How Digitization is Transforming Logistics Services
The increasing volume of global trades will put more pressure on the existing supply chain, with the logistics services sector estimated to reach a value of $16,445 billion by 2026 with a CAGR of 7.4%. A confluence of forces – Amazon and Alibaba, electrification and sustainability, autonomy and robotics, among others – are changing the logistics industry to become more resource efficient, faster, and responsive to customer needs. Digitization is a key enabler.
Logistic Services: Value Chain Business Activities and Examples
Digitization across the value chain
Enabling technologies such as sensors, IoT, data analytics, and robotics are being deployed into specialized applications for the logistic sector. For example, vehicle telematics and self-driving technologies initially developed for passenger vehicles are now finding applications in the trucking sector to solve for the growing pain point of an increasing shortage of trucker drivers. Peloton is developing a truck platooning system to reduce operating costs, while Locomation is developing a complete self-driving technology for heavy duty trucks. Robotic innovations for warehouses and fulfillment centers also aim to solve the shortage of general labor with technologies ranging from automated forklifts to fulfillment robots.
Digitization of current operation processes is another area that is much needed for a transformation. Legacy operations that involve phone calls and faxes to create shipment orders are not only inefficient, but also lack visibility in tracking shipments’ progress. Digitization also provides more granular real-time data (think available containers, rates, etc.), hence enabling the wave of new freight forwarding platform companies that are aiming to streamline the shipping process.
Online marketplaces that seek to monetize under-utilized assets (e.g. BlaBlaCar/Airbnb) is another trend enabled by digitization. Freight shipping marketplaces like Convoy, CargoX, and HuoCheBang allow shippers to connect with carriers with underutilized assets and provide a platform with more granularity on shipping service availability. Similar platforms also exist for last-mile delivery services such as Shadowfax and Roadie.
Challenges to overcome
Data can be both a blessing and a curse when it comes to digitization. On one hand, device-level data provides carriers with incredibly useful information across their entire operation, from planning and asset utilization to billing and invoicing. On the other hand, data integration is a challenge in itself to derive the level of granularity across the supply chain. Companies like Turvo and Elementum are developing an end-to-end solution to consolidate various data sources into a value-add centralized platform. Find out more about cleantech innovators.
Another inherent challenge in deploying digital solutions is the readiness of the supporting infrastructure. Particularly for technologies designed for warehouses, they would require wireless connectivity networks to support the sensors and other hardware that would be operating in the facilities. For remote warehouses that were constructed for storage, this would likely require a complete retrofit, meaning additional costs and complexity in sales cycles if the warehouses are not owned by the same prospective customer. And the often unspoken challenge of digitization is cybersecurity – what is keeping the data safe?
At our upcoming Power Breakfast, we’ll dive deeper into this topic to explore how the logistic sector will change in the next 5-10 years. What will be the rate of new technology adoption in various points along the logistics chain and what ripple effects are they likely to have? What new business models are forming as a result of such new technologies?