Dip your feet into digitalisation

Alex Labonne, CTO at Hermes, spoke with CargoForwarder Global earlier in the year to discuss digital transformations.

With COVID-19 leading to the postponement of the World Cargo Symposium in Istanbul, Turkey to 09-11MAR21, CFG went online to talk to Alex Labonne (AL) from Hermes Logistics Technologies, regarding original plans for the WCS 2020, the Hermes digital product, and the business impact of the current corona crisis.

CFG: What was the message that Hermes wanted to present at the WCS 2020?

AL: Digital transformation! In the cargo industry, technology is currently lagging behind, for good reasons, but I think there’s a large portion of the cargo industry that truly misunderstands what digital really means. When I see some of the focus put on protocols like XML, it shocks me. XML is very old, and to me the message is wrong. It is based on protocol and those technologies are almost irrelevant. It is our thinking about data, about what we exchange, which needs to evolve. We now have real life cases of customers using our NG Business Intelligence platform, which is interestingly not based on data itself, but based on events. Realistically, if you want to make a system digital, base it on events: ‘What happened?’ That is then the payload that goes with it – the data that pertains to the event. And this is very easy to share! You can share one event, you can share ten events, twelve. It has nothing to do with data-sharing, or the cargo-thinking ‘will I have to poke holes in my big database that does everything and give access to everyone?’ that currently prevents an advance. At Hermes, we created a digital platform that extracts everything that is changing and tries to give some context and meaning to it. So if you are a new CFO in cargo, and you don’t know cargo and the jargon that goes with it, what you see are comprehendible events: your cargo has arrived, the cargo was broken down, the cargo was built up. This is meaningful and something you can do business with. The old system just saying that something is wrong in the database, was absolutely no good to anyone, but now this is not that case. We have a digital platform with events and context, and I would have shown and explained this at the WCS.

CFG: So, clear steps and transparent processes along the chain. Privately, even in these corona times, I recently had a parcel delivered to me in Austria within two days from Hong Kong and could track and understand every single step that it did from when it left the warehouse in Hong Kong. So, that is similar to what we are looking at in Hermes’ cargo system?

AL: Exactly! It is the same as when you use Uber. Your app is for you. You don’t have a button where you have to log in as an administrator. Your app is all event-based. You request a taxi, so you put that event out, it goes into the fray and then something else picks it up and deals with it, and some notification gets sent back saying ‘we found a car’, and you go. That is exactly the idea: The system is looking at what is happening. Cargo is a supply chain system and is perfect for this. We have some customers that are  already using our NG BI, which actually creates a whole lot of apps by-products like track and trace, for example, and we would have been talking about this with potential and existing customers at the WCS, with more examples.
Also, we had an event planned in June for our customers in the UK – unfortunately this is on hold now due to corona. I worked in the past with many professors from universities like ITU in Copenhagen, and the idea is that we put scientists on the data and start to look beyond analytics to predictive analytics, and then prescriptive analytics – showing cargo handlers how they need to behave to hit the mark at a certain point. We would have shown this in June. This exercise is still going on. We have a lot of beautiful events piled up in massive data lakes, and we have a post-PHD scientist who is going to start looking at this together with our customers’ wishes, to see what mathematics can do for us.

CFG: Excellent. You have been talking about the NG BI platform which started off in Chile, correct?

AL: Yes, it started off with one of our clients in South America (UASL of Ultramar Group), because they were receptive to the idea and had the old questions like ‘I want a report that shows me this’. The idea of the NG platform is to pile all these events somewhere, and to allow the customers to draw what they need.  You know what reporting is like usually – long-winded and then, by the time the report suits the question, it is out-dated and difficult to understand. We wanted to offer something that is quick to deliver, easy to navigate, and meaningful. We provide you with the cargo IQ, the standard stuff, but anything non-standard, you don’t have to wait for anybody – you can hire a third-party to do the job if you want to. our South American customer has been using the platform for quite a few months, and now we have network and larger customers, for example one in Australia, testing the technology on productino events and getting ready to fully go live soon.

CFG: You said in a previous interview that when you joined Hermes, three years ago now, you saw lots of low hanging fruit in the cargo industry. You mentioned your shock at XML already, what other low hanging fruit were there that you saw?

AL: Again, how cargo deals with what happens from when they get the freight in, when they get the booking, when the flight leaves. Things are sometimes cumbersome and hard to analyse. So, in the BI space for example, there are so many easy ways to actually react to dwell times, damaged cargo, etc, and today it is still a problem for cargo handlers to get at data, to actually justify to their customers and freight forwarders why something costs more, why, how and by whom cargo was damaged. These things are very well managed in other industries already, so it looked to me like quite a divide, and as shown by how our customers receive the NG BI platform, I did not have to battle long to convince them. The battle, when it comes, is on the commercials and the costs, but again, it is very easy to justify e-checking facilities when you currently have a large amount of manpower doing this job, who could be put to better use within the company. A reduction in manual costs in this area – though that is a sensitive topic, of course – and the heavy use of paper, are two low-hanging fruit. IATA is doing much in this area with One-record, but I often struggle with worldwide imposed protocols. It is better to let IT providers like us do the legwork and rely on IT integration rather than imposing protocols.

CFG: You said, “let IT providers do the legwork”. Do you find it an issue when you talk to large companies who have their own IT departments that struggle to find staff, need to ensure that they are on the front end of developments, and think future-oriented, yet are tied down by their legacy systems, and thus their decision makers are also restricted by this focus?

AL: Yes, there is a reluctance to go outside, because companies fear that data security is not given. As an IT architect, I advise that companies segregate their concerns, and push them out to people who are experts in the IT field, so that the company itself only need deal with the contractual side of things. People say, ‘My data is going to go there. I’m not going to control it!’ Yet, especially the security aspect is better off in the hands of IT experts.

CFG: Yes, I saw your answer to that in a recent interview, where you pointed out that, for example, Microsoft has hundreds of security experts on their system, yet companies with own systems often do not realise they have been hacked until something goes wrong. Understandable.

Regarding IT experts, there are a great many start-ups popping up now, focusing on individual solutions to various cargo problems. At the recent Cargo Facts EMEA conference in FEB20, 5 of them who had been through the IAG Hangar 51 hackathon, presented solutions on data analytics, cargo dimension measuring and label reading, for example. Does Hermes work with start-ups, too? Since you talk about IT ecosystems which, as I understand it, are basically lots of little apps and everything all working together in one overall umbrella. So, does Hermes do everything in-house or do you also work with them?

AL: Absolutely! We do work with them. I know a number of these start-ups and some who attended that hackathon, and, as you said, we look for ancillary capabilities that could be integrated into our platform, so we do keep an eye on them, and will maybe considering acquiring some of them, or partnering in future. Currently, given the corona crisis, we are focussing on underpinning our own community platform and its integration possibilities – for example, we are talking to BRUCloud at the moment – but once this corona crisis is over, we will resume looking at some possible acquisitions we started talking to before.
Start-ups have a hard job. Digitally they are advanced and do not have the baggage that large IT providers like us have, but what they lack is the customer-base. Cargo handling systems are very “sticky”, since any move to new IT is a huge, costly and many times painful projects. So, on the one hand, large companies with large functionally rich systems like Hermes, will need to break down their massive handling system to more modular applications to evolve at the right pace, and start-ups can benefit from acquisitions or partnerships with us to better access customers through joint ecosystems.
We would have liked to use the WCS to meet up with potential partners in terms of ecosystems – two of them would have been attending – as well as talk to our competitors in regards to aligned technology thinking and consulting, so that our competition terrain becomes a competition of excellence rather than simply competition on the basics.

CFG: Plan 2020. You mention in one of your recent blogs, that you want to move to artificial intelligence, focus on e-commerce and being able to handle loose packages and mail, other than standard cargo, and that you want to work on slot management systems. Now that we have corona at the moment, two questions: 1) Is that plan still going ahead and what is Hermes going to come out with this year? And 2) Because of corona and because you also deal with Chinese customers such as PACTL, do you see a financial impact already?

AL: Yes, we are already preparing our customers. In terms of sales orders for the new generation system and new technologies, although we had no cancellations of any kind, we have made plans so we are ready in case orders will not be near what we expected. As we see that more and more companies reporting going through consolidation, we had to take some preparatory actions ourselves such as revise all our plan of hiring staff for our teams. In this time we put the emphasis on safety while ensuring our service level will not decrease which lead us to move all our staff to work seamlessly from home and be able to support our global customer base, something that kept our IT team quite busy. That said, like all businesses right now, we are looking at option one to ten to temporarily hold back on spending and how best to support our customers. It is pretty tough for our customers right now, so we know that we’re probably going to have to make some adjustments because our customers will. We have taken the foot off the pedal a bit for innovation, but then again, we’re looking at partners, for things like slot booking for example. There are some excellent community systems out there and we will still be looking into integration rather than doing it on our own which is not viable in the current climate.
In terms of innovation, we are in a good flow still, and based on our agile development, we have the ability to accelerate or slow down, so whatever our NG customers want to do this year, we will do. Just some of our other plans will be slowed down a bit. Our digital roadmap is secure because we already have done the groundwork and have the resources.

CFG: At the ACHL, you had a talk called “How to Make Your Own crystal ball.” What was the main message from there?

AL: It was all about monetizing data! We generate time-based, event-based, classification-based data, which is excellent for machine learning and better forecasting, even going all the way to dynamic pricing, something which is particularly highly profitable for businesses. It was all about alerting cargo handlers to the fact that they are sitting on a data goldmine. If they don’t go digging, and don’t pay for diggers, if they keep their coffers locked, nothing’s going to happen. I just wanted to show them the possibilities in the simplest way really, of profiting from predictive analysis.
The by-products of this business intelligence are awesome! Once you know what’s going on when it’s happening and why it happened, then you can start creating all sorts of apps or let start-ups loose on the event. And we develop everything in the cloud, which is both secure plus it allows you to connect with other partners in the cloud, resulting in some excellent business possibilities.

CFG: What is a final message you would like to send out to CFG readers?

AL: What is new about the digital platforms out there? The entry costs! Compared to the big, incumbent handling systems where the entry costs are heavy, what we focus on in the digital world at Hermes, are minimum entry costs. And also, the ability to “dip your foot in” which is what we tell our customers for NG BI, for example. We don’t install it and say, “There, you got it!” since every handler has different processes, different events, is a different size and so on. We tell them to go for six months, play with it! Usually, after the six months, the customers have ideas of what they want next. During the six months, if they have issues with working with what they are looking at, this prompts us to train, develop and evolve, too.
The entry costs are really minimal, and the beauty of it is that after six months they can decide to keep it or remove it. So, cargo handlers should dip their feet into the digital world. It doesn’t cost that much. The infrastructure costs are pay as you go – so if you don’t use is, you don’t pay it – and the potential efficiencies are enormous.

CFG: Thank you, Alex Labonne