Digital Transformation in Logistics and Transportation

Alex Tarasenko
Alex Tarasenko

Continuing to review the effect of digital transformation on the traditional industries and business niches, it’s time to take a closer look at an indispensable sphere of commercial human activity like transportation and logistics.   

THE STATE OF AFFAIRS IN THE LOGISTIC INDUSTRY

More than half of logistics management sees the need to review and adapt their companies operational models in order to meet the new challenges and stay consistent as the world is shifting to a digital-first, remote-based, delivery priority realm where less and less trade is conducted in person

At that, the global online shopping boom which began well before the COVID crisis has grown even more since the introduction of quarantines last Spring. All of this creates an increased demand for appropriate tech solutions in the logistics industry.

DIGITIZATION OF LOGISTICS ON INDUSTRIAL AND CONSUMER LEVELS 

When it comes to the digital transformation of logistics and transportation activities, there are three main technologies fueling the process. Those are the much spoken about technology trio of IoT, AI, and Blockchain. 

Let’s look into each one in particular.  

INTERNET OF THINGS 

One of the key technologies pushing digital transformation in logistics is the Internet of Things, also referred to as telematics. 

The transportation industry is based on moving countless products between millions of physical locations on a daily basis. So, making the entire network coherent by connecting items, vehicles, and personnel into a mesh of trackable data is an important step towards boosting operational efficiency via digital means.

In this regard, apart from the traditional RFID and barcode-based tracking, the following tech solutions are being adopted right now: 

Autonomous Delivery

  • Drones 

Drone delivery is gaining momentum among Retail and E-commerce businesses. Facilitating same-day delivery to poorly accessible (rural) areas and traffic-clogged locations, drones perform great in cases where the traditional delivery options are just ineffcient. 

Driverless Trucks

Over 65% of all goods transportation globally is executed via trucks. At that, things like vehicle maintenance, personnel employment, and road accidents include some of the costs that can be dramatically reduced via the use of driverless vehicles. In fact, automated truck delivery can save transportation companies as much as 45% of operational (maintenance and administration) budgets, according to McKinsey’s report.

Smart Warehouses

IoT-based WMS (warehouse management systems) allow monitoring warehouse goods on an item-to-item level. This allows companies to boost the overall order-placement efficiency through precise inventory monitoring and automated goods management.

Wearable Devices

Adopting trackable wearable devices for employees involved with the logistics activities can help supply chain management monitor and oversee the delivery process with higher accuracy. Meanwhile, it facilitates hands-free workflow for the personnel, ultimately boosting daily work efficiency. 

ARTIFICIAL INTELLIGENCE

Since transportation activities rely heavily on analyzing both historical and real-time data, AI plays an important role in seizing the benefits of digital transformation in logistics.  

The already mentioned increase in the usage of connected devices provides a wide specter of data, which cloud-based computing has the power to effectively comb through. This, in turn, allows businesses to determine efficiency constraints on one hand, and find potential points of improvement – on the other.

Here’s how the logistics industry can benefit from adopting AI tech: 

Smart Demand Estimation

Although still in the development stages, intelligent demand forecasting solutions are already outdoing traditional methods, allowing to predict future product demand and improve overall user experience. 

Efficient Shipping

AI can help logistics companies optimize shipping and cut associated costs by analyzing real-time data on shortest routes and traffic jams, as well as staff and vehicle availability. 

Better Automation

AI-backed workflow automation and robotization of the workplaces is one more way intelligent software can bump up processing capacities and improve daily operation for logistics companies.    

BLOCKCHAIN

Software systems security and reliability represent yet another major pain point for both companies and service consumers in the supply chain niche. This is where distributed ledger systems become extremely useful.  

On one hand, Blockchain enables storing various operational data about the origin and location of goods, transportation conditions, expiration date, etc., and use advanced, self-executing smart contracts to automate trading activities. On the other hand, the technology provides a bullet-proof security level making Blockchain-based software virtually impenetrable. 

As you can see, when it comes to Blockchain’s benefits – it’s always “buy one get one for free”.    

PRESENT INDUSTRY CHALLENGES 

However beneficial for all parties involved, digital transformation in the logistics industry has its own issues to overcome on the way to a brighter, automated future.

In this regard, there are three key barriers halting the progress right now. Those are: 

INSUBSTANTIAL IT EXPERTISE

Some 40% of logistic companies’ top management see the lack of appropriate IT training and skills as the main obstacle to the successful and prompt business transformation. More so, almost two-thirds of them consider engaging third-party services and outsourced talent to close the expertise gap, according to a GT Nexus’ report

SLOW ADOPTION RATE

While half of surveyed logistics and transportation companies run on legacy software and traditional communication and workflow models, a quarter of all industry businesses do not have an outlined digital transformation strategy whatsoever. At that, only as few as 20% of industry executives leverage operational data to improve the workflow.      

TECH LIMITATIONS

Apart from the ominous human factor, the very technology imperfection often slows down digital transformation. Like that, connectivity issues and security holes across the supply chain, as well as imperfect automated delivery tech – are some of the pain points to be yet assessed when it comes to industry digitization.    

CUSTOM DIGITAL SOLUTIONS FOR LOGISTICS BUSINESSES 

Given the huge demand and comparably smaller supply of niche software on the market, it is rather lucrative to invest in these kinds of solutions right now. 

Here’s a list of the main directions to pick when thinking about niche product development for the transportation industry: 

  • Inventory and order tracking
  • Smart warehousing
  • Routing (mapping) and shipment optimization 
  • Autonomous transportation
  • Drop-shipping and same-day delivery
  • Transport cost optimization

SUMMARY

The logistics industry is evolving rapidly on both industrial and consumer levels. Right now AI, IoT, and Blockchain are among the main technologies fueling the process. And while a lot has been achieved in this direction already, the transformation is still happening. So, there is a wide pool of opportunities to seize and leverage both business-wise and in terms of technology development.

Want to learn more about IT product development in logistics? Reach out to us to get all the answers!