As featured in The Business Profile November 22.
The global supply chain is undergoing a radical change to remain competitive. Businesses are now aggressively vouching for digital transformation initiatives that impart the needed agility, resilience, and visibility in supply chain processes. Digital Transformation in Logistics is critical to facilitating digital maturity in the most critical supply chain processes. According to a recent Gartner Survey on Top Technology Trends in Supply Chains, 38% of companies are improving technologies to support end-to-end processes, benefiting from enhanced data rationalization and process integration capabilities.
True Digital Transformation in Logistics
A World Economic Forum Analysis states that there is $1.5 trillion of value at stake for logistics players and a further $2.4 trillion worth of societal benefits resulting from the digital transformation of the industry until 2025. Thus, industry stakeholders must prioritize digital transformation initiatives given the potential for significantly higher value creation for society and industry.
Many businesses are still running on highly fragmented logistics processes with many stand-alone applications on different technologies or from multiple sources. Inefficient logistics processes suffer from such siloed functional solutions with little or no data integration. Businesses must leverage a networked ecosystems to build strategies that ensure supply chain visibility, agility, risk mitigation & management, and supply chain resilience.
Here are some of the drivers of Digital Logistics transformation.
Changing Vendor & End-User Expectations
Vendor and Customer expectations have greatly increased. Forbes Insights states 44% of senior executives said the “Amazon Effect” is having a dramatic impact on more than their logistics, supply chain, and transportation operations. Both businesses and individuals expect to get goods faster, more flexibly, and in the case of consumers at low or no cost for delivery. Manufacturing is becoming increasingly more customized, which is good for customers, but hard work for the logistics industry. The sector is under growing pressure to deliver better service at an ever-lower cost. Which can only happen with use of technologies, such as advanced ERP systems, business networks, automation, and robotics.
Additionally, companies are becoming conscious of their sustainability practices and are actively taking initiatives to combat climate change, measure and report carbon emissions, and attain other Environmental Social and Governance (ESG) goals. The 2021 Gartner Future of Supply Chain Survey states 67% of organizations have defined environmental and social sustainability KPIs they expect supply chain leaders to be accountable for. Changing consumer behaviour and the need for end-to-end transparency motivates companies to undertake sustainability initiatives that extend from raw materials sourcing to lastmile logistics, and even product returns and recycling processes. It has become imperative that businesses align their strategies with customer expectations around Sustainable Development Goals. Sustainability is becoming a rising necessity for enterprises to reap long-term financial benefits and deliver new value to customers.
“Technology is changing every aspect of how logistics companies operate. As businesses leverage advanced technologies like Machine Learning, IoT, Artificial Intelligence, and Big Data to advance digitalization initiatives – the journey to the cloud is a consistent and ever important factor”
Mahir Anwar IoT and Digital Supply Chain Expert, ArchLynk
Growth in Cloud & Technology Capabilities
Logistics leaders are under pressure to maintain current margins and profitability and achieve targets for sustainability, speed, and innovation. This can only be done by making maximum use of intelligent technologies, from data analytics and AI, connected business networks, to automation, and robotics. This promises lower costs, improved efficiency, and the opportunity to remain innovative. The right tools offer realtime visibility and provide data that drive more cost-efficient solutions and controls across the supply chain. But “digital maturity” is a challenge for the logistics sector, which currently lags many of its customers in this respect. Leveraging intelligent technology is critical, but defining a clear digital strategy that’s integrated into business strategy is even more crucial.
Technology is changing every aspect of how logistics companies operate. As businesses leverage advanced technologies like Machine Learning, IoT, Artificial Intelligence, and Big Data to advance digitalization initiatives, the journey to the cloud is a consistent factor. A recent Aberdeen report stated manufactures that adopted a cloud ERP had 19.6% productivity growth over the last two years. Technology is a key source of resiliency, additional efficiencies, and cost reduction.
Cost Factors & Efficiencies
With costs of raw materials, fuel, and transportation reaching record highs, managing spend on logistics is critical to business survival. Seeing that 50-75% of costs are directly influenced by the supply chain, managing logistics costs is essentials.
There are many factors that can contribute to high logistics costs, including:
- Poor design of the transportation system: if routes are not optimized, delivery times and/or costs can be unnecessarily high.
- Low personnel productivity: if operators are not managed correctly, their productivity may not be optimal.
- Inefficient use of resources: packaging, pallets, trucks… for example, if loads are not optimized, your logistics costs will not be maximized.
- Wasteful order preparation: unnecessary round trips, lack of consumables, unavailability of goods – if your orders take too long to be prepared, profitability will not be optimal.
- Unsuitable storage: cost for storage space can be significant, therefore must be optimized. If your product is not appropriate for your storage location, space will not be efficiently utilised.
The good news is that with the right technology implemented you can analyse and plan for transformation into a cost-efficient supply chain that is resilient and optimized. When done well, you can align logistics requirements and costs to future demand and manage strategic priorities.
About ArchLynk
ArchLynk is a global leader for supply chain execution consulting services enabling clients worldwide to uncover the benefits of SAP’s stateof- the-art Digital Supply Chain platforms.
Originally established in 2008 and operates from eighteen global offices. ArchLynk has more SAP TM, GTS, LBN, GTT, EM & EWM engagements worldwide than any other partner
Data-Driven Management
Organizations that do not use data-driven management are at a great competitive disadvantage. A data-driven business can benefit most aspects of your organization and customer experience.
To run efficient logistics operations there are best practices to strive towards:
- You must have emphasis on data quality and analytics, data used to generate insights must be clean and accurate.
- Select the right software that meets the business requirements of today as well as can scale across the organization for your future business objectives.
- Moving routine tasks to the cloud will provide agility and scalability to your enterprise.
- Removing data silos is critical to generate accurate data insights.
- Ensure cybersecurity and compliance to mitigate risk of attacks and disruptions.
A reminder that data science is not a onetime process, your company, and the industry you compete in are constantly evolving. Your data and analytics systems must constantly update. When done properly, you should be able to create and maintain a competitive advantage.
The Rise in Service Over Product
The pandemic and recent global disruptions have changed supply chains for the foreseeable future. Manufactures are scrambling as they cannot get the necessary raw materials or components from suppliers to make and sell products. In a time when margins are razor thin, a subscription-based model could be the competitive advantage needed to succeed in today’s fast-paced, digital environment. Organizations that employ a service model can better understand their customers, build ongoing relationships, and deliver a product that genuinely adds value to their lives. For supply chains, using a services model would create efficiencies as manufacturers would know, based on consumers who have subscribed to their service, how many products they need to build. New revenue streams are also created from services that didn’t previously exist.
Subscription services are increasingly growing preferable to buying and owning products. Why buy a car when you can subscribe to one? Why spend hundreds of dollars on a dress when you can rent one?
Consumers today expect ongoing value and personalized experiences. Gartner predicts “by 2023, 75% of organizations selling direct to consumers will offer subscription services”.
Conclusion
Without a digital logistics transformation, organizations risk obsolescence. They will lose any competitive edge and will be unable to satisfy changing expectations from partners and customers. Critical to the digital transformation process is defining a clear digital strategy that’s integrated into business strategy. Technologies such as advanced ERP systems, business networks, predictive analytics, AI, and cloud solutions are essential to remain competitive and innovative. In today’s volatile environment cost efficiencies and data insights can only be obtained through data-driven management.
If you would like to discuss digital transformation options for your logistics operations, contact ArchLynk.