How can business digitisation drive the transport industry?
History tells us that the transport and logistics industries have usually been behind the curve when it comes to digitisation and mobility compared to other industries.
However, in the last few years transport and logistics companies have been embracing digital devices and innovations. Why? Quite simply, because they have helped to increase the bottom line, and are enabling business leaders to create a wider gap between their company and its competitors.
This is set to continue as illustrated in the World Economic Forum white paper on the digitisation of the logistics industries, which states $1.5 trillion of value is at stake for logistics players as a result of digital transformation in the industry up until 2025.
A survey by IDG substantiates this and discusses a device explosion, therefore highlighting mobility as business critical with 64 per cent of enterprises placing it as a high priority on their technology agendas.
With IoT in transportation set to see a CAGR (compound annual growth rate) of almost 17 per cent by 2020, there is a clear need for companies to underpin their transformation strategy with mobility, and place it at the beating heart of the business – but is this happening across Europe and what does it look like in reality?
More devices, increased complexity and greater risk
40 per cent of business leaders in the industry said improved use of technology was a main focus for growth. From mobile tracking solutions and advanced GPS to telematics, the transport and logistics industry is embracing a multitude of IoT innovations. Businesses have seen the benefits of greater mobility, such as: improved internal and external communication, customer retention and an increase in the speed of decision making.
However, as the number of mobile devices explodes there also comes more complexity, IT pain points and far greater risk.
Therefore, will the promise of nirvana through mobility be vastly different from the reality?
To begin to answer the question there must be a mobility management plan in place. Only then can devices be managed correctly and work effectively.
Mobility management cannot work in isolation - for transport and logistics businesses to reach the end goal of reaping all the benefits they must place mobility at the heart of a transformational strategy. If not, it will be left working in a silo and unable to deliver true ROI and competitive differentiation.
Strategy is not the only consideration; transport and logistics companies are operating in a specific industry with its own idiosyncrasies, therefore they must consider their landscape. The UK Logistics Confidence Index 2016 highlighted that 49 per cent of business leaders confirmed current business conditions are tough with some of the biggest concerns cited as customer price pressure and cost control.
The Index also noted the best way to respond to pressure from customers demanding more for their money was through technological innovations, as this would both cut costs and add value.
Despite concerns over harsh business conditions the industry is also continuing its trend of mergers and acquisitions. The Index showed that over a third of respondents said they were likely to acquire another business over the next six months, which is one of the highest results since the survey began in 2008.
This can add further challenges when it comes to business critical mobility. Mergers and acquisitions can present mobility stumbling blocks as they often require the need to migrate or manage legacy systems. Without due diligence this becomes complicated, making it vulnerable to error, and as a result much less likely to deliver effective outcomes.
Gaining the best traction from IoT innovations
The industry needs to think laterally, and with the future in mind in order to see the real value from IoT. At SOTI’s Research & Innovation Lab, mobility related innovations are being devised and evaluated every day to help customers gain the best traction from connected devices.
SOTI’s MobiControl solution already manages the mobile equipment in customers’ vehicles; therefore to go a step further the company has been looking at connecting a device to the vehicles self-diagnostic and reporting capability. Establishing this connection will enable information from both the device and vehicle to be analysed, which will undoubtedly provide an improved solution to the customer. In the case of Fleet Management companies for example, this type of connection is crucial; the customer is then able to remotely monitor and troubleshoot the on board device and also ensure the overall smooth running of the vehicle.
There’s no doubt IoT is transformative for the industry. A clear gauntlet has been laid down, the growth potential and competitive advantage to be gained through IoT is there for the taking. For instance sensors installed in vehicles can effectively create their own IoT network; by tying in the fleet management system into this network allows a business to collect more crucial data from the vehicle than ever before. The ability to remotely monitor and track the temperature of for example a refrigerator truck, will allow for immediate response should the climate change.
However, investing in IoT technologies doesn’t come cheap. Businesses need to ensure those investments pay off and real value is delivered. 40 per cent of the value of IoT requires multiple systems to work together and 60 per cent requires the ability to integrate and analyse. Therefore, it is more than just connecting the dots; it’s being able to do something with it and making things smarter.
The industry is already making great strides by embracing IoT and mobile devices. Business critical mobility is being clearly driven by some companies and they are reaping rewards. However, it’s not widespread and for those considering the IoT investment and wanting to generate a real return and the creation of mobility nirvana then a strategic mobility management plan needs to be in place. The key also lies in starting small and achieving great success, then to build on it. In reality, in every industry we are seeing Io (some) T rather than IoE (Internet of Everything).
Finally, in order for companies to see real benefits from IoT the mobility strategy needs to sit at the heart of the organisation. Only then will organisations reap the business critical mobility rewards and leave competitors in their rear view mirror.
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DHL and UPS: How is 3PL Evolving in 2021?
To optimise their supply chains, many companies have turned to third-party logistics providers—3PLs—to outsource how they manage inventory, stock warehouses, fulfil customer orders, pack pallets, and handle returns. Especially in the midst of the pandemic, corporations have struggled to satisfy their customers, mitigate shipping delays, and react to rapid spikes in demand. In short: if logistics isn’t your core competency, rely on the experts.
To examine the current state of 3PL, we decided to have a quick roundtable with Philippe Gilbert, President of UPS Supply Chain Solutions, and Phil Roe, Chief Customer Officer and Strategy Director at DHL Supply Chain. Here’s what they have to say on the subject:
What are the fundamental benefits of partnering with a third-party logistics provider?
‘Proper supply chain visibility and planning is one of the key challenges facing modern supply chains’, says Phil. ‘Supply chains now cover multiple jurisdictions across significant distances. They’re also omnichannel, meaning that it’s now standard practice for there to be multiple routes to the customer’. Philippe adds that, ‘3PLs can deliver efficiencies and resources across the supply chain that are difficult for most businesses to replicate’.
According to a study from UPS Global Logistics, five major challenges drive companies to outsource:
- Limited Space
- Increased Customer Expectations
- Faster Order Fulfilment
- Reduced Labour Costs
- Multiple Fulfilment Channels
Now, the pandemic has accelerated 3PL adoption. In that same UPS survey, 29% of respondents indicated that they’d switch to outsourcing their logistics as a direct result of the past year. ‘One of the biggest issues impacting our current customers is the timing on inventory levels’, says Philippe. ‘Production delays out of APAC have pushed receipts and built back orders of products’.
How are 3PLs helping businesses cope with broader disruptions, such as Brexit, transport logjams, and driver shortages?
‘We can categorise supply chain disruptions into three broad areas’, explains Phil. ‘Demand-side, supply-side, and environmental. Some of these are easier to control than others, but all benefit from proper oversight and the ability to quickly adapt’. When the Brits finalised Brexit, for example, DHL scaled up areas that needed specialist support, such as customs processing. ‘We can leverage our network and redeploy on demand’, he explains.
As for UPS, the company developed a post-Brexit SCS solution that enabled its clients to keep inventory closer to their UK customers. ‘We can maintain a broad portfolio of carriers and providers to quickly adapt to supply chain disruptions’, Philippe says. ‘This allows customers to avoid service delays, added costs, and administrative burdens associated with customs clearance’.
Next, this conversation would be incomplete if we didn’t talk about how the boom in e-commerce has affected 3PL.
Do you anticipate that e-commerce growth will continue?
‘The growth of the past 18 months shows no sign of slowing down’, Phil says. ‘Consumer habits have altered, in some cases, permanently. Over the last eight months, DHL has seen a 150% increase in its fulfilment division—reflecting the soaring demand’. To keep up, the company has focused on data and automation, as well as deploying robotics solutions alongside its employees. ‘Whether that’s automated pallet systems or pick-and-pack robots’, Phil explains, ‘we’ve coupled technology and data to manage demand, meet customer expectations, and smooth out labour requirements’.
Fundamentally, e-commerce is driving demand for additional labour and space. ‘This presents a unique opportunity for 3PL’, Philippe says. ‘New entrants in retail platforms, though currently small, will look to disrupt the giant retail players. They’ll be closer to their customers in the city. And they’ll try to unify and digitalise SME brick-and-mortar retailers’.
How are shifting customer expectations - such as the next-day “Amazon Effect” - impacting 3PL?
‘We see 3PLs expanding their networks to be closer to consumers and integrating fulfilment with last-mile delivery’, says Philippe. ‘They have to expand their reverse logistics, including investments in warehouse space’. He suggests that data analytics can enhance visibility and help 3PL companies address inefficiencies. ‘With the right technology’, he says, ‘businesses can access accurate, connected data and derive actionable insights’.
Predictive and prescriptive analytics, when coupled with artificial intelligence and machine learning, can help companies understand when, why, and how supply chain disruptions occur. ‘This way’, Philippe adds, ‘they can prepare for them—or better yet, sidestep them completely’.
In addition, customers now expect companies to follow through on their social commitments...
Can 3PLs help organisations deliver on their ESG objectives, such as reducing carbon emissions?
Absolutely. Through UPS’s Eco-Responsible Packaging Programme, for instance, the company evaluates its clients’ packaging processes to determine the best way to protect their products and the planet. In addition, the corporation works with carriers on creative, lower-emissions solutions. ‘By 2025, we plan to source 40% of all ground fuel from sources other than conventional gasoline and diesel’, Philippe explains. ‘That’s nearly double what we used in 2016’. By then, 25% of UPS’s total electricity will come from renewable sources.
As for DHL, the company offers a portfolio of GoGreen solutions, which offers its customers a range of ways to minimise their impact on the environment. ‘This includes everything from carbon reporting and analytics solutions to investments in internationally-recognised climate protection projects’, says Phil. ‘Sustainability provides us an opportunity to collaborate with our customers’.
Yet, it’s often challenging to serve customers in highly regulated industries. How can companies overcome those hurdles?
‘Companies operating in highly regulated industries such as pharmaceuticals and life science face extra pressure on their supply chains’, Phil explains. ‘Dealing with rapidly growing changes then requires depth and breadth, which is something a global business such as DHL can offer’. To overcome regulatory challenges, DHL offers its clients dedicated sector specialists who understand niche industries but still have access to its global network.
At the end of the day, Philippe comments, 3PLs must take responsibility for running compliant programmes and services. ‘Licensed or not’, he says, ‘they’ll need to work with their highly regulated customers to ensure that SOPs (Standard Operating Procedures) and audit processes are in place’.
What do the next 12 months hold for 3PL providers?
‘Providers will focus on mastering omnichannel e-commerce’, says Philippe. ‘You’ll see faster last-mile delivery, more sustainable logistics and packaging, and better forecasting for risk management’. Overall, he notes, 3PL providers will invest in data analytics and new warehouse technologies to provide greater visibility into their supply chains.
For example, UPS is rolling out a new suite of digital engagement tools. According to Philippe, the company introduced a new UPS Forwarding Hub, UPS Customs Brokerage, and CoyoteGo portals to help their supply chain solution clients. In addition, its e-Fulfilment and Ware2Go products help small- and medium-sized businesses outsource with ease. ‘We’ve focused on adopting technologies to improve our operations’, Philippe says.
Finally, UPS’s Advanced Technology Group (ATG) has implemented robotics, drones, artificial intelligence, autonomous vehicles, new software platforms, and sensor technologies to increase its 2021 revenues and cut bottom-line costs. Says Philippe: ‘With these tools, we can meet customer expectations for real-time tracking, end-to-end visibility, and personalised service’.
And there you have it: the future of 3PL.