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Insight: The Rise of Digital Logistics

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The supply chain, along with the shipping and ports industries, is changing very quickly, driven by a heady synergy of digital innovation and a rapidly expanding global market.

This change has created challenges, particularly concerning supply chain visibility – the act of tracking an asset from source to destination via data which all stakeholders can access.

In turn, this has led to the creation of online-based logistics providers.

This is a trend which could streamline the supply chain and improve trade through container tracking, as well as smart and internet-of-things (IoT) technology.

Digital logistics offers supply chain executives the ability to break down operational silos.

It fuels growth through providing personalized, customer-focused processes that increases cycle times and lowers costs.

To fully understand the pressure the supply chain is under and the need for greater visibility, one must first realise how we got here – it is a journey which takes into globalization, technological innovation and a phenomenon that some have described as the ‘Amazon Effect’. 

 

 

New Frontiers

 

 

Today, the supply chain involves a network of resources scattered around the world, with data crossing borders and flying between multinationals.

However, while this causes challenges, it also provides opportunities to streamline the supply chain, and at the same cut costs, boost profits and increase operational efficiencies.

To do that, supply chain resources need to be linked and their needs to be visible to all stakeholders.

By achieving supply chain visibility, all the stakeholders operate as a hub and do so by collaborating and sharing the necessary data that drives global trade.

According to the GEODIS 2017 Supply Chain Worldwide Survey, as few as 6% of businesses claim to have achieved supply chain visibility.   

 

 

In response to these challenges, visibility and collaboration has become the fastest growing supply chain sphere and the one with the greatest number of technological innovations.

The e-commerce boom, fuelled by the massive spike in worldwide trade caused by globalization and mobile technology, has increased customer expectations, opened new markets and challenged the traditional ways of doing business.  

As a result, the 3PL market grew as the global economy sought to manage the ever-increasing flow of goods between continents.

More recently, 3PLs have been challenged by new, disruptive business models in the shape of online-based and digital logistics solutions.

Platforms such as Uber Freight and Cargomatic provide cost-efficient, real-time, on-demand container visibility.

Similarly, as has been highlighted in a previous PTI Insight ‘How Smart Start-Ups Are Changing Maritime’ start-ups are challenging previous business models by utilizing internet-of-things (IoT) technology.   

Worldwide connectivity and mobile technology has not only increased the amount of customers but also accelerated their expectations, which has led to increased pressure on ports and shippers.

This new force was recently enigmatically described as the ‘Amazon Effect’ in a Port Technology paper by Dr Noel Hacegaba of the Port of Long Beach.

 

Broken Links in the Chain

 

 

At present, the global connected logistics market appears cluttered and almost fragmented, due in no small part to the amount of players in the sector.  

A study in November 2018 from Transparency Market Research said it will grow at an annual rate of 17.5% for the next six years and reach an approximate valuation of US$55.7 billion by 2025.

For scale, it was worth $10.21 billion in 2016 as the industry evolves and according to PricewaterhouseCoopers, the supply chain is facing several areas of disruption, all of which are continuously renewed by rising customer expectation and technological breakthroughs. 

 

 

However, it is still common for processes to be done manually, with carriers and stakeholders using teams of people to respond to basic customer queries and write reports on shipments.

This involves requesting data from multiple parties across the supply chain, a job which increases massively for a freight forwarder who could have hundreds of shipments in transit at once.

The inefficient flow of information has a multitude of drawbacks – the lack of timely and accurate information being the main one.

If milestones are missed, costs are incurred through dry runs, re-routing, charges and other costs, including storage.   

In short, common supply chain challenges include an inability to see a unified view of shipments and other documents with relevant statuses.

 

Surviving the e-commerce boom

 

 

The single biggest factor in supply chain pressure is the boom in e-commerce, which ran parallel with the opening up of new manufacturing hubs in Asia and South America in the 1990s and 2000s.

As a consequence of the acceleration in e-commerce and revolution in consumer behaviour, the market for asset-tracking smart technologies, such as IoT sensors and blockchain, has grown all over the world.

By 2023, IoT alone could track 500 million assets globally, with the number of installed devices expected to reach 8.9 million by 2022.

Online sales are set to reach $4.5 trillion by 2021, almost double what they were in 2017.

In the US alone, e-commerce represents 10% of annual retails sales, a figure which is expected to grow by 15% each year.

Unsurprisingly, the overwhelming majority of e-commerce shoppers are younger than 40.

According to a survey conducted by UK-based e-commerce experts Advantec, 69% of shoppers between the ages of 21 and 35 routinely bought two or more items online every month.

The same survey found that just 11% of shoppers aged 50 to 64 did likewise, as did just 2% of those older than 65, suggesting the e-commerce boom will not slow down significantly any time soon.

It has meant pressures on the supply chain have grown steadily, and with this has come the need to streamline processes and increase visibility.

 

Tracking the Future

 

 

Going digital is of pivotal importance for supply chain stakeholders, as it is through smart technologies and greater visibility that make shippers, ports and the like competitive for the future.

Solutions to supply chain inefficiencies vary widely between stakeholders, with the final chain or ‘last mile’ opting, in some areas, for driverless trucks and other automated vehicles.

By increasing visibility, stakeholders can easily identify areas where the supply chain might breakdown and make decisions to avoid potential losses. 

Track and trace technology, powered by IoT, can bring data together to pinpoint containers as they move across the world.

This brings data together into one platform for quick, easy and accurate tracking, at which point automation can speed up the logistics process by removing barriers and reducing risks.

The statistics tell a story of constant growth in the digital and smart markets, which means the supply chain will only expand and become more integrated in the future. 

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