Digital innovation in logistics sector is the key to success

The past decade has brought about more changes in the logistics industry than in the whole of the previous century. The global logistics sector is in the midst of a transformational phase – accentuated by an exponential increase in e-commerce, massive technological disruption across the operations, and the Covid-19 pandemic.

From cloud computing to collaborative robotics, big data analytics, artificial intelligence, and the Internet of Things, logistics professionals have had to make sense of wave after wave of disruptive technology, driving higher levels of digital maturity. Even as global e-commerce booms, blockchain continues to press as a significant supply chain and logistics enabler.

A successful business in the logistics, supply chain domain has always been dependent on a high degree of collaboration and trust. In today’s dynamic world offering a mix of traditional and e-commerce, where artificial intelligence, machine learning, and digital supply chains are the name of the game, enabling and reinforcing trust at all levels – from a technology and human perspective – is critical to success.

Particularly, artificial intelligence is critical to solve the most complex operational challenges in the logistics sector, like dynamic route optimisation, precise capacity & demand prediction, as well as intelligent physical automation. The logistics industry is also embracing the arrival of workflow automation software commonly known as robotic process automation [RPA].

Transform operations

AI will continue to play a vital role in the development of RPA, allowing these tools to address more complex, unstructured data formats and processes. According to a research by logistics trade association MHI, 79 per cent of supply chain professionals now expect AI to become a core competence in their organisation by 2022 and 88 per cent believe it will help to improve risk management and predictability in operations.

There is no denying that the potential for AI and machine learning in logistics is huge: a supply chain is a veritable goldmine of structured and unstructured data, and by harnessing and analysing it, identifying patterns, and generating insight into every link of the supply chain, the logistics companies can dramatically transform their operations.

Robotics and automation, big data analytics, machine learning, sensors, IoT, and next-generation wireless will continue to play a critical role in the future of supply chains. This digital transformation was already well underway before the coronavirus crisis, but change has taken on a new urgency as executives look for ways to protect their organisations from future disruptive events.

According to a survey by PwC, 37 of 80 chief financial officers (CFOs) responded that accelerated automation across their organisations will be part of their post Covid strategy. As logistics companies digitise their processes, they are finding that increased transparency and flexibility fuels demand for further digitisation.

Improving efficiency

On the other hand, customers quickly come to appreciate the benefits of faster delivery, higher service levels, and clear communication. That ramps up the pressure for flawless execution and ever-increasing efficiency. All these also encourage companies to explore a wider range of newer technologies to further augment and improve processes.

The goal for many organisations is a supply chain that is both automated and agile, capable of sensing, adapting, and learning as supply and demand conditions change.

As digital approaches become increasingly central to supply chains and logistics processes, companies are realising that they need to pay more attention to the human side of their activities. Digital systems need people to build, maintain, and improve them, and supply chain operations require close and continual collaboration between people and machines.

Organisations that fail to recognise the central role of people in the success of their supply chains are already running into problems, from shortages of skilled personnel to the outright rejection of promising new technologies. In the coming years, companies will need to address these issues by taking a human-centered approach to innovation.

Flexible solutions

Leaders are already working hard to foster a digital mindset: establishing positive cultural norms, standardising processes, and continuously reskilling the workforce. There is no other industry where so many experts ascribe a high importance to data and analytics in the next five years than transportation and logistics – 90 per cent in the industry compared to an average of 83 per cent.

The symbiosis of algorithms and humans will create a significant opportunity to improve supply chains. The algorithms are designed to fix complex processes while people with logistics expertise can handle exceptions. There is an increasing demand for digital and flexible logistics solutions that allow global trading companies to adapt their supply chains quickly as circumstances change.

Moreover, it is vital to connect digitisation and work-life balance. The reality of digitisation’s impact on balancing work and personal lives should be one of flexibility & freedom and managed appropriately. The industry, with its stakeholder chain, should work together to encourage a connected business environment with realistic, humane expectations. This will require embracing a new mindset, that grasps the benefit of digitisation and at the same time creates more resilient and sustainable workplaces.

The logistics industry must adapt to this new digital age in order to evolve, and not only because of the impending threats faced by companies that fail to do so, but especially because of the competitive advantages gained by businesses that understand how to make the most of opportunities.

Amadou Diallo is the CEO of DHL Global Forwarding, Middle East and Africa