Digital transformation in logistics: technology-driven streamlined operations and enhanced customer experience
Managing logistics in today's digital age comes with new possibilities, as well as pressures. On the one hand, the digitization of systems throughout supply chains has unlocked efficient, data-driven ways of operating. On the other, this same transformation has built up the volume and velocity of orders and shipments, and organizations can't afford to fall behind.
Both B2B and B2C buyers have adjusted their expectations to suit this age of ubiquitous e-commerce and high-speed communication. Brands are becoming faster and more efficient, constantly competing with one another, and buyers now fully expect high-quality customer service and fast, same-day or next-day delivery.
So, how can companies keep up with this faster market? Technological upgrades represent an important answer. Two-thirds of companies in shipping and logistics have formalized digital transformation plans, while 31% are in the process of making these plans, per S&P Global research. Becoming adept at digital operations is now a must in the world of logistics.
Digital transformation: major takeaways for the logistics space
Two important forces are converging to make digital transformation not just a nice-to-have but a true need-to-have. The first is the aforementioned change in customer expectations.
As industry-leading companies in both the B2B and B2C segments become faster in fulfilling orders, powered by technology such as automation, there's a need for all other businesses to keep up with the unrelenting pace. Customers who have become accustomed to receiving same-day delivery may hesitate to settle for anything less.
The second important trend is the need for organizations to optimize their supply chain performance. With so much focus — and investment — going into logistics, there is an intensive need to control spending and processes in this space.
The use of data can be the cornerstone of digitization and optimization efforts. Modern supply chain transactions are carried out digitally and generate a trail of raw information that can turn into fuel for organizations' advanced analytics systems. The insights from this data can reveal opportunities for simultaneous savings and process improvements.
Businesses that fail to embrace digital transformation could quickly fall behind in supply chain performance, hampered by manual processes that their more advanced competitors have already phased out. This divide between digitized logistics organizations and those that fail to adapt could become stark in the years ahead, adding pressure to evolve quickly.
Roadblocks to digital transformation
Businesses that fail to adapt smoothly to new, digitized work styles tend to be held back by a few specific issues. Overcoming these challenges should be top of mind due to the competitive need for evolution.
Notable roadblocks on the path to digital transformation include:
A need for real-time visibility and tracking: Modern supply chain management is defined by access to real-time data. When organizations don't have the systems in place to meaningfully analyze information, the massive amount of data stored in enterprise resource planning (ERP) systems or flowing in from global positioning systems (GPS), radio-frequency identification (RFID) tags and much more can be overwhelming. Processing the raw input from those devices provides new opportunities for efficient tracking to prevent loss and damage, as well as positive customer engagements, giving buyers detailed updates on the position of their shipments.
Continued limitations of legacy systems: Organizations still using extensive legacy technology are at a distinct disadvantage in their attempts to modernize. Given that these systems are often expensive to maintain and difficult to integrate with other platforms, including advanced analytics, machine learning (ML), and artificial intelligence (AI) tools, upgrading is a high priority. This process often comes with challenges, such as difficulty transferring data and the expense of integrating replacement tools.
Data privacy and cybersecurity risks: Three major types of cybersecurity risk can set organizations back in their attempts to modernize and improve supply chain performance — described as the "risk trinity." These include a direct attack on a supplier, a stepping-stone hack of a software partner and the exploitation of an embedded vulnerability in a company's software that provides a backdoor for attackers.
Skill gaps among key personnel: People are the real lifeblood of the supply chain, so if individuals lack knowledge and abilities related to digitization, efforts will necessarily encounter strong headwinds. Indeed, when S&P Global asked shipping and logistics leaders what the biggest issue keeping them from becoming more technologically was, the No. 1 response was a skills and people shortage, cited by 40% of respondents, with a legacy mindset coming in second. Team members must understand the objectives and processes associated with digitization to make it happen smoothly.
Overcoming these factors should be the primary concern of companies empowering their logistics processes through digitization. Once these pressures and limitations have been dealt with, it's possible to tap into a new and more effective style of operations.
To see an example of this process in action, you can read about Transcenda's engagement with BNSF Logistics. BNSF sought to roll out new digital capabilities without destabilizing its systems — all while dealing with legacy systems integration, demanding careful focus from both internal stakeholders and Transcenda experts.
As a result of this collaboration, the supply chain organization reimagined its customer experience while increasing load count by over 50% per head and saving more than $500,000 annually. These are the kinds of results businesses aim for when embracing the latest trends in digitization.
Emerging digital logistics trends
Organizations that successfully overcome the challenges of digitization can unlock new capabilities to deliver better customer experiences and future-proof themselves as the market changes and evolves around them.
The new practices associated with digitized logistics are closely related, because a few overwhelming trends, namely data utilization and automation, tend to tie them together. Organizations pursuing a program of digitization can unlock advances in several areas, including:
End-to-end visibility: Knowing the position and status of every moving piece within the supply chain — down to the individual shipment level — is a powerful capability for today's organizations. While achieving such a view is a challenge, once unlocked, it becomes a crucial opportunity. This new level of insight allows companies to provide a better customer experience, engage in more effective loss prevention efforts, mitigate supply chain risk and perform more accurate, useful demand planning.
The Internet of Things (IoT) and big data: The IoT is a concept based on collecting data through a network of sensors to add "intelligence" to devices and objects that previously lacked it. Deloitte projects that as the IoT increases its footprint within the supply chain, organizations will find ways to change their business models for the better. The new sensors can enable a previously impossible level of real-time visibility, one that can extend to customers.
Cloud computing and software as a service (SaaS): The cloud, with its promise of scalable computing resources, has reshaped the possibilities in every industry, and logistics is no exception. Per S&P Global research, 40% of industry respondents see the cloud as the most impactful tech area in the push for digitization. With the ability to access powerful SaaS platforms from anywhere, at predictable costs and on a scalable basis, logistics firms of all kinds can level up their digital capabilities.
Robotic process automation (RPA): Automation has become more advanced and capable over the past few years. RPA is an approach to automating common tasks that allows computer systems to take over work previously performed manually. This enables a higher degree of productivity and precision around repetitive and menial work and lets stakeholders turn their attention to value-adding tasks that require human intelligence to complete.
Digital twins: A digital twin is a computer model that represents real assets and real-world conditions, allowing users to make very accurate decisions based on complex projections and analysis. Modeling out the whole system and using AI and ML technology to run predictive and prescriptive scenarios allows effective planning. Companies equipped with the raw computing power of the cloud can run advanced digital twins and take an ever-closer look at their supply chains.
Advanced last-mile delivery: The desire for customers to receive their shipments as quickly as possible is not going away. In response, logistics organizations have adopted new technologies and experimental options such as drones, delivery robots and electric vehicles. The rebuilt last-mile capabilities these companies possess allow them to be more cost-effective and streamlined in their approaches while reducing their overall costs and passing those savings along to their buyers.
Sustainability and green logistics: Responding to demand for sustainable practices is another possible use case for digitized logistics. This could mean making adjustments to current practices, such as optimizing delivery for more efficiency. It may also entail major shifts, such as converting a whole delivery fleet to electric vehicles. Organizations that shift their practices to become earth-friendly may have a significant advantage as regulations and customer preferences shift.
Accessing these digitized supply chain capabilities is not a future priority — companies are already well on their way. Keeping up with the wave is a key facet of staying competitive today.
Get in touch with design and engineering experts
An engagement with a technology partner can be the key that unlocks digital transformation for your organization. The design and development of new solutions can deliver bespoke capabilities that fit in with your existing systems and push your overall business toward a more efficient, data-rich and automated next stage.
Contact us to learn more about design and engineering in the rapidly evolving supply chain space.
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