Digitization of Logistics

Logistics has always been in a race against time to make the impossible possible. But now, they have one more runner with them: Technology.

I firmly believe, for a business to grow exponentially, it has to swiftly adapt to the new business-friendly advancements. Serving more than ?a decade in Telecom & Logistics, I have noticed various trends and scenarios, and one thing is evident that the future of the business world is where there is advancement of technology and equipment. The current technological advancement is about digitization of every sector so as to make businesses happen faster and more efficiently. A sprint has begun where companies are increasing their efficiencies and mode of functioning through digitization. Logistics is not an exception too.

But when we talk about digitization, the first question that pops up in our minds is ‘What is the meaning of digitization?’

In a layman’s term, it is changing the data and the information into digital form. However, that only is not digitization. It's a whole big universe. Digitization is the total digital transformation, rather than only changing data and information into digital form.

Digitization: Need of the Hour

Technological advances have taken every sector into its clutches and grown them by leaps and bounds. The black swan scenarios like Covid-19 have further tightened the grip of technology on businesses. Now, every sector requires better connectivity to enrich its connection with the customers. Moreover, as the businesses are budding, there’s an increased demand for global trade. Every business needs to uplift their transportation & distribution facilities, their automation, and professional transparency. In fact, to provide a seamless?customer experience, it's mandatory to evolve & embrace Technology. The introduction of new business models has enabled every sector, including logistics, to adapt digitization to maintain pace with the developing economic world. Considering this newly born trend, digital transformation is must for Logistics companies.

Why Digitization?

We know that digitization is now a demand of every industry. But before we seek our answer in the future, let's have a deep look at the past.?I went through a report by CB Insights which says there has been a tremendous evolution in the tech companies' market caps during the past 15 years. In 2021, the top 5 companies as per the market capping were tech companies, compared to the previous years where there were one or two on the list.

It was no less than a surprise to find out that while in 2006, there was only Microsoft in the Top 5 publicly traded companies, and that too on the 4th rank. But by 2016, all top 5 publicly traded companies were swept by technology-based companies. Not only they have taken over the industry but have also grown their market size tremendously. The market cap also rose from 2016 to 2021 from half a trillion to more than two trillion dollars.?It was truly an eye-opener for me.

The process of digitization has been drastically incorporated into most business models. It's not a choice but a necessity now. I was shocked to find in few reports that if earlier Benz was competing with other vehicle producers like BMW and Lexus, now it is competing with Tesla, Uber, and Google. Similar is the case with companies from different domains, be it hypermarkets, telecommunications, payment cards services, financial services, etc. There is no fixed pattern between business models; it's all about ‘Technology’ now.?

As per few reports earlier Product Life cycle was “14 Years” but with Digitization pace Product life cycle has reduced to “2.5 years” now.

?But how is such a significant shift happening?

- A Tsunami has come in the Fintech innovation capital, which has jumped by 157% from 2020 to 2021. It's mainly because finances needed in launching a start-up has decreased from $5000k in 2000 to $5k in 2011. The current situation is that all the significant money in the industries has been acquired by Fintech.

- There has been great unbundling of financial services with so many markets to tackle in payments, lending, wealth, insurance, and so on.?

So, every business and every industry has to adapt technology as its integral part to grow in this ever-growing competitive world. Well! Logistics is not an exception.

Why Digitization in Logistics?

For the ease of communication in the logistics department, there has to be a perfect solution to overcome the supply chain technicalities. What could be better than a complete digital transformation in logistics? To survive in this digital age, logistics sector requires digitization for all areas of its management for better efficiency, better performance, and economic growth.

According to a survey by Forbes Insights, 65 % of logistics companies consider digitization necessary for their survival in the market.

Current Digitization situation in Logistics

This may sound harsh, but if I truly analyse the situations, facts, and data, logistics is currently a few steps behind other sectors in welcoming digitization. For instance, while 41% of automotive companies and 45% of electronics companies are considered 'advanced' in digitization, only 28% of logistics companies have regarded themselves as advanced digitized. Moreover, only 35% of shippers find the 3PLs support valuable for their significant initiatives, and only 26% of shippers are satisfied with current data analytics capabilities in the industry.?Additionally, only 6% of shippers consider blockchain as a crucial component of logistics.

According to the industry trends, around 74% of the RFPs include components of digital solution, while the rest 38% presume digital to be a part of the solution. COVID-19 has only served to accelerate this interest. In 2020, however, the digital app of one of the logistics company saw an astounding 460% increase in uptake and activity from January to June. In addition, a few of the online booking platforms launched in 2019 saw a significant increase in the three months between March and June 2020 compared to the previous three months. Bookings were up 49.9% across the platform. These all incidents indicate both a need and a new willingness to use these online tools.

?In logistics particularly, customers have started preferring booking online or on mobile applications for many reasons:

-??????Traditionally, shippers would have to go through a lengthy rate calculation and booking process in a system in which it is not uncommon to see overbookings to the tune of 30%, often leading to the rolling of cargo. But now, clients can click and book online or from a mobile, as simply they would while booking airline tickets online.

-??????Rate calculations are fixed at the time of booking, and a cargo loading guarantee avoids the unpredictability of being rolled.

-??????In addition, some of the prominent players in the industry have started using comprehensive track-and-trace API definitions to support easier cross-carrier shipment tracking by carriers, shippers, and third parties.

-??????TMS, Load Planner, Route Planner software’s have ease the operations while increasing the accuracy of operations to 90%+. ?

?Strategies for Digitization in Logistics

Everything has changed, the consumer, the producer, and the expectations as well. Emergence of the mobile world has enabled the customer to do all the functions with the help of a touch only. The bank transaction, bill payments, submission of fees have been switched to just a tap mode. Every sector that is associated with economic development and almost every business is dependent upon logistics, and the digital transformation of this sector needs strategical advancements. Every company has its own set of goals and challenges, and the transformation has to occur accordingly. Digitization is not a single step change in logistics, but it needs a series of modifications for the complete digital transformation of the logistics sector. Using digital technologies by logistics companies can’t help creating a digital supply chain. The whole ecosystem of the logistics company has to be under operation and the connectivity as well. There must be a process for the transformation to occur.

So, I have jotted down some points that can be considered for digital transformation in the logistics sector-

·???Identify the challenges and needs of the company-?Digitization as a process must be taken as a mean to increase the company's efficiency, not as a liability. Every company has its way of dealing with the customer and handling operational technicalities and then implying that digital advancement is necessary to proceed in a grander manner.

At every step, or we can say every operational level, there must be a recognition of challenges and requirements. Every company has its own set of operational downturns, and one has to look for the specific areas where development is needed. The data and all the paperwork have to be digitalized. The physical documentation is a thing of past now. The consignments and deliveries of the companies have to be assured of the time and quality as well. Every company or customer needs fast and efficient delivery and tracking every step that the logistics follows. This can only happen through digitization.

·???Setting Budget for each sector-?Each logistics company has its own set of expenses and the budget for every area of operation. The company needs financial planning to implement during development in a digital arena.

·???Tracking the development-?After digitization, everything will be automated, but tracking the product is necessary in automation. Until the whole operation starts running smoothly in better coordination and automation, motivation and effort are needed constantly for any business to rise.?

Technologies aiding the digitization of logistics?The evolution of any sector into a digital mode involves many technological upgradations acquired through many different ways and processes.

·???Cloud computing –?Logistics is a sector that involves a lot of data, and management of this enormous amount of data is a cumbersome task. To facilitate this, many formats have been used by the service providers, like the EDI format. The EDI format has now been upgraded to API format with the help of internet. To manage the vast data components, cloud computing is used very commonly. Cloud computing is a technology for managing and saving the data and information of a company. The logistics sector is also utilizing cloud computing to accomplish various tasks efficiently. Cloud has enabled multiple industries to cope with the complexity of the modern operating system and now penetrating the logistics industry.

·???Blockchain in Logistics-?Initially, the whole logistics industry was based on complicated paperwork that would upsurge the transportation cost by 20%. Furthermore, missing one paper could delay the delivery extensively and leave the receiver stranded. Blockchain a blessing in disguise for logistics. It has transformed more complex procedures to a crisp, clear, and transparent transaction. Though the concept of blockchain was originally developed to account the virtual currency like Bitcoin, it has been incorporated into many different industries. Blockchain technology has facilitated in creating an authentic record through an encrypted audit trail that can be accessed by every individual linked to it. The verified record, once computed, cannot be reformed or altered and is tangible for every customer willing to track the information. Giving up the traditional physical documentation and using the new blockchain method has highly augmented the speed and efficiency while reducing the cost.?

·???Internet of Things-?Internet of Things (IoT) can be understood as the network of data and information according to the operating system connected through the internet. To run a smooth operation of the industry, IoT provides an intelligent way to interact between various departments of the logistics sector. It can reduce effort and increase the efficiency of any industry by creating a connection through multiple devices and joining the platforms with one another. IoT can help the logistics sector manage tasks more accurately and smoothly. The transmission and compilation of data can be hassle-free and error-free. One can track the real-time delivery and transportation of consignment instantly.

·???AI in Logistics-?New technologies have enabled most industries' digital advancement, and logistics is no exception. With the introduction of cloud, blockchain, and IoT, the digital transformation has added other advanced technologies like Artificial Intelligence (AI) into logistics. The automation of various departments and systems has accelerated the industry's growth to many folds. Many giants of the business world like Amazon and Google have started to invest in AI for the future perspective. AI technology is an effective way to enhance the supply chain by providing an insight into better transformation. AI technology can transform every sector by increasing accuracy and efficiency, including logistics.?

Advantages of Digitization of logistics?I have profound confidence in digitization process as it’s an excellent idea for the future of logistics. It ‘advances’ operations. One of the 2020 Council of Supply Chain Management Professionals (CSCMP) survey states the lack of clean and valuable data was one of the leading concerns of shippers and 3PL providers alike, with 77% and 82% respectively. Hence, this was a key problem in implementing analytics.

With digitization, the industry can ensure a better data quality that benefits both the company and the customer. It can create better customer satisfaction and minimize cost and errors. Through the digital makeover, logistics can provide a better solution to the customer expectations and increase the area of their operations. With improved technologies in the sector's functioning and snap of a finger, one can establish himself as a better player in the market.?The overall digital transformation of the whole industry can improve performance and enhance the sector's effectiveness in other sectors too.

?Future of Digitization in Logistics The prevalence of cheaper digital modes and the introduction of cloud computing into logistics have enabled the technology to be assessed very effectively. While currently, the logistics is behind the curve in terms of technology, but future will see a great evolution in logistics technology. The existing companies of the logistics sector are tending to adapt the digital transformation to increase their market value further and to survive and compete with the newcomers in the industry.

From AI-powered data analytics to blockchain, there are substantial potential applications of new technology within logistics. Likewise, similar efforts are being made by the Blockchain in Transport Alliance (BiTA) to develop standards that will help in the establishment of public blockchains for use by the entire industry. Gartner predicts that, by 2023, over half of all B2B transactions will take place via real-time APIs.

The transportation and logistics sectors can also aid to contribute to the national economy of any country. The digital advancement will assist to trade with other countries through advanced modes of the exchange. It can lead to improvements in global business and the overall global market. Enabling digitization in logistics can push it to a new horizon and help e-commerce develop extensively.?