The most popular definition of a logistics company is one that plans, implements, and controls the movement and storage of goods, services or information within a supply chain and between the points of origin and consumption. By definition itself, the scope of work for a logistics company becomes very vast. Add to this the complication of remoteness and accessibility of certain locations within India. The number of logistics companies, registered and unregistered is extraordinarily significant from the macro perspective.
The need of the hour
COVID-19 has shown the world the need for quick adaptability and the significant role those digital technologies and their implementation will play in keeping businesses afloat. As a result, the key focus for most companies with a line of vision is to create digital twins (DT) that map on-ground realities and also provide real-time tracking, real-time freight rates, real-time bottlenecks, and automated escalations. For the customer and the consumer, the benefits include realistic expectation setting, pre-emptive disruption communication, situation management, and automated and on-time escalations. Technology has the ability to enable growth, cost efficiencies and productivity gains for logistics.
Challenges pertaining to the adoption of digital technologies
Given the vastness of the country, and the lack of penetration infrastructural support, investment in digital technologies is still considered to have a very high migration barrier. The ability to create a smoother and quicker adoption of digital technologies is highly dependent on:
- Availability of skilled resources
- Affordability of skilled resources
- Ability of digital technologies to create adaptive/customized models
- Immediate impact on revenue (actual financial impact)
- Time cost of the implementation and adaptation clearly mapped out
- Actual cost of application proportionates to productivity gains
- Technology constraints include limitations imposed by various levels of evolving flawed hardware and software
The tangible benefits
Fortunately, the range of choices within digital technologies is very high. Right from the choice of the RFID products, to real-time mapping, tracking, and paperless bills of lading, automation has shown that it can offer a productivity benefit of anything in the range of 10% to 25% depending on the volume and frequency of the implementation. Indirect costs continue to contribute to 40% of the logistics costs in India – which is very high compared to 10% for developed nations. These indirect costs include inventory carrying costs, thefts, damages, and losses in transit.
With the adoption of real-time tracking technology, these challenges and costs are likely to go down. According to a 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. 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.
Technologies that will make a difference
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. Smart application of 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. Creating DTs (digital twins) has more advantages than just real-time tracking or mapping.
IoT solutions enable businesses to assess demand based on historical data and automate inventory replenishment – these include solutions like RFID- and barcode-based asset tracking.
AI-powered 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.
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. Given its capabilities, there is an urgent need for AI technologies that are evolved enough to focus on collision avoidance.
From autonomous mobile robots (AMRs) which locate, track and move inventory in warehouses and fulfilment centres to collaborative workspaces where humans and intelligent machines work hand in hand, robotics presents a unique opportunity for businesses looking to fill the labour gap and scale operational capacity.
Leveraging blockchains would enable self-executing digital contracts. This in turn allows 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.
Reforms that technology adoption has led to within the logistics space
Technology adoption has seen benefits like improving end-to-end visibility and efficiency, as well as back-office operations. However, as per a McKinsey report, only 21% of the companies have actually implemented digitalization in the field of products and services while only 2% have implemented it in the supply sector.
The benefits of real-time freight rate tracking, paperless bills of lading, and automation helping boost operational efficiency are often underrated in an industry that is largely dependent on the contributions of the unorganized sector.
While a Forbes study from 2021 indicated that 65% of logistics managers are aware of the benefits of digitalization yielding data-driven insights that can aid in productivity gains, and the need for survival in the digital age, the adoption rates continue to be significantly lower.
The common mistake that is made is to see digitization as a goal in itself. The goal is ultimately digitalization and not just digitization. The results of which can be made tangible with holistic visibility and efficiency, assess RRR (Route Risk Rates), identify the CIP – Critical Impact Parameters and their evolution over a period of time and ensure that the information is accessible to everyone in the industry for quick upscaling and servicing.