Digital Logistics – Moving the Needle
Inspired-Search | 6 November 2017
Written by: Annemieke Gelder
With the amount of innovation and digitalization around us, these are probably the most exciting times for Supply Chain professionals. In the next series we will discuss a couple of key Supply Chain trends and considerations for your strategic and organizational needs and to shape your next generation supply chain.
Digital Logistics – Moving the Needle
Many new logistics e-solutions are being introduced to support supply chain digitalization. However, this digital landscape still looks fragmented and is far behind other industries. Many companies still rely on significant amounts of spreadsheets and manual data entry. In the logistics end of the supply chain specifically we will have a closer look at the state of play and how an acceleration of its digitalization could look like.
Logistics Digitalization Relevance
HBR published a study on the level of digitalization by industry, which points out transportation and warehousing looks very bleak except for the area of ‘interactions’. The interaction space saw early adoption of EDI’s between ERP’s and WMS, primarily to share order, shipment or inventory movement data. The wide variety on systems and contract variations made the integration very bespoke and the early adoption make adoption of new technology cumbersome and put a break on investments on digital platforms or cloud services to further enhance process digitalization.
Digitalization and advanced integration can deliver an expected reduction of costs of 3.2% p.a for the logistics industry by 2020 according to PWC, and double digit cost reductions and revenue improvements the top end adopters and first movers.
Complexities in the Logistics Landscape
Logistics has traditionally been a support function, rather than a strategic pillar. Increased focus on customer service and the battle for the consumer is changing this rapidly, however the function and it’s complexity has not yet been understood across businesses. The Supply Chain Satellite strategic assessment tool demonstrates that only 12% of the respondents recognizes Supply Chain as a profit centre. This non-strategic perception is hindering any significant or strategic investments in the space.
The logistics space sees many stakeholders to move goods from A to B, varying from shippers, receivers, primary and secondary transporters, customs brokers, warehouse providers, all driven by its own transactions, various documentation sets and country specific regulation. The complexity of the logistics ecosystem makes it difficult to align, integrate, build relationships and trust or have ‘one size fits all’ tools.
Route to Market design, tools and systems are customer specific and do not leverage any under-utilization across shippers and sharing and sharing tools will allow for further optimization of asset location and utilization.
Another complexity is the capital intensity of the space typified by relative short-term contracts limiting the appetite of service providers to make significant investments they can’t recover.
Tools to Advance the Logistics Digitalization
A diversity of platforms is available in the market, and no single (e-)vendor tackles each area of logistics or supply chain as a whole at best, shows recent Supply Chain Movement mapping. A tailored solution suite to your logistics network in conjunction with cloud-integration seems therefore the most logical and effective step into digital logistics.
Independent e-solutions for transportation and warehousing are surfacing in each global region. Yet, limitations in global reach and mode of transport and a focus on hub or trade lanes, no single platform dominates.
Logistics parties should however not delay any steps into digitalization either through automation or e-platforms, as operational labor costs, data accuracy, worker satisfaction and accelerated transactions are immediate benefits to enjoy. The asset-light nature of e-forwarding presents low-cost, data intense solution to price transparency, performance, control towers and a ‘sharing’ business model. As most shippers use multiple 3PL’s and carriers for their shipping and warehousing needs, these independent e-providers offer many benefits through a single platform.
How to Leapfrog Digital Supply Chains
Up till today many shippers lack a significant amount of critical shipment data or are not able to connect their supply chains to the wider business needs.
Business leaders state outdated technology (49%), the lack of integration and data (41%) and the lack of adequately skilled teams (38%) are the biggest barriers to achieve results from digital initiatives, as researched by PWC.
To overcome these barriers, logistics is to invest in resources and training into the digitalization space and underscore it’s strategic relevance to business leaders. Digitalization is not limited to your own operating model alone, as well how you collaborate in your logistics eco-system and the strategic partnerships you establish (Accenture).
While sorting out the digitalization strategy, buy in and budgets level, a hands-on bottom-up approach is recommended to establish urgently needed learning and benefits, allowing the shaping the logistics digital roadmap. An initial assessment by teams of all manual steps in the process from shipment bookings to their delivery, piloting e-solutions and automation, automated creation and sharing of documentation, reports and KPI’s are fundamental to clean out the space and get ready for more advanced approaches to digitalization.
Annemieke Gelder has over 16 years experience in end-to-end supply chains across different industries. She is a certified Procurement Professional (MCIPS), Project Manager (PMP) and holds a MSc Business Administration in Supply Chain of the Rotterdam School of Management. She recently set up www.supplydirection.com to channel her learnings and views on supply chain trends, as well help business shaping and improving their supply chain operations.
Reading more blogs of Annemieke?
Consider reading her blog: Omni Channel Strategies Changing The Warehousing Landscape