Emerging Technologies and the Future of Logistics

Stephen DeAngelis

November 19, 2015

There are a lot of moving pieces in a supply chain, but none are more central than logistics pieces (i.e., those parts of the supply chain that physically move things from one place to another). Logistics, however, is undergoing some significant changes thanks to emerging technologies. One sign of these changes is taking place in Australia. Jamie Smyth (@JamieSmythF) reports, “Rio Tinto has rolled out fully automated driverless truck fleets at two of its iron ore mines in the Pilbara in Western Australia, in what it says is a world first. The Anglo-Australian miner is also trialling driverless trains and deploying autonomous drills in the region as it embraces new technologies to cut costs and boost safety.”[1] Commenting on this development, analysts from Stratfor conclude, “As the developed world undergoes demographic decline and labor costs continue to rise, offsetting these two trends remains paramount to reinforcing economic health. Automation and remote-controlled operations have several applications in agriculture, mining, manufacturing and industry — particularly in the developed world, where the physical and digital infrastructure to support it is the most well developed. And they are important along every step of the supply chain, from Rio Tinto’s mining of raw materials in remote Australia to delivering a final product to a consumer in urban Manhattan.”[2]

 

Last fall Han Nabben (@Han_Nabben), Director of Global marketing & Communications at Damco, discussed a dozen trends he believes are affecting or will affect the future of logistics.[3] They are:

  • Growth patterns: Growth in the logistics industry is no longer driven by exports from Asia to North America and from Asia to Europe. It will come from elsewhere, and will be more fragmented, more unpredictable and more volatile. Economic and population growth will be increasingly centred in cities. Infrastructure is becoming a major determinant for growth.
  • Flexibility: Meeting consumer’s requirements at multiple locations with multiple transport modes at different times requires a flexible supply chain that can adapt easily to unexpected changes and circumstances.
  • Globalisation: International, mature and emerging markets have become a part of the overall business growth strategy for many companies. Going ‘international’ has become the standard and logistic solution providers need to enable that trend.
  • Near shoring: As labour costs in Asia and transportation costs rise, increasing amounts of manufacturing are being brought closer to the end user.
  • Multi-channel sourcing: End-consumers increasingly source via multiple channels, ranging from brick & mortar shops to e-commerce. The logistics industry needs to support multi-channel strategies of their customers.
  • Information technology: The growing complexity and dynamism of supply chains requires increasingly advanced Information Technology solutions.
  • Continuity: To be able to secure speed to market and to reduce risk of delays, alternative transport modes and routes are required to support the continuing trend of outsourcing of logistics services.
  • Sustainability: Customers increasingly prefer products that are made and sourced in ‘the right way’; minimising business’ social, economic and environmental impact on society and enhancing positive effects.
  • Compliance: Anti-bribery and corruption legislation is having an increasing impact on supply chains, since multinational companies demand that no facilitation payments are made during the export of their goods, yet still seek to source from low cost countries, which are often also at the bottom of Transparency International’s global corruption index.
  • Partnerships: Manufacturers continuously search for supply chain innovations and gains through partnerships with logistic service providers.
  • End-to-end visibility: Complete visibility of the entire supply chain aspires to achieve true demand-driven planning, allowing efficient response to changes in sourcing, supply, capacity and demand.
  • Complexity: Supply chains are becoming increasingly complex and dynamic with sourcing locations being changed increasingly quickly and purchase orders becoming smaller and more frequent.

Nabben’s list deserves more than a quick perusal. I’ve touched on every one of those trends in previous articles and each of them deserves serious consideration. Some of the trends are ironic. For example, driverless trucks are being considered for use in the United States because there is a serious shortage of truck drivers (at the same time immigration remains a hot topic because people fear immigrants will take jobs now held by Americans). Losing human jobs to automation creates social worries as well (but that’s a topic for another article).

 

Nabben notes that cities are becoming increasingly important as the majority of the world’s population continues to become urbanized. Although there is a lot of talk about creating smart cities, too little talk is spent on how logistics is going to work in large cities where citizens would prefer not seeing large trucks clog their streets delivering goods. Technology is surely going to play a role in trying to solve the urban “last mile” challenge. Drones, driverless delivery vehicles, and underground systems are all likely to play a role.

 

The last two trends on Nabben’s list (i.e., end-to-end visibility and complexity) are receiving a lot more attention nowadays because emerging technologies are becoming available that can help deal with these challenges. Two of the more important technologies are the Internet of Things (IoT) and cognitive computing. Combined these technologies can help provide the kind of end-to-end visibility that has until now eluded supply chain professionals. They can also help reduce complexity since sensors can do much of the tracking and cognitive computing systems can handle most of the decision making. Adam Robinson (@TweetsByARob), Director of Marketing at Cerasis, asserts, “In today’s highly competitive marketplace, it’s imperative for businesses to innovate new ways to streamline their supply chain and optimize productivity. With the aid of modern supply chain technology applications, you can create better visibility within your supply chain, which will enable you to have more control over your business and stay ahead of the competition. Technology can help to simplify your supply chain management, which will enable your business to operate more efficiently, give you more visibility and control over your inventory, and help to reduce your operational costs.”[4] Robinson lists four different ways that technology is being used to improve logistics. They are:

1. Computerized Shipping and Tracking — With the aid of modern technologies and web-based software, like a transportation management system (TMS), you can simplify the supply process and dramatically reduce shipping errors. Utilizing systems like TMS, ERP, and even CRM enables savvy business owners to consolidate all aspects of their supply chain in one place. The software will allow you to digitally organize inventory data, monitor and manage shipping, and tracking information, and create electronic bills of lading or invoices with ease. Through the use of supply chain management technologies, you can greatly reduce the time spent shipping, receiving, tracking, and compiling order data, which will save your company both time and money. Not only will the use of widely available supply chain technology applications improve the operational efficiency of your supply chain, it will also greatly enhance the customer experience by providing consumers with the ability to continuously track the status of their orders. Through digitalized tracking, you can significantly reduce shipping errors and more rapidly respond to the errors that do occur. In this day and age, having technology is essential to running a thriving corporation that is both business and consumer-friendly.

2. Radio Frequency Identification (RFID) — Radio Frequency Identification (RFID) is a vital piece of technology that can provide innumerable benefits to the business owner. RFID chips are placed on every product and provide a way for business owners to easily track their inventory. Due to the increased visibility RFID chips provide, they will substantially improve your supply chain efficiency by detecting any order anomalies as they occur, enabling employees to immediately correct mistakes. In addition, it allows for easier and more consistent tracking, enabling business owners to have maximum control and visibility over their products at all times. Since RFID chips provide computerized product management, they can eliminate the potential for errors, simplify the supply chain, and reduce operating costs. Radio frequency identification (RFID) has become one of the megatrends in logistics. …

3. Use Social Media to Streamline Supply Chain — Social media is a popular technology that has swept the world. … Through the use of social media, you can create more open communication with customers, increase the visibility of your company, improve the demand on your products, utilize cost-effective and time-efficient marketing strategies, lower your operational costs, and enhance your company’s overall productivity. Social media can be used to interact with customers, respond to questions, report accidents or weather conditions that may impede delivery schedules, and create automated updates about your inventory.

4. Big Data Will Envelope and Empower all Other Supply Chain Technology Applications — The scale, scope and depth of data supply chain technology applications are generating today is accelerating, providing ample data sets to drive contextual intelligence. … The majority of supply chain data is generated outside an enterprise. Forward-thinking manufacturers are looking at big data as a catalyst for greater collaboration.

Stratfor analysts conclude, “The overarching progress toward automation is inevitable.” And inevitably the logistic pieces of the supply chain are going to see some of the most significant changes due to technology in the years ahead.

 

Footnotes
[1] Jamie Smyth, “Rio Tinto shifts to driverless trucks in Australia,” Financial Times, 19 October 2015.
[2] “Automated Supply Chains Take an Inevitable First Step,” Stratfor, 19 October 2015 [registration required].
[3] Han Nabben, “12 Trends that are Shaping the Future of Logistics,” Supply Chain Digital, 16 September 2014.
[4] Adam Robinson, “[Infographics] 4 Uses of Supply Chain Technology Applications Moving Shippers into the Future of Effective Management,” Cerasis, 14 October 2015.