freight for every transport request, the
marketplace has been "deliverable" from the very beginning.

In contrast to many other start-ups in Germany (only 3 out of 10),

a global approach is followed. Although they are starting in the
DACH countries (Germany, Austria, Switzerland), they want to
cover the market globally within a few years. This would be a
real problem for many other start-ups in Germany because the
financing situation in Germany is very difficult compared to the
USA. But there you can once again rely on the large parent
company Deutsche Post DHL Group. The know-how of the group
can also be relied on when it comes to building up the partner
network, for logistics know-how, or on legal issues.

Otherwise, the startup usually goes its own way. Customers and
logistics service providers are asked systematically about their
needs. They want less administration, fewer telephone calls, and
also less paper. In return, they expect a logistics platform to
deliver additional orders, speed, accuracy, transparency, end-to-
end processes with integrated payment, CRM and logistics
functions.
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DIGITAL SOLUTIONS FOR
TRANSPORTERS
The smaller logistics companies in particular are usually unable
to afford their own IT solutions. Saloodo! provides them with a
user-friendly IT platform. Therefore, neither shippers nor
transporters need their own IT know-how. The platform supports,
monitors, documents, and optimizes the entire processing of
shipments between the shipper and the carrier.

•   A driver app uses the GPS function to compare the current

position of the truck with the pick-up and arrival address
of the respective route and reminds the driver to confirm
important status messages during the journey.

•   In addition, the driver app has a scanner that allows

documents such as proof of delivery to be easily recorded and
transmitted via mobile phone camera. This speeds up the
payment process and allows shippers to track the complete
transport process.

•   The marketplace gives carriers access to a large number of

transport orders in all regions.

•   A dynamic price calculator supports the transporters in

making competitive offers and acquiring the required load
quantities.

•   Current studies show that a driver spends an average of 32

hours in traffic jams. Saloodo! therefore offers transporters
a dynamic route optimization, which offers drivers the possibility
to adapt their route to current conditions in real time, save
energy, and improve delivery punctuality.

•   The payment process can also be accelerated by the digital

capture of the transport documents and the transporters are
guaranteed to receive their money within 14 days.
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DIGITAL SOLUTIONS FOR SHIPPERS
The shippers, in turn, find reliable transport companies with
Saloodo! without lengthy price negotiations or costly price
comparisons.

•   As soon as the shipper has set his transport order, he receives
a price indication based on the current market situation. As soon
as the order is visible on the platform, the transport companies
can submit bids. The sender is completely free to choose the
best offer in terms of price and quality. However, Saloodo! acts
as the contractual partner. In the event of problems during
transport, Saloodo! will step in.

•   Shippers can use a personalized dashboard to obtain real-time

information on the shipment status of all their shipments,
thereby optimizing their supply chain. In case of delays, they are
automatically informed and can in turn inform their customers.

DIGITAL SOLUTIONS FOR A BETTER

ENVIRONMENT: GREEN LOGISTICS
The logistics industry today places a heavy burden on the
environment. That is why digital solutions that reduce
environmental pollution are very important. Saloodo! has a
clear vision on this topic: Make your customers more profitable
and environmentally friendly at the same time.
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To improve the strongly paper-based administration processes,
Saloodo! already offers an online document management system.
Documents such as proof of delivery, delivery orders, incoming
payments or invoices can be entered and edited online or via
smartphone. With an average of eight paper pages for each
transaction and approximately 300,000 transport transactions
processed in Germany alone, Saloodo! could help save up to 2.4
million sheets of paper.

Added to this are the CO2 savings through improved utilization

of loading capacities and fewer
empty runs.

Last but not least, more profitable transport companies can also
afford to invest in more environmentally friendly trucks.

FROM TRADITIONAL TO DIGITAL

BUSINESS MODEL
The business model of Saloodo! foresees that the shipper pays a
handling fee for arranging the order. Registration, on the other
hand, is free of charge and transport companies do not pay any
fee at all. The more shippers and carriers use the platform, the
more profitable the platform becomes.
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Figure 1: Changes in business models in logistics

The new business model thus differs significantly from that of a

traditional carrier.

•   In a classic logistics company, the entire value-added chain is

covered, from the acceptance of the order to delivery and
invoicing itself. Classic logistics companies see their core
competencies in managing warehouses, distribution centers,
truck fleets, and transport in the best possible way. Saloodo!, on
the other hand, sees its core competence in the coordination of
processes with the aim of providing the best possible service
for both shippers and transporters.

•   Traditional transport companies have to make large

investments in their infrastructure and/or vehicles, are poorly
scalable, and have low profit margins. The Saloodo! business
model does not require own vans or department stores. But
because it acts as an intermediary for transport orders and works
with a large number of transporters, it is very scalable. At the
same time, Saloodo! becomes more profitable with each
additional transport order.
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•   In traditional logistics companies, employees are very much
involved in administration – there is neither time nor money for
innovations. At Saloodo!, on the other hand, the employees focus
on the permanent improvement and innovative development of
the platform.

•   In traditional logistics companies, employees have to work

with mostly outdated IT systems and inconsistent data, while
Saloodo! uses the latest technologies and user-friendly
interfaces.

•   The processes used by traditional logistics companies are

heterogeneous, paper-based, inefficient, and not very
environmentally friendly. In contrast, Saloodo! processes are
consistent, digital, and environmentally friendly.

•   Data does not play a major role in traditional logistics

companies. This is different at Saloodo!, where data is
seen as a resource that serves to create customer value.
 
•   Traditional logistics companies compete with each other
mostly on price. Saloodo! on the other hand, sees logistics
companies as partners and customers and wants to contribute to
fair pricing.

Figure 2: The End2End process of Saloodo!

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INTERMEDIARIES IN THE LOGISTICS
MARKET: SALOODO! IS NOT THE
FIRST AND NOT THE LAST
LOGISTICS MARKETPLACE
The idea for a marketplace for logistics services is not entirely
new. A whole range of marketplaces are already gathered on the
Internet of Things, such as Cargonexx, Instafreight, Pamyra,
Freightex, and UShip. Even though many logistics professionals
are not yet familiar with these newcomers, the logistics market
is constantly changing and more logistics marketplaces will be
added. The publicly known financing rounds of logistics start-ups
over the last ten years total almost eleven billion euros. On
average, a new logistics start-up is founded every five days. What
they all have in common is that they want to use a marketplace
to bring together supply and demand for transport services via
an online portal.

Now, quite different competitors are also pushing into the highly
competitive logistics market. Truck manufacturers see an
opportunity to expand their business model. VW has founded a
new brand. RIO stands for digital solutions in transport and
logistics. The goal is to network all participants of a supply chain
from the shipper, the forwarding agent, the shipper, the
scheduler, and the driver, up to the recipient via a uniform
information system. By combining information about the towing
vehicle, trailer, superstructure, driver, order, and goods, the
transport and handling process should be significantly improved.
Among other things, the solution stores data on energy
consumption or downtimes and rest periods, informs the driver
e.g. about new transport orders (Driver`s Connectivity), helps to
optimize the utilization of the vehicle by informing the driver
about possible partial loads on his route (Loadfox) or shows the
driver free parking spaces on his route (digital parking space
management).
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In the medium term, the aim is to monitor and optimize the
entire logistics value chain from the supplier, purchasing,
producers, warehouse management, picking, distribution,
logistics, and retail to the customer in real time.

The logistics experts see further potential for optimization,

particularly in the case of transports for the chemical and food
industries. While container transport already works very well,
there are even greater inefficiencies in logistics planning for
special transport containers.

The cloud-based solution is to be offered via a standard interface

(FMS), independent of the vehicle brand, primarily to small and
medium-sized fleet owners for vehicle and load management.

SUMMARY AND OUTLOOK: THE

WINNER TAKES IT ALL
The logistics sector is being transformed by digitalization like
hardly any other market. The reason for this is the many
inefficiencies that have emerged as a result of the large number
of players along the value chain and the non-continuous
exchange of information. Start-ups, logistics companies, and
automobile manufacturers are trying to exploit this situation and
conquer the market with digital solutions and business models.
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This will not be worthwhile for all start-ups, marketplaces, and
logistics system providers. Only a few will have enough suppliers
and demanders of transport services as customers to be
profitable. Mostly oligopoly-like structures with few large
marketplaces will establish themselves, because customers do
not want to work with different systems. They will be guided by
where they find the highest benefit at reasonable cost – and the
benefit is usually highest where they receive the most and best
offers.

Will the transporters benefit from the changes? That depends on

the individual case. If they succeed in making better use of their
transporters, optimizing routes, reducing their administrative
costs, increasing their delivery reliability or simply demanding
the right price at the right time, it may well pay off.

KEY LEARNINGS:
•   Digital solutions in logistics create added value for shippers
and transporters

•   The consistent alignment of technical solutions to user

requirements is a basic prerequisite for success

•   By eliminating major inefficiencies in transport, an important

contribution can be made to reducing pollutant emissions

•   New competitors for the logistics companies come from the

commercial vehicle industry, who want to optimize the value
chain of companies through digital solutions