How Markus Sontheimer, CIO, CDO at DB Schenker, aced the freight forecast & costing game

There are but a precious few industry verticals that leverage emerging technologies to the extent logistics does. Be it through AI, IoT or blockchain, the logistics space is incessantly challenged to predict and optimize freight routes and traffic, manage inventory, and enhance customer engagement – all while working towards the all-important objective of keeping operational costs to a minimum.

To get a thorough understanding of what’s transpiring in the global shipping and logistics space, CIO India talks to Markus Sontheimer, Chief Information and Chief Digital Officer at DB Schenker. 

Albeit a legacy spanning 140 years, the German logistics giant has always placed technology at the forefront of its innovation drive. In our conversation with Sontheimer, he shares his insights around technologies that could really make a difference in the logistics space, his take on blockchain, and why a CDO’s role in the present-day enterprise goes beyond a CIO’s ambit.

A veteran CIO and a true-blue digital leader, Sontheimer headed the technology function at Deutsche Bank and Daimler prior to joining Schenker.

Before we deep dive into the tech scene in shipping and logistics, here are Sontheimer’s two-cents for CIOs to be successful:

Edited excerpts:

Markus, could you give us an overview of the current tech landscape in the logistics space. Which technologies, in your opinion, are most promising in this space?

The heart and soul of a logistics company is still the transport management platform. In the transport management space, you have different approaches. Some of the smaller firms either use standard software or opt for Software-as-a-Service. 

However, companies of our size develop in-house software; at Schecker, we have a really strong platform for air and ocean freight. 

Visibility is an absolute game-changer in our space. You want to know where your stuff is – it could be an IoT platform that combines all centers and all events to give the customer full visibility.

Information about the shipment is as important to the customer as the shipment is. For instance, if you run into a customs problem in one harbor, you should be able to proactively reroute a shipment to the customer. 

Interfacing with customers is all about apps, and digital trading platforms are key. At the backend, it’s all about data lakes and data storage. 

And while we’re talking about data, it’s important to understand that data analytics cannot be the CDO’s prerogative alone, the CIO needs to get buy-in from business decision-makers. In the end, the business needs to be driven by data. This is because logistics is all about being able to predict freight rates.

Could you take us through the IT infra at Schenker? Which technologies are the company placing its bets on?

In the cloud, we have 56,000 clients live at this point in time – it gives us the necessary agility and end-point security; cybersecurity is the topmost focus for Schenker. 

We already moved 30 of our core applications to the cloud for hosting, and we at Schenker believe infrastructure has to be safe, stable, and scalable. 

In the last two years, we put a lot of focus into AI – we believe deep learning technologies are absolute keys. We have a team of 25 data scientists and algorithmic teams who work on R and Python.

When I moved from Deutsche Bank to Schenker, I saw there were no mathematicians employed to predict ocean freight pricing, which is a very volatile market, by the way. You can do much more with the data we have, and that was how we built trade management engines. 

The same holds good for forecasting volumes – we’re now able to predict volumes with 98 percent, four weeks in advance. 

Your thoughts about artificial intelligence becoming a key technology in shipping and logistics? 

I believe that the combination of camera images and visual recognition is an absolute top use case for logistics. The reason for this is that we have so many different packages, so we can hardly follow standards. But by using camera images, you can really start learning – by dimensioning the shipment, checking for damage, or read the barcode on it. 

You can also see what shipments are being moved around warehouses and optimize storage. So camera imagery combined with deep learning technology is a key combination for ‘logistics of the future’.

*/ /*–>*/   Image recognition is a top use case for logistics. Using camera images, combined with deep learning technologies, is a key combination for ‘logistics of the future’. Markus Sontheimer CIO & CDO, DB Schenker

Now we know shipping and logistics is a price-driven vertical. How did ‘Logistics Orchestrator’ enable DB Schenker slash costs by 25 percent? 

We at DB Schenker incorporated a few changes which are practiced globally.  The advanced services implemented globally for customers’ convenience and satisfaction help us create a complete visible inventory, improve inventory planning, make the order management automatic for clients, and offer intelligent supply chain business logic. 

The innovation has enabled us to improve the quality and bring about an overall cost reduction by 25 percent.

How do you see blockchain playing out in the supply chain and logistics space?

We have carried out 20 POCs around blockchain. For instance, one was around shipping wine from Australia to China – we used blockchain to ensure that wine being transported was authentic. 

Customers might want to pay for the authenticity of goods shipped. You can carry out the entire process of supply chain security by storing it in the blockchain. 

The most promising use case for blockchain we see right now is in the Bill of Lading.  [Bill of Lading is a legal document issued by carriers to shippers detailing the type, quantity, and destination of goods being carried. It also serves as a shipment receipt.]

A blockchain system really works when you use smart contracts on top of the blockchain layer. Smart contracts can legally secure the shipment. A lot of blockchain initiatives are partially successful because the smart contract part of it wasn’t addressed. 

I personally believe that nobody should have a monopoly on blockchain – it ought to be public, so there are no winners, per se. A public blockchain will bring about fair play and will ensure nobody is cheated or taken advantage of. 

A key challenge right now is the technical overhead associated with blockchain, specifically with respect to energy consumption.

From a sustainability standpoint, that’s not acceptable. We need lighter solutions that do not consume so much energy for securing crypto technology. 

[Note to reader: Currently, the bitcoin network uses around 64 Terawatt Hours of energy per year – that’s more than what Switzerland uses over the same time period.]

*/ /*–>*/   A blockchain system really works when you use smart contracts on top of the blockchain layer. Smart contracts can legally secure the shipment. A lot of blockchain initiatives are partially successful because the smart contract part of it wasn’t addressed. Markus Sontheimer CIO & CDO, DB Schenker

On a closing note, Markus, you are playing the role of a CIO as well as a CDO. How have you seen these roles evolve?

In the second half of 2016, I took on the CDO’s role in addition to the CIO’s. A CDO’s role extends much further. I put three departments specifically for a CDO’s function – one is around managing innovation worldwide, cooperation with universities, and for looking at newer business models. 

The second department deals with customer-interfacing platforms – that’s like online banking for logistics. The third department is focused solely on data and artificial intelligence. 

The CDO needs to formulate new business models. A key change we made to get rid of departments working in silos is that we are now implementing projects in integrated agile teams. Now, this was made possible only by my role as a CDO. As a pure IT guy, you really can’t achieve this.