Forces Shaping the Diffusion of Information and Communication Technologies in Freight Transportation

Forces Shaping the Diffusion of Information and Communication Technologies in Transportation

Three forces among others shape the diffusion and application of ICT over freight transport systems:

  • Path dependency. Transport systems are the outcome of substantial capital accumulation in assets that takes place over decades, which shapes operations and additional investments. There are sunk costs within transport systems that future innovation cannot effectively bypass. Infrastructures have been built, modes selected and specific locations have been reinforced. Thus, as the level of asset accumulation increases, sunk costs incite a path dependency where innovation, or at least available options, are increasingly limited. More than any other transport technology in history, containerization has geared global freight distribution in a path dependency that undermines future paradigm shifts towards new forms of distribution, but which is still significantly prone to incremental improvements.
  • Asymmetry. Different actors have different level of access to information, which results in unequal power relations. A common pattern is that large transport firms have more information and the capacity to use it than small firms, for the simple reason that they operate a larger network and are thus able to better understand and shape the systems they are operating in. Asymmetry is also a competitive advantage as firms will not reveal comprehensive information about their general costs and operational characteristics (e.g. capacity, scheduling) to their customers and competitors. Competitiveness tends to alleviate asymmetry since competing firms will reveal more information about their services to capture and retain customers. Still, firms are reluctant to reveal their market intelligence and operational knowledge, which are essentially their business model. This is particularly the case for their deficiencies (such as spare capacity) which would enable customers and competitors to gain a temporary advantage. While there is always a price discovery mechanism at play influenced by market forces, several transportation systems operate in an oligopolistic environment, particularly the international segment, so a level of obfuscation is implicitly part of business strategies. Even with ICT, asymmetry is likely to endure in global freight transport systems as it enables a better level of information control within firms.
  • Internalization. Concerns an ICT strategy established by a firm to help take control of its management and decision making processes. Information within the firm can thus be more efficiently collected, organized and used. Thus, internalization appears to be a prevalent strategy of ICT development which operates within the boundaries of the firm, but several channels / conduits can be established with partners and customers to ensure proper interactions. This can reinforce asymmetry as the more internalized and ICT system is, the less likely the involved firm will share the information and the associated business practices. An example of internalization would be between a maritime shipping company and a terminal operator that would share information, particularly if they are parent companies. However, the terminal operator may reveal little information to the port authority.

There is a particular belief that ICT can help break these forces, particularly asymmetry, but it is more likely that ICT will reinforce them. Thus, the outcome will not necessarily be an harmonization of ICT systems since asymmetry and internalization of powerful forces embedded into business models, but a convergence towards better interoperability. The latter opens opportunities to establish specific information exchange schemes where the concerned players see mutual benefits; where cooperation provides more returns than competition. Port community systems are such an endeavor where cooperation leads to efficiency improvements since the maritime / land interface and its intermodalism are complementary. The setting of automated ledgers (Blockchains) are also tools allowing interoperability while keeping selected information internal to the firm.