Logistics, Innovation, and the Future

Stephen DeAngelis

December 17, 2018

If consumers ever think about supply chains and how the items they desire manage to find their way into their homes, they likely picture fleets of trucks, trains, airplanes, and cargo ships — the logistics part of supply chains. That’s because the most personal contact consumers have with the supply chain is when a package is delivered to their doorstep. That’s why so-called “last mile” logistics receive so much attention. Articles about how drones, autonomous vehicles, artificial intelligence (AI), and optimization schemes are going to play a future logistics’ role are easy to find. Daniel Gagnon, Vice President of Marketing, Global Logistics and Distribution, at UPS, writes, “This fast-paced, new world of change in logistics is happening because businesses and consumers are demanding better (faster) service at a lower-cost-to-serve.”[1] He believes all of these innovations are good things. “More than any other time in history,” he concludes, “technology and innovation are here to make it happen.”

E-commerce and logistics innovation

From the first time a craftsman or supplier established a trade relationship with a merchant in an adjacent village, logistics have played a role in commerce. As modes of transportation improved and supply chains extended, logistics got more complicated and complex. Logistic complexity dramatically increased with the advent of e-commerce. For over 150 years consumers have been able to purchase goods through catalogs and have them delivered to their homes. For most of those years, their delivery expectations were modest (i.e., they were willing to wait days or weeks before ordered items were delivered). In the e-commerce era, delivery expectations have heightened. Consumers are no longer willing to wait weeks to receive an item ordered on-line. Two-day shipping is rapidly becoming a standard and that may be replaced by same day shipping. Daphne Howland (@daphnehowland) reports, “More than half (51%) of retailers say they now offer same-day delivery, up from 16% last year, and within two years 65% plan to offer it, according to the ‘2017 Digital Commerce Benchmark Survey‘ from retail management consulting firm BRP.”[2]

Consumers only get a peek into supply chain operations when they see the friendly postal worker or delivery person dropping off packages on their front stoop. What they don’t see is the frenzy, innovations, and hard work involved in getting those packages to the door. Gagnon writes, “We all know that the primary catalyst forcing change in logistics is e-commerce growth. E-commerce can be a blood sport for those businesses trying to gain competitive advantage on the retail side (just ask any brick-and-mortar retailer).” Because logistics can be a significant differentiator, Mary De Asis reports some retailers are establishing their own logistics fleets.[3] “Our notion of convenience is evolving,” she writes. “Being able to offer options, from product variety to flexible delivery schemes, is essential for every business. That’s probably why some of the biggest companies in the world are moving beyond retail to establish their own logistics task forces.” Driver shortages and limited capacities also play a role in retailers’ decisions. To remain competitive, traditional logistics providers routinely apply for patents involving new ways of providing last-mile deliveries or speeding up warehouse operations. De Asis notes, “Logistics has always been vital to the customer experience. In-store logistics, from shelf arrangements, to store layouts, to return services, has significant and direct impacts on customer satisfaction. But it’s with the growth of e-commerce that logistics — particularly last-mile logistics — has gained attention as a key driver of enterprise success.”

According to Gagnon, business-as-usual no longer works in the logistics arena. “Logistics companies cannot afford not to be innovative,” he explains. “Fail to innovate, and customers will view your organization as providing no value. Standing still is not an option. Technology is getting lighter. Cloud-based systems are eliminating a key barrier to entry into logistics. Nontraditional competitors have entered the market delivering better analytics and creating value with minimal investment.” Those analytics are more likely than not to be provided by a cognitive-based system embedded with advanced analytics.

Big data, cognitive computing, and logistics

Logistics has always involved record keeping. Some of the earliest discovered records are not of great battles but of everyday commerce. In the Digital Age, the amount of data involved in logistics transaction is enormous. Dealing with and learning from that data has become one important area of innovation for logistics providers. Mona Lebied explains, “Big data is revolutionizing many fields of business, and logistics analytics is one of them. The complex and dynamic nature of logistics, along with the reliance on many moving parts that can create bottlenecks at any point in the supply chain, make logistics a perfect use case for big data.”[4] As president and CEO of a cognitive computing firm, whenever I hear the words “big data” and “complexity,” I start pondering how cognitive computing can help deal with the data and the complexity. When Lebied states logistics is a perfect use case for big data, she actually means it’s an ideal use case for advanced analytics, which make sense of big data. She adds, “The future is bright for logistics companies that are willing to take advantage of big data.”

Bruce Orcutt (@bdorcutt), Senior Vice President of Product Marketing at ABBYY, asserts, “Digital technology is changing many industries and the transportation and logistics industry is no exception.”[5] Cognitive technologies can gather, integrate, and analyze both structured and unstructured data providing insights and improving process optimization. Orcutt concludes, “Digital Transformation is about innovating processes, connecting the supply chain, launching new and innovative digital products and services and evolving your organization with the goal of transforming the customer engagement experience to drive more business value. Digital transformation in the transportation industry is a competitive weapon to improve your ROI.”

Concluding thoughts

David Sparkman, CEO of David Sparkman Consulting, reports a Penske Logistics-sponsored study conducted by A.T. Kearney and published by the Council of Supply Chain Management Professionals (CSCMP) concluded supply chains are “struggling under the twin demands of constrained capacity and the need for significant technological investment to help service providers and their customers keep up with soaring growth.”[6] He adds, “Statistics depict an industry straining to fulfill its mission in the face of a booming e-commerce sector and unprecedented demand for services, particularly in the trucking and courier industries.” To meet growing demands today and in the future, logistics providers need to continue to innovate and leverage advanced analytics. As Sparkman notes, “We have to look for efficiencies, exploiting technology and collaborating more closely than ever before. … In addition to fully autonomous trucks, innovations include Uberization of freight, blockchain, artificial intelligence applications, truck platooning, electric vehicles, autonomous mobile robots, and drones and unmanned aerial vehicle delivery systems.” I’m optimistic about the future of logistics because it has historically been a field willing to adopt new technologies to improve operational performance. I see no evidence this willingness to change is diminishing.

Footnotes
[1] Daniel Gagnon, “4 Myths About Innovation in Logistics,” Longitudes, 13 August 2017.
[2] Daphne Howland, “Same-day delivery services tripled in a year,” Supply Chain Dive, 19 September 2017.
[3] Mary De Asis, “The Blurring Line Between Retail and Logistics,” Chain Reaction, 8 August 2018.
[4] Mona Lebied, “5 Examples of How Big Data in Logistics Can Transform The Supply Chain,” The datapine blog, 5 April 2017.
[5] Bruce Orcutt, “Why Digital Transformation Matters in Transportation,” Supply Chain Management Review, 28 September 2017.
[6] David Sparkman, “The Future Is Now for Logistics,” Material Handling & Logistics, 14 August 2018.