Supply chain technology will have a critical role in shaping the future of logistics businesses in 2019. It is like a do or die situation: either you create a digitalization strategy finding the right technology solutions in time so that it can give you an edge or you will fall behind, and it will be a lot harder to catch up later.
This article will look at trends, megatrends, disruptive forces, and enabling supply chain technologies that are most likely going to shape the future of the logistics sector.
According to PWC, US$4.6 trillion revenue at stake – this means that companies that want to be successful and profitable need to refocus and find the right technologies that will help them to become more digital.
What is the state of the sector in 2019? How will the future look like for supply chain?
Which technologies are game-changing for the logistics industry right now?
I read this was the question the other day, and I decided that I wanted to write an article about this. While the chart almost speaks for itself, more could be added to provide a full picture of the supply chain technology that will enable the digital transformation of logistics processes.
The chart of Statista below indicates the leaders of the logistics sector find blockchain, artificial intelligence (AI), robotics, autonomous vehicles, and drones to be the most influential supply chain technologies in 2019 and the years to come.
These technologies will be disruptive forces in the logistics industry when the sector needs innovation, digitalization, and efficiency more than ever. Nevertheless, besides these technologies mentioned above, it's important to mention the disruptive start-up companies that made it their vision to leave their mark on supply chains. Besides them, we cannot forget about the integration providers play a vital role in the digital transformation in this data-driven world.
Depending on the specific areas of the logistics companies, their strategies, and the niches they want to focus on, each one of these companies should find the technologies that will help them the most to achieve their goals. Simultaneously, they need to consider the ever-increasing customer expectations and the need for providing better customer experience – how they need to create more efficient operations, improve traceability, and supply chain visibility besides other factors.
Out of curiosity, I entered the word ‘blockchain’ into Google Trends and looked at the growth of search during the last 5 years worldwide.
Here is the result:
Source: Google Trends. 2019.
The word blockchain is googled worldwide on average 246 000 times a month, while blockchain technology 40 500 times. The chart and the numbers are good indicators for how big the hype is around this technology.
What’s behind the hype? Can blockchain technology have a severe impact on the supply chain?
Blockchain is not a piece of software to buy. It is an integrative technology that uses process logic to synchronize the data and experts suggest that it is a solution for overcoming the lack of interconnectivity across technologies.
Many think that blockchain will provide logistics firms with an entirely new approach at the ecosystem level. This means that while most firms are isolated, blockchain would have the power of connecting industry stakeholders on a global scale for data sharing as well as it would add the much-needed trust into the equation.
The blockchain is basically a continuously refreshed digital ledger of transactions, and it should bring more transparency and traceability into logistics processes. It is a way to build trust across partners by having reliable, up-to-date data available for example physical, financial or digital information. The blockchain is also a way to prevent fraud or abuse of data. In other words, it can also add efficiency to your global trade operations by reducing red tape and paperwork.
Besides better visibility, more accurate and reliable data, blockchain could also be used for creating digital smart contracts to end costly procure-to-pay gaps.
Blockchain will also enable new business models, and many industry players have started to unlock the possibilities of blockchain to acquire better data for improving their services. New firms are also offering blockchain-based services that could redefine the future of logistics.
DHL in their report on Artificial Intelligence (AI) defined the technology as “human intelligence exhibited by machines, they mimic, replicate, automate, and eventually improve on human thinking”. We are not going to explain AI in more depth, instead, we will focus on how it could improve supply chains.
Although AI has been around since the late 50s, the technology has just now started to mature – it is now accessible and affordable. According to IBM, only 10% of the current systems use AI, thus technology is an enormous opportunity for those that adapt to it now.
AI will be a tool for removing the complexity of the supply chain and create more efficiency by replacing humans with AI in handling specific processes. AI will help accounting teams to treat invoices faster, and it will be able to detect financial anomalies. It will also have a role in handling cognitive contracts so that humans won’t need to read hundreds of legal texts. Another application of AI is replacing custom brokerage with technology. You could automatically transfer all the necessary documents to customers (after the data formats were harmonized and the information was validated and enriched), so then only the customs officers would validate the information to provide you with tax statement and release the goods. You would then automatically receive an invoice from customs.
Another aspect of AI that it will help you to make more sense of the data, use analytics, and it will enable data-driven decision-making. You will be able to use predictive logistics, improve demand and capacity planning, and forecasting. It will also help with predictive risk management that is critical for supply chains to prevent, e.g. problems with suppliers or material shortages. Using data acquired from satellite maps or analyzed traffic patterns, logistics companies will be able to implement real-time intelligent route optimization.
Autonomous robots are becoming more mainstream in supply chain management, mainly in warehousing and manufacturing. Robots require little to no human intervention, they can replace humans or work side-by-side with humans. The presence of robots will improve the handling of routine tasks, and they could work well in a dangerous environment. It is expected that the presence of robots would go strongly in the next five years. This would have benefits such as decreasing operational costs, stabilizing labor, increasing productivity, or reduce errors in inventory by doing frequent inventory checks.
Autonomous vehicles could help logistics firms to overcome driver shortages and improve supply chain efficiency by faster deliveries. Switching to autonomous vehicles could result in reduced shipping costs and fewer accidents.
Drones will also simplify the way manufacturing, warehousing, and distribution years are working in the next 5 years. They will enhance efficiency, but also safety and security.
Drones can be used in obtaining raw materials (for example in the mining sector), or drones are already used in farming inspecting plants, testing soil and water.
In addition to these, drones provide a way for inventory tracking using RFID or QR codes.
There have been many articles on how drones could enhance last-mile delivery, as currently, it is expensive for companies. Drones would speed up the delivery process, but they would also reduce the costs.
Last mile delivery – it’s expensive for firms, but perhaps, drones could speed it up and reduce the costs.
The power of freight tech startups and companies shaping the logistics industry has been enormous during the last few years. There are probably hundreds of these companies on the market that have the vision of revolutionizing supply chains by providing innovative digital services.
Their impact is a game-changer. These companies realized that while customer behavior has been changing (just think about your everyday life – how you book flights online, have a smartphone and use apps to make your life easier, or how you can track your packages you ordered online) the logistics sector hasn’t been adjusting at the same pace. Supply chains are still instead operating in an old-fashioned manner – not much change has happened during the last 50 decades.
FreightTech companies want to reshape the logistics and supply chain on the B2B side the same way digital technologies disrupted B2C businesses.
Some of these new companies offer digital marketplaces for booking containers on vessels or trucks, and they aim to eliminate empty containers or trucks and want to improve the way logistics works around the globe. They also intend to make the booking process more simple so the buyer can even compare the prices in an instant.
Some want to ensure that all the goods shipped can be tracked easily. Track and trace solutions would not only add security, but these would also provide you with the opportunity to optimize your processes. Some freight tech companies are focusing on improving warehousing and inventory planning, while others chose supply chain analytics as their expertise area.
One thing is common in these firms: they all need to be able to connect many different companies so that they would be able to receive the data that would work as the lifeblood of their services. While most of them have proprietary technology, often this couldn’t work without a sufficient data supply.
Those companies that will be able to connect with all their trading partners and get the real-time information they need constantly will have a considerable advantage compared to those that fail to do so.
As an integration provider, we like to think that integrations enable companies to have their data at their disposal at the right place for all the right stakeholders in real-time.
While integrations and iPaaS as a technology tend to get a lot less media attention than technologies like blockchain or robotics, integration is a foundation of digital transformation most logistics companies simply cannot afford to overlook.
EDI has been around for decades and it has enabled trading partners to communicate with each other effortlessly. While EDI is still widely used, many companies have been looking to modernize their B2B integrations and move them to the cloud or outsource completely to managed integration service providers, thus saving time and improving gross margins.
Modern integration platforms enable companies to do much more with integrations in a short time (compared to integration projects in the past that could last anywhere between 2-8 months and often were unsuccessful). System and data integrations allow companies to create interconnectivity across their ecosystem so that they can send and receive business-critical data in real time. Creating connectivity with a large number of stakeholders can be challenging due to the responsiveness of the parties or because of the variety of the systems that they use. They systems can be on-premise or in the cloud, so connecting them can get difficult. This is why enterprises adopt to EiPaaS (enterprise integration platform as a service) so that they can tackle even hybrid integration challenges. Besides also, in logistics, there are still data quality issues, especially when the data goes through multiple stakeholders. The data often needs to be validated and enriched before it can move forward to the system/application/data storage. Data integration providers also have experience in creating data mapping, even from in-house proprietary formats, so that you always receive and send the data in the preferred format.
Digitalization will be a prerequisite for success
Supply chain technology and innovation shouldn’t be overlooked. It will help companies to redefine the way they collaborate and how they readdress the customer experience.
Logistics leaders will need to adjust their supply chain strategies, including various technologies that will most likely give an edge to those that pioneer in their application. According to PWC, 50% of the respondents said that the lack of digital culture and training is the biggest challenge transportation and logistics companies face currently. This can be changed with a good plan, excellent change management, and innovative technologies. Now is the time to refocus your supply strategy to avoid the risk of losing your edge to a more innovative competitor.