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Denis Grankin Head of Sales Department
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Why will the logistic industry focus on Digital Transformation in 2019?

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digitalization in logistic sector

Hardly another industry would hold more unrealized potential than logistics. While the industry is rapidly developing along with the rapid growth of customers expectations, companies have had time adapting to these requirements.

Some fields, like ocean transportation, has barely begun to digitalize. Only 6% of the biggest freight forwarders and ocean carriers have online booking services. The one-third of them don’t allow leaving online quotes.

Some innovations like smart pallets, containers, and automated ports have already become a universal standard. The success of computerized cities and AI-based transport systems proves that there is a vast untapped potential in logistics digitalization, patiently waiting to be explored.

What is digitalization?

Before we proceed to describe the digitization process specifically in the logistics industry, let's first take a closer look at the term of digitalization and its business value.

Digitalization means using technology to produce and explore new value-creating opportunities, reforming a business model, and moving a business to a digital industry. It’s also used to describe digital data storage in an online database.

How is digitalization applied to logistics?

With modern IoT, Artificial Intelligence, and significant data innovations, logistics stands a chance of being almost completely reformed. Even the way it is, it’s apparent that the field needs digital reforms. With the growth of self-driving tech and Vehicle-to-Vehicle innovations, logistics industry needs to evaluate these possibilities and adapt to them.

Cases in point:

  • An automated truck platooning system, developed by Peleton, solves issues with the shortage of trucks by providing clients with timely data on truck’s routes and current positions;
  • Locomotion has created a self-driving technology for heavy vehicles.

Soon self-driving industry will use evolved Vehicle-to-Vehicle algorithms when cars can communicate with each other with no middlemen, as well as Vehicle-to-Network and Vehicle-to-Infrastructure. This will enable transport to communicate with the online services or nearby institutions and connect online to transfer this data to a control app.

Another direction of logistics digitalization development is the creation of marketplaces for client-provider cooperations, both in B2B (freight shopping) and B2C fields (for instance, BlaBlaCar).

Key factors of digitalization in logistics

The customer needs in logistics and travel increase as the number of providers grows every year. Now both B2B and B2C companies have to compete for delivering maximal satisfaction, which is now influenced by more factors than ever.

Let’s take a look at what makes up successful digitalization, and what should be the critical points in building a digitalization strategy. We defined five key pillars of successful logistics digitalization.

1. Changing customer expectations

Even though logistics has countless applications, the main one is still product delivery. Now, with online stores and marketplaces, users expect the digital experience to get as close to physical one as possible, if not better. The main competitive factor is the time spent on product delivery - the faster you provide delivery services, the better it is for your customers.

popular delivery choices

So far, we have already seen several global examples of adapting logistics experience towards evolved customer expectations.

  • Amazon provides two-day product delivery of more than 40 million products for each Prime subscription holder.
  • Walmart has joined the trend of two-day delivery and made huge investments into the supply-chain logistics.
  • Apple, CVS, and Best Buy partnered professional logistics providers to keep up with ever-evolving customer demands.

Main customer expectations and entailed trends

  • The process of ordering an item now takes less than five minutes. With the general increase of ordering speed, stores lower the expectation-time bar. Users get used to receiving products here and now - and logistics companies have to follow the trend.
  • Detailed information on the movements of each order. With shipping labels, attached to all transported package, user can track product’s movements at all stages of delivery.
  • ‘The Amazon effect’. Standing out in the logistics industry is not an easy task. At least because companies compete with big corporations that raise the bar of expectations. More than 100 million users hold the Prime subscription. Of course, big companies like Amazon have the resources to deliver products in two days. Still, even without those possibilities, smaller logistics providers and retailers should aim at the same standards.

customer expectations

A dynamically changing customer mindset and an ever-growing competition require logistics companies to innovate supply chain services, use the Internet of Things and AI for tracking and monitor these processes with big data.

2. Redefining collaboration

Collaborative logistics implies that competitors are joining their forces to improve services for a common customer. This means using the same truckloads, establishing joint return loads, providing each other with data, and exchanging innovation.

The main reason to consider redefining collaboration in logistics is its cost-efficiency. Collaborative outsourcing saves up to 15-20% for each order. An excellent example of this is a US food company Sysco, which recently conducted joint operations with U.S. Foods. In Synco’s reports, the company stated that the collaborative practices resulted in more than $600 million savings.

Additional benefits include:

Exchanging technological expertise. The only way for smaller logistics providers and retail businesses to keep up with Amazon-level innovation is to use other company’s experience, in exchange providing them with their own insights.

Long-term relationships with clients. In an ever-changing marketplace, developing strong relationships with customers is an almost impossible task for 3PLs (third-party logistics service providers). There are multiple emergencies, delays, the abundance or orders - one company often can’t get through all the peaks. In collaboration, the workload is smoothly divided.

New markets and product lines. Doubled or tripled possibilities of delivery, postponement, and kitting create space for expansion on new markets.

Digitalization in logistics collaboration

There are various ways in which technological improvements can facilitate cooperation and increase its efficiency.

Method #1 - Using a digital virtual collaboration platform

Suppliers, customers, and competitors start using the same management platform. All shipment data and information on global markets is recorded in the software, and each business contributes its expertise. Also, it’s easier to pay for the technical support of such a platform, splitting the costs of development and maintenance.

Method #2 - Strategic management

Strategic long-term analysis implies that two or more partners have similar objectives and unite their resources to achieve those goals. Such objectives are penetrating new fields, developing new technologies, bypassing governmental controls, and many others. Collaboration participants invest in IoT tracking technologies and share big data algorithms. With digitalization, their collaboration would now be powered with detailed data on every transportation aspect.

Method #3 - Digitalizing joint ventures

When the firm is looking for new market opportunities, it’s wise to connect with a local company which would provide resources, expertise, and labor adapted for that specific market. With online B2B platforms, logistics companies could automate the search of such a partner.

These are several main vectors of collaboration digitalization in logistics, although there are undoubtedly much more possibilities to consider.

3. Adapting and improving existing multicarrier shipping solutions

If you are managing parcel shipments and work with various logistics providers, you can’t possibly keep up with each parcel status without an assistant. That’s why there is a multicarrier software in place.

Main functionality

  • Label compliance to carrier’s standards (such as UPS or FedEx requirements). Carriers change the label standards regularly, and only smart machine-learning algorithms can fully keep up with these ever-changing standards. One of the most popular services, Logistyx, for instance, reports having been required to comply with 480 specific requirements.
  • Transportation visibility - all label products are tracked real-time. This data can be shared with clients, collaborators, and the company’s employees.
  • Bill audition. To make sure that the shipper is not overcharged, such software controls the compliance to previously discussed tariffs and measures expenses.

The labels, created by such software, should provide the following insights. Let’s take a look below:

For carriers

  • An ID code for each customer.
  • Tracking and managing codes of all carriers.

 

Shipment data

  • A unique ID code for each shipment.
  • A delivery note with carrier’s comments.
  • Sequence-number identification for the situation when one order is delivered in different parcels.
  • Recipient’s and sender’s data and two addresses.

 

Package and parcel information

  • Tracking code for each parcel.
  • Optional comments for each parcel.
  • Stamp for each time when the content of the package is validated and labeled.

 

Communication with main carriers

  • Direct communication with all of your carrier services, both online and offline.

4. Growing requirements for performance measurement

When companies implement new strategies and technological improvements, they enter one of the most complicated challenges. Now it’s imperative to measure how much the changes have impacted the company’s efficiency and most importantly, define that this output was connected precisely to the innovation.

All measurement tools should be based on clear, tangible metrics:

  • cycle time metrics that assess cash-to-cash cycles as well as production cycle time;
  • cost evaluation - cost per shipment or warehouse pick;
  • quality measurements: detecting defective products and checking on-time deliveries;
  • evaluating inventory capacities and activities.

Each company needs to develop its own KPI and evaluate their performance based on those metrics. Also, logistics service providers (LSPs) need to collect feedback from their clients, employees, and partners, and store them in a reliable database.

5. Safety and flexibility are the main priorities

As companies are adapting to the described above factors, they are inevitably increasing the level of connectivity. Now companies collect customers, staff and partners’ private data in online storages. This leads to increased security vulnerabilities.

In a global logistics market, big companies have already understood the dangers of hackers. Continuous security issues in Amazon and Walmart proved that even logistics giants are not safe. That’s why carrier companies like FedEx and International Post Corporation adapted automated multi-step identification and data capture systems - as soon as the shipment is delivered, all associated information is archived and end-to-end encrypted.

Another factor to take into consideration is the popularity of elastic logistics. Flexibility in terms of providing different capacities depending on the supply chain needs becomes a key choice factor. Companies should monitor popular truck sizes and record their orders to forecast the size of the next shipments.

Top 10 technologies that transform logistics in 2019

Let’s take a look at how each ‘buzz’ innovation can contribute to improving logistics processes and increase efficiency and customer satisfaction.

For seamless cooperation and monitoring

  • Internet of Things offers a possibility to embed sensors into physical objects to control them through an app. Each object is connected to another via wireless networks. Those networks accumulate a lot of data that is used to control shipment activities and forecast further projects.
  • Distributed ledger. The most common example of a distributed innovation is blockchain, although non-blockchain innovations are getting common as well. They are used to safely exchange data between logistics providers, retail, and third-party assistance.

 

For automated decision making

  • Big data. With data management platforms, managers are powered with tangible insights on each operation and the company’s growth overall. You can pull out a numeric report at any given moment.
  • Machine learning. These significant data insights are transferred to a smart machine learning algorithms that use the information to learn about logistics processes and propose improvement options.

Parcel delivery

For smooth human-machine interaction

  • Natural language processing, facial and gesture recognition enable faster communication between humans and digital systems.
  • Virtual reality. We can control the time status and transportation process in a realistic, visual way - and display the same visual to clients.

 

For advanced physical processes

  • Autonomous cars, drones, and ships are becoming a new norm. Logistics company need to research these changes and invest in their robotic assistants.
  • 3D printing makes it possible to print polymerized materials, melting technologies, and bonding agents, therefore reducing manufacturing costs.

Automated vehicles

drones

For fast, on-demand data usage

  • 5G Internet for almost immediate connectivity all over the world.
  • Cyber-security: end-to-end encryption algorithms and multi-step verification systems.
  • Cloud storages: using cloud servers to store business information without spending resources on in-house servers.

These applications of modern innovations are not just desirable improvements but must-use practices.

How can logistics industry benefit from digitalization in 2019?

Digital logistics wins over traditional logistics in various aspects. Let’s take a closer look below:

  • Digital logistics bases all strategies and planning on tangible data and metrics. With big data innovations, forecasting future activities and performing tangible improvements becomes much easier.
  • Digital logistics uses enterprise logistics platforms that facilitate collaboration between partners and competitors, as well as connecting all components of the transportation process. Now supply chains are connected with warehouses, retail, and end clients.
  • Logistics industry becomes more flexible and safer. When all vehicles are monitored via the same systems, each package is labeled and controlled, there is no chance of a parcel getting lost. Also, it prevents miscommunication between logistics services providers, saving resources (both economical and environmental benefits) and increasing the speed of the process.

Digitalization is no longer optional

With growing customer expectations and developing competition, logistics companies need to get ahead of innovations and digitalize their key business processes. Using examples of Amazon and Walmart and applying main technologies is a place to start. To make the innovation more sustainable, it’s imperative to cooperate with other logistics providers, invest in common digital platforms and exchange experience.

Most importantly, each implemented innovation should be assessed based on customer’s feedback. Additionally, you should establish clear metrics that will evaluate the cost and efficiency of a particular process after the technology was implemented. Listening to feedback is the only way to reckon you are on the right track.

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