Digital Transformation Technologies and Predictions!

Digital Transformation

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Digital transformation article written for Supply Chain Game Changer by, and permission to publish here provided by, Andrei Klubnikin at at R-Style Lab.

According to a recent survey conducted by Forbes Insights, 65% of logistics, supply chain and transportation executives acknowledge the necessity to revamp existing models and add flexibility to business operations in order to ensure omnichannel delivery, reduce costs and meet the ever-shifting consumer demand.

In fact, 72% of enterprises involved in planning, executing and monitoring the flow of products from the point of origin to the point of consumption consider improved customer experience the key benefit of business transformation.

The path to increased operational efficiency and customer satisfaction lies in the digitalization of logistics workflows.

Driven by considerable advances in hardware and software development, as well as the surging global economy, regulations and heavy competition, 62% of business leaders surveyed by Forbes admitted that their companies were undergoing Digital Transformation at the time.

With supply chain being a goldmine of structured and unstructured data, it seems only natural that the Internet of Things, Artificial Intelligence and blockchain are considered the key drivers of Digital Transformation in logistics, supply chain management, warehousing and transportation.

By gathering the information generated by connected equipment and logistics software and matching the data against  Machine Learning models implemented in the cloud, businesses can achieve greater supply chain transparency and dramatically reduce operating expenses.

Having said that, the industry largely trails behind the digital curve.

Although cloud computing adoption rates across the sector topped 50% last year, a little over 20% of businesses involved in logistics and supply chain management work with IoT software companies to fast-forward their Digital Transformation initiatives, while only 10% of logistics companies rate their data processing and analytics capabilities as advanced. 

In this article, I aim to identify the technologies which are expected to make the most profound impact on logistics, as well as the major barriers to the digitalization of the sector.

Emerging Technologies in Logistics & Their Potential Impact

INTERNET OF THINGS

The Internet of Things, which is often referred to as “telematics” in the realm of transportation, could have a direct economic impact of $ 1.9 trillion on logistics and supply chain within the next five years. 

Operating on three levels — i.e., connected hardware, infrastructure which facilitates data exchange and processing and the software tier, —  IoT blurs the line between the digital and physical, as virtually any object such as a delivery vehicle, picking cart or inventory items can potentially become trackable.

Equipped with IoT solutions, manufacturing, retail and transportation companies can monitor goods’ whereabouts in real time and ensure they arrive at the right time and place and in appropriate condition. Furthermore, IoT solutions enable businesses to assess demand based on historical data and automate inventory replenishment. 

Besides RFID- and barcode-based asset tracking, the applications of the Internet of Things technologies in logistics include:

  • Connected & autonomous delivery vehicles.While on-board GPS trackers, driver drowsiness detection technology and fuel level sensors have become a reality in modern logistics, further advances in electronic engineering and computer vision are expected to give rise to unmanned delivery solutions including drones and driverless trucks aimed at automating short-haul delivery services and facilitating same-day delivery to remote areas.
  • Smart warehouse.Unlike traditional warehouse management systems (WMSs), IoT solutions allow warehouse managers to monitor goods down to the item level, streamline order processing with the aid of picking robots and improve inventory accuracy by up to 95%.
  • Wearables. The applications of the wearable technology in logistics, supply chain management and transportation encompass hand-worn, head-mounted and fabric-contained devices which expedite picking operations in the warehouse, monitor employees’ well-being and provide hands-free guidance to industrial workers. 

ARTIFICIAL INTELLIGENCE

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As I mentioned earlier, the logistics business is interwoven with historical and real-time data. To fast-forward the ultimate Digital Transformation goals, it has to be captured, analyzed and acted upon.

With the greater availability of cloud managed services supporting rapid and cost-effective development of custom AI-based analytics solutions — as well as exponential growth in IoT devices’ computing power enabling software engineers to relocate data processing closer to the edge of a network, — these tasks become manageable.

Today Artificial Intelligence can sense much of textual and spoken interactions— the comprehension ability of AI speech-to-text algorithms has already surpassed that of humans — and successfully transform vast amounts of visual data into system-usable content.

Large-scale adoption of AI solutions is set to make a revolutionary impact on supply chains:

  • Intelligent forecasts.Although AI-based demand forecasting is still in the early stages, smart algorithms tend to display a 6.4% higher accuracy rate compared to traditional forecasting methods for industries with highly volatile demand, as they take more factors into consideration (from demand fluctuations to bad weather). By ensuring a consistent flow of data throughout a supply network and incorporating advanced ETL capabilities into enterprise software solutions, companies involved in logistics and supply chain management can achieve near-real-time information exchange, anticipate customer needs and personalize buying experience.
  • Route & freight cost optimization. Besides anticipatory shipping enabled through smart demand forecasting programs, AI technology can be integrated into delivery modules to optimize routes based on real-time environmental, traffic and vehicle/staff availability data, and thus reduce the last mile costs, fuel consumption and carbon dioxide emissions.
  • Increased automation with robotics.From autonomous mobile robots (AMRs) which locate, track and move inventory in warehouses and fulfillment centers to collaborative workspaces where humans and intelligent machines work hand in hand, robotics presents a unique opportunity for businesses looking to fill the labor gap and scale operational capacity.

BLOCKCHAIN

The applications of the distributed ledger technology in logistics largely fall to smart contracts — i.e., self-executing digital contracts which allow companies involved in goods distribution to automate the buying process, eliminate bureaucracy and commercial process inefficiencies related to human error, secure payment transactions and increase supply chain transparency.

Furthermore, a blockchain-based logistics system can store electronic documents on goods’ origin, transportation conditions and expiration date. With each item having a unique identifier, the cutting-edge technology offers an opportunity to monitor products’ journey from a manufacturing facility to the end user, and therefore can be used in the fight against counterfeit pharmaceutical goods, which comprise 30% of all medications sold in emerging markets, and ensuring cold chain quality for temperature-sensitive products.

Identifying the Barriers to Digital Transformation in Logistics

  • Limited IT capacity. According to the Digital Supply Chain Transformation survey conducted by GT Nexus, 39% of logistics executives cite the absence of the required technology skills and expertise — on-site and throughout the supply chain — as the major barrier to business digitalization. To accelerate digital workflow implementation, 61% of companies are expected to rely on external partners — i.e., outsourcing, technology and Digital Transformation consulting providers.
  • Resistance to change. 25% of logistic and transportation companies do not have a digital strategy in place. 48% of businesses involved in product distribution rely on traditional technology and legacy software to communicate with partners and manage workflows. Only one-fifth of logistics executives admit having access to data from the extended supply chain and leveraging it for well-informed decision making. The lack of collaboration between technology and business development teams only exacerbates the problem.
  • Technology constraints. The major technology-related obstacles for innovation uptake include failure to ensure connectivity across the supply chain, AI shortcomings — i.e.,  immature collision avoidance technologies preventing delivery drones from mass adoption, — and the Internet of Things security challenges, which stem from flawed hardware and software systems design.
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In real-time economy, speed, timing and data-driven decision making are key to ensuring a company’s success and meeting the liquid customer expectations that stretch beyond on-time delivery. The technologies that hold promise for the logistics sector mostly revolve around location, connectivity, Big Data, cognitive computing and security. 

Considering the fact that 74% of logistics executives currently place their companies in the middle of the digital advancement scale (thus, most Digital Transformation projects in logistics are still at the Proof of Concept stage), it is safe to say a solid start on digitalization has been made — and only takes a technology leader and team agility to steer the businesses towards a successful conclusion.

Author Bio

Andrei Klubnikin is Content Marketer at R-Style Lab. He creates articles in collaboration with IoT experts and highlights the benefits of adopting cutting-edge technologies in business. Andrei also writes for Datafloq, DZone, IoT Evolution, IoT for All, StartUs Magazine, etc.

Originally written for Supply Chain Game Changer and published on May 1, 2019.

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