Transportation and logistics is regarded as one of the least developed industries when it comes to digital transformation. The need to increase the efficiency and speed of work by adopting modern technologies is an urgent requirement for this industry.
Logistics encompasses several sub-sectors like logistics services, freight rails, maritime, truck, and other private vehicle loadings. These sub-sectors have separate outlooks for digital transformation. There are a few trends, however, such as IoT and e-AWB, which can broadly help to enhance the digital performance of the transportation and logistics industry.
What Is Digital Transformation?
Digital transformation is the process of adopting various technologies within a business to digitize and modernize its operations. When properly implemented, it helps to enhance business efficiency. Over 70 percent of business experts state that they have experienced a hike in their business through digital transformation.
Put another way, digital transformation can be defined as a process to rethink how an enterprise uses people and technology to improve its business performance. Effective digital transformation offers benefits such as achieving maximum efficiency, getting closer to customers, cost reduction, lower risk, and increased competitiveness.
For example, a number of retail shops have improved their logistics by utilizing digital technology to enhance delivery times. Traditional stores have also started incorporating new technology by launching online ordering options to improve their online sales, web presence, and social media strategy. This helps them boost their market share.
In this article, we look at digital transformation in the logistics sector and the priorities of companies that are planning to adopt new digital technologies and tools to boost their business.
Why Do Logistics Companies Undergo Digital Transformation?
Digital transformation is disruptive, and utilizing digital solutions has become necessary to obtain a competitive edge in today’s market. Carriers, shippers, and other logistics firms increasingly see digital transformation as a growth-oriented, positive change. In fact, digital transformation is viewed as an essential part of the supply chain and logistics thinking.
In a survey of 8,000 companies, 98% of decision-makers in the supply chain field stated that they aim to improve their logistics technology solutions. Most shippers are considering the use of technology to enhance efficiency. Eighty-eight percent of shippers wish to use technology to enhance reliability and transparency.
Digital Transformation Priorities for the Logistics Industry, by Sub-Sector
Each sub-sector in the logistics space has its own digital transformation priorities. Let’s look at a few of them:
Consumer goods companies
The goal of consumer goods firms is to enhance customer satisfaction, and their priority is to deliver faster to any location. Thus, B2B (Business to Business) enterprises utilize internet technologies to improve operational relationships between organizations.
Two common internet technologies used by B2B companies are e-commerce platforms and web analytics. E-commerce solutions are leveraged to manage functions like mobile commerce, marketing, inventory management, transaction processing, and more.
Web analytics tools are used to measure details like the number of visitors to a website, how they were attracted to the site, the keywords entered by them on the search engine, and other metrics. B2B companies also utilize CRM (Customer Relationship Management) and supply chain solutions to serve their consumers.
B2C (Business to Consumer) firms also utilize e-commerce technologies to enhance relationships with their end customers.
Carriers and loaders
These companies want real-time data regarding the delivery of goods, and their goal is to utilize online platforms to gain information about current services in all modes of shipping. Carriers aim to optimize their shipping processes by obtaining real-time info about incidents, and delays. This data helps them react swiftly and switch to an alternate shipping method or change the delivery route.
Fleet management companies
Fleet management firms aim to improve delivery management by using route-planning solutions that consider multiple elements like customer preferences, load placement, vehicle capacity, distance between delivery locations, and others. For this purpose, fleet management companies look to use IoT technology and sensors placed in the vehicles that show maintenance requirements for particular parts. They also utilize onboard safety solutions that minimize incidents due to human error.
Government-facing companies use technologies like blockchain, IoT (Internet of Things), AI (Artificial Intelligence), process automation, big data management, and analytics to gain efficiency, productivity, and profitability. The use of technology helps them overcome challenges like public accountability, tighter budgets, and antiquated infrastructure.
Digital Transformation for Large vs. Small Companies
Both large and small enterprises pursue the four main types of digital transformation, which are organizational/cultural, domain, business model, and business process. The main difference is that big companies need to implement digital transformation on a larger scale to meet their greater demands and needs.
The top digital transformation priorities of large companies are typically enhancing operational efficiencies, customer satisfaction, and experience. On the other hand, cloud adoption is a leading technology priority for smaller firms, as it allows them to quickly obtain the needed resources to meet their growing business requirements.
Digital Transformation Priorities for Logistics Services Providers
Services providers within the field of logistics are undertaking a wide range of digital-first initiatives as well.
Warehouse management companies’ goal is to use technologies like IoT to digitize their operations and move them to the cloud. This ensures that the right item is in the correct location at the right time. Warehouse management firms also look to prevent congestion in specific areas at peak times, lower fuel consumption, and minimize unnecessary trips. They can achieve these efficiencies and make their operations more precise by using RFID systems.
Reverse logistics companies’ priority is to use ICT (Information and Communications Technology) to improve their operations. These tools produce precise information after an item has been consumed, which helps to manage physical flows. Reverse logistics firms utilize ICT solutions to get assured connections between chain participants and to effectively control cost, time, and quality of service provided.
Inventory management firms prioritize digital transformation to achieve goals such as reduced mistakes, robotic integration, improved logistics performance, and higher fill rates.
- Minimized mistakes: Systems present an automated workflow to significantly lower the chances of human error in information analysis and input.
- Robotic integration: Inventory planning solutions can be integrated with robotics and ERP systems on the shop floor to facilitate process improvements, enhance productivity, and save costs.
- Improved logistics performance: Software products use data in almost real-time, allowing asset tracking to boost on-time delivery.
- Enhanced fill rates: Inventory-planning software with machine learning algorithms can have fast demand-sensing features to look at inventory as dynamic data. This tool can help to reduce holding and inventory costs.
The digital transformation priorities of top freight forwarding companies are to standardize selling procedures, leverage a sophisticated freight rating tool, automate approval processes, and auto-generate documents.
Logistics tech companies
Logistics tech organizations have the digital transformation objectives of improving speed and time, using sensors and alarms to ensure ultra-connectivity between devices, improving intelligence in business, boosting visibility across vital departments, and ensuring the health of equipment and machines.
Digital Transformation Trends Common to All Logistics Companies
Let’s analyze the main digital transformation trends across different logistics sub-sectors. Logistics firms are using blockchain combined with telematics and IoT to gain greater visibility. Technologies like machine learning (ML) and AI are expected to improve the customer experience. The following technologies are anticipated to have a considerable impact on transport and logistics in the future:
Blockchain can enhance transparency for consumers by allowing them to view the entire journey taken by a product before it reaches them. It can increase audit transparency and boost security by making it easier and faster to identify attempted fraud. Blockchain solutions are being developed to save time and improve the efficiency and effectiveness of logistics processes.
Supply chain firms can use blockchain to facilitate smart contacts, establish more trust, and ensure more secure digital payments. IDC figures indicate that global spending on blockchain will grow at 73% CAGR to top $11 billion by 2022.
Artificial Intelligence (AI) and Machine Learning (ML)
ML and AI have huge potential in logistics. Supply chains offer large volumes of unstructured and structured data. Logistics companies can analyze and utilize this data to identify patterns and produce insights into each supply chain link to dramatically improve their operations.
Firms can use ML algorithms to identify patterns in supply chain information and spot the main elements that influence the success of their supply network while learning simultaneously and continuously. The patterns can be associated with transportation management, production planning, forecasting demand, supplier quality, inventory levels, and others. They can give enterprises the needed insights and knowledge to reduce supplier risk, enhance supplier performance, and minimize freight costs.
AI is helping to improve business, and logistics firms can use NLP (Natural Language Processing) to identify financial issues by deriving important data from invoices. Further, predictive network management can pinpoint transportation delays and assist firms to efficiently plan freight delivery. Predictive risk management involves utilizing NLP features to track online conversations and news about supply chain elements and take corrective action proactively. Infoholic Research reveals that the logistics AI market is forecast to grow at 43% CAGR to reach $6.5 billion in value by 2023.
Track and trace using IoT
IoT technology can be used to track assets between the manufacturing plant and vendor location. Companies can track materials and deliveries around their manufacturing center. They can analyze data produced by tracing and tracking these assets to spot patterns, forecast customer preferences, and pinpoint possible supply chain breakdowns. This can increase delivery visibility for consumers, improve customer services, and minimize costs.
As mentioned earlier, fleet management can benefit from using sensors in vehicles to enhance employee safety and CSR (Corporate Social Responsibility). IoT devices can generate data that fleet management firms can leverage to gain insights into vehicle and driver behavior, speeding, possible law-breaking acts by drivers, and other details.
IoT tracking and tracking solutions can help to increase profitability for companies. Frost and Sullivan report that trucking companies are utilizing IoT tools to enhance control and traceability of freight, which is leading to an increase of 10% to 15% in annual profits.
Which Logistics Sectors Have the Greatest Need for Digital Transformation?
Many assets and sub-sectors in the logistics industry are not yet digitized properly. For instance, document management is a tedious process, and one air shipment needs 21 files to be delivered 40 times through 20 steps. This complex, paper-based manual process increases the possibility of human error, as the same information needs to be re-typed multiple times during handovers.
Thus, freight forwarding and carrier companies need to digitize these assets to boost efficiency at each stage, including handovers. Tracking produces better visibility, which is important in global trade due to the multiple transport modes and interchange terminals involved in the delivery process.
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