Five key technologies for immediate digital transformation in logistics
By: Angel Mitev, SVP & Practice Lead Big Data, Transportation & Logistics, at Sciant
The next five years will see a huge increase in digitalisation in the logistics industry. The Logistics sector has, until recently, been slow on the uptake of new digital technologies. But in the last couple of years the tide has begun to shift with new players seeking to disrupt the market and established logistics firms looking to work more closely with tech start-ups.
With revolutionary new technologies coming online like cloud logistics, IoT, big data and blockchain, that trend is only set to continue, making global supply chains faster, smarter, more sustainable, responsive and customer centric.
The electronic Air Waybill (e-AWB) is the first step to industry digitalisation. It is a standardised digital version of the existing paper Air Waybill which follows cargo from shipper to delivery.
The e-AWB hugely improves efficiencies in tracking and processing cargo data as well as increasing transparency, improving security and reducing costs and delays. It has so far received a good uptake, with the International Air Transport Association (IATA) declaring the e-AWB its default contract of carriage earlier this year. Big airlines like Lufthansa and Emirates have already implemented it and others like Delta Airlines and United Airlines are expected to follow soon, meaning an expected 80% industry adoption by 2020.
Perhaps the most important aspect of e-AWB is that it opens the way for other digital technologies to enter the market. Without a basic standard of digital data sharing across the air-freight industry, technologies like big data, cloud logistics and IoT will be severely hampered in their usefulness. This is why universal adoption is so important.
2. Big data and machine learning
Data is the most valuable commodity in the world for a reason — used correctly it can revolutionise business models. Now it is the turn of logistics, where analysing and merging data streams with the help of AI will lead to new insights in demand forecasting, route optimisation, risk management and predictive logistics. This could reduce costs by 49.2% and drive innovation by 44.3% according to a study by Big Data Executive. No wonder 98% of third party logistics firms believe big data is essential to their continued success.
Merging data streams concerning weather, traffic and shipment information, for example, will lead to real-time route optimisation where freight is dynamically shifted to the optimum route as situations develop, providing an exact to-the-minute ETA.
Risks can be mitigated by comparing current conditions with existing data pools, safeguarding against everything from port congestion to high flood risks. DHL’s Resilience 360 is an example of data-driven supply chain risk management already in use.
Ultimately big data can shift the logistics business model from a reactive to a predictive one. Predictive demand planning uses data from online vendors to predict sales spikes so that extra orders of the in-demand product can be shipped in readiness. Likewise data on customers’ shopping habits can help predict a purchase before it occurs so the relevant product can be stored nearer the customer in anticipation, leading to the possibility of same-hour deliveries. Amazon already uses this method to facilitate its same-day delivery service.
3. Cloud Logistics
Cloud logistics is receiving rapid adoption with 50% of logistics providers already using cloud services and another 20% planning on doing so.
As data shifts to the cloud, logistics IT services are becoming available on a flexible, on-demand, pay-per-use model. This means smaller businesses no longer need to fork out on monolithic IT structures, paying only for what they need when they need it.
Services like Shipwire and Freightly already provide real-time cloud-based transport management systems that cover all logistics processes from procurement to billing, making the whole process easier and cheaper for SMEs.
Ultimately all supply chain information will be stored in the cloud, creating a single integrated global overview. With the development of edge computing, where data processing occurs closer to the cloud, these services will become increasingly accessible.
4. Internet of Things (IoT)
IoT will be the next big game changer. Combined with next generation connectivity and sensors, it will allow for practically any object to be connected to the internet wherever it is, meaning full traceability and transparency from shipper to delivery. No wonder it is expected to generate a possible $1.9 trillion for the logistics industry.
Smart connected trucks will collect data on their movements and idle time for dynamic route planning and to maximise fleet utilisation, as well as lowering maintenance costs by monitoring vehicle health.
Connected warehouses are already being tested by operators like DHL, where individual items and equipment can be tagged, relaying constant information on their status, operation and position, allowing for greater visibility and efficiency in warehouse processes.
Iot-connected sensors will monitor temperature and humidity for sensitive cargo such as food and pharmaceuticals. Near Field Communication (NFC) tags will provide product authentication with the tap of a smartphone, thus protecting against counterfeiting and theft. And key processes will become automated, from automatic re-ordering of used products and parts to automatic scheduling of maintenance tasks for vehicles and other important equipment.
Consumer ordering will be simplified with the use of IoT push buttons like that already developed by Kwik, which allows for automatic ordering of new products with the push of a button. And delivery headaches will be removed as smart home devices become more widespread, such as smart locks which will allow for unattended home deliveries.
Further away but with huge potential is blockchain. The distributed ledger technology decentralises data, increasing transparency and traceability by giving every participant in the chain the keys to vital information on a product’s journey. By reducing complexity and breaking down trade barriers, it could lead to a 5% increase in global GDP and 15% in global trade.
Blockchain-based traceability schemes like Walmart’s Food Traceability Initiative will allow for full transparency and traceability of products across the entire supply chain. This means customers will be able to verify for themselves that products are authentic, have not been tampered with and have met with correct handling requirements.
Supply chains will become more efficient as all parties involved can track the progress and status of goods. Digitalisation of important documents like the e-AWB and bill of lading, opens these up to the possibility of blockchain adoption, allowing the original document to be issued, transferred and received on distributed ledgers that are visible to all participants in the process, increasing efficiency and security across the supply chain.
Blockchain could even lead to automatic payment and invoicing, with payments processed as soon as goods reach a pre-agreed destination.
Facing the challenges of digitalisation
With logistics companies ranging from small-family run firms to franchised networks and global enterprises where each are part of the same delivery chain, the disparity in systems between them is causing friction and challenging tracking processes. This lack of connectivity will inevitably hit those businesses that are not embracing digital transformation. The key three core challenges we see are:
1. Acceleration of cloud-based technologies -
Logistics companies have been mistrustful of cloud-based solutions and as a result been slow to adapt IT infrastructure putting them at a disadvantage to the newer or more agile players. Cloud solutions are providing the flexibility, resources and applications to diversify services while working with real-time information that is improving efficiencies in the business. Logistics firms need to realise that products cannot be developed in-house to achieve the same agility and bring the speed of delivery required to remain competitive.
2. Data quality and data cleansing
Data quality in logistics is another long standing issue, especially where the responsibility of data is left to low-paid employees, there is often little consistency or reliability in the data sets. Improvements in system connectivity can free employees of manual data management by bringing automatic collection of data (including from IoT devices) that allows for proper validation of input using artificial intelligence to cleanse the data and complete missing or incomplete pieces.
3. Source system harmonization and modernization
Many primary source systems, such as transportation management systems, warehouse management systems and financial systems are legacy systems that have not evolved and therefore are not up-to-standard to support digitization and big-data. Many of these systems only support old standards of data exchange protocols and lack open APIs restricting opportunities for growth and data exchange with industry partners. Logistics companies need to invest in reviewing, replacing and harmonizing source systems if they are to fully benefit from the advancements in big data.
All these technologies are coming whether we like it or not. But that doesn’t mean we can just sit back and wait for them to happen. Logistics operations need to proactively engage with tech firms to implement these solutions. Outsourcing is often the easiest way, enabling for a flexible, on-demand service, rather than trying to set up large in-house IT infrastructures.
However we choose to do it, do it we must. If we don’t face the challenges of digital adoption pro-actively we risk being beaten to the prize by new, agile disruptors or big players from other sectors who spot an opportunity.