"Data is the new oil" - Clive Humby
Time and efficiency are the two most important cogs in the logistics machine, so it's no surprise that the global logistics automation market is expected to exceed $121 billion by 2027. Even back here in 2022, however, there's a rapid transformation happening. Just as today's factories are scaling up to smart technologies to achieve connected, interoperable workflows, so is the supply chain.
Why so rapid? Because the logistics industry is facing more challenges than ever: increased costs, fluctuating shipping demand, and the need to manage multiple warehouses, partners, and e-commerce clients efficiently are just a few.
Digitization and automation are key to overcoming these challenges for 3PLs, and in this article, we'll explain exactly why.
The pandemic has exposed the fragile nature of global value chains and the interconnectedness of our world. As countries emerged from lockdowns and demand for products and resources rose, an international supply chain crisis erupted, resulting in the greatest supply shock in a generation. Consequently, firms have begun to re-shore operations and build more regional and localized supply chains enhanced by digitalization and automation to provide better levels of assurance and "what if" resilience. In this context, many regions face significant warehousing space shortages plus high labor costs, underscoring the need for enhanced efficiency.
Recent reports predict that 75% of large enterprises will have implemented some form of intralogistics smart robots to automate processes in their warehouse operations by 2026. Why? The competition is fierce.
In fact, some of the traditional customers in the sector have launched their own logistics operations. Meanwhile, industry newcomers are exploiting digital technology or new "sharing" business models to carve out the more lucrative aspects of the value chain without asset-heavy balance sheets or clunky existing systems dragging them down. This has led to innovative supply chain technologies remaining top of mind to industry leaders seeking a competitive advantage.
"The introduction of sophisticated technologies in robotics systems, increasing dependency on automation solutions to manage the supply chain ecosystem, new safety protocols [...] are the major factors responsible for driving the global market." - Fortune Business Insights.
Beyond automation, the industry is propelling towards a digital transformation because large enterprises have numerous stakeholders in different countries within the supply chain. It is imperative to use intelligent networking and predictive analytics to stabilise the entire supply chain and anticipate and avoid potential failures or disruptions.
German and American CFOs, in particular, have increased their focus on supply chain digitization. In fact, for 31% of US organizations it overtook supplier diversification as the top priority today. In Germany, supply chain digitization received 33% of the attention. Why? 61% of global executives report decreased costs and 53% report increased revenues as a direct benefit of introducing artificial intelligence into their supply chains.
Digitization allows companies to handle higher order volumes efficiently and increase fulfillment and delivery speed. Companies no longer need to tell clients when they can expect their delivery. Instead, customers can access the information themselves online. Digital platforms can also identify the most efficient routes and ideal carriers as well as avert traffic congestion. Plus, when automated messages are sent to clients to relay information throughout the process, CX improves, trust builds, and bottlenecks are reduced or eliminated.
Another advantage is that all fulfillment operations are managed in one place thanks to the integration of different warehouses, fulfillment centers, and clients via one platform. This helps optimise cost savings for storing or moving goods. Cloud-based systems are particularly beneficial for companies going through fluctuating growth because they are highly adaptable to their needs. Consequently, there is a rare opportunity to cut costs, increase revenue, and enhance CX at the same time.
It is now evident that digitization and automation are no longer optional in the logistics industry: they increase efficiency while decreasing costs, which in turn, improves the bottom line. Embracing logistics 4.0, cloud-based management platforms, and AI, as well as autonomous vehicles and drones, have all proven to have a direct impact on a company's ability to differentiate itself from the competition, increase profits, and accelerate growth. Supply chain management software (SCM), IoT devices and automated back-office processes such as order, inventory, and warehouse management systems, and enterprise resource planning software are all very much prevalent.
According to recent market research, the global SaaS-based supply chain management market totalled over $6 billion in 2021. The findings anticipate that the market will grow by 140%, totalling $14.49 billion by 2027. It has proven to be quite successful in fulfillment because SaaS solutions facilitate integration smoothly.
Codept's platform, for example, enables 3PLs to add value for their retail customers by managing merchant connections as well as providing integration of store (e.g. Shopify, WooCommerce and more) and ERP systems. It does all of this in a quick and secure manner which simplifies the onboarding process of etailers for 3PLs. This is a key point for ecommerce companies as they are increasingly looking for logistics partners with modern IT infrastructures and fast set-ups.
They also enable the interconnection of disparate systems in one platform: Codept allows labelling and fulfillment planning processes to be coordinated across different carriers. Given the complexity of modern delivery management, the integration of transportation management systems (TMS), point of sale (POS) systems, warehouse management systems (WMS), and client store and enterprise resource planning (ERP) systems is critical for efficient data collection and transfer among all teams involved in the order fulfillment process.
Cloud-based systems in general are similar to traditional standalone systems, but they include additional SCM functions such as inventory management and warehouse operations management. They also allow for customization based on the software vendor's offerings. Furthermore, a software or SaaS platform controls and manages all IT upgrades and data security features. This setup will result in cost savings for the customer.
Nowadays, digital solutions (including SaaS) provide customers with a better and more comprehensive range of delivery options for managing relationships with logistics providers. Digitising delivery operations improves efficiency by streamlining negotiation, coordination, and planning processes across multiple taskforces, locations, and time zones. Plus, certain platforms enable parties to view the history status, performance and interactions, resulting in less back and forth. Seven Senders, FIEGE, and eCom Logistics are examples of logistics providers who are already leveraging SaaS solutions to enhance logistics and fulfillment management for their customers. Other advancements in delivery include predictive maintenance (PdM) programs for vehicles, autonomous drone deliveries and carrier optimization. Notably, Amazon, UPS, and Domino's Pizza have begun to experiment with them in an effort to slash last-mile delivery issues and cut costs.
Etailers and 3PLs usually need to hire IT consultants to facilitate the transition, but this is expensive. The Wall Street Journal reported that wage inflation in the Western technology sector is intensifying, reaching more than 20% for some key roles. This is caused by two main factors: record-level overall inflation rates as well as an increasing competition for tech talent, which has been further exacerbated by the war in Ukraine.
Moreover, 70% of young workers expect their employers to provide digital training. They also know that the post-COVID "Great Resignation" has blessed them with an employee market, exacerbating wage inflation further. Cloud computing architects, data scientists and modelers, and machine learning experts are among the most in-demand tech roles today. Given that there is a lack of knowledge about the industry and a talent shortage, there is a temptation to fall into the status quo trap. The attitude of "why fix what isn't broken?" may prevail among stakeholders or management that are resistant to change.
As a result, what may start out as a financial risk can turn into a competitiveness gamble. For example, some smaller companies employ manual processes simply for the lower investment, such as Excel lists or paper inventory sheets to manage and exchange data with suppliers and other partners during the fulfillment stage of the supply chain. However, shortcutting creates inherent risk. SCM software is a much more secure option. Larger firms may fail to integrate new clients efficiently due to the lack of know-how and resources. Given that some manage their data flows from various IT systems, it is vital to do so in a scalable manner.
According to a 2018 study, most manufacturers in Europe were just getting started with digital supply chain adoption at that time, with data integration proving to be the most difficult roadblock. It investigated the digital supply chain readiness of 179 European manufacturers and discovered that only 13% have a "prescriptive" supply chain. However, 31% believe they would have one in place by 2023.
Unfortunately, data integration continues to be the primary obstacle. According to recent studies, the biggest hurdle for logistics service providers is still aligning different IT systems, standards, and levels of knowledge across data transformation project partners, describing it as a "megaproject" and a "big puzzle that requires enormous organizational effort". Most 3PLs use a myriad of different tech and IT solutions which can be quite messy interoperability-wise.
Is data the new oil, as everyone claims? Yes. But only if it is accurate, complete, and integrated throughout your organization in a timely fashion. Technological expertise and modern IT infrastructure are increasingly driving merchants' decisions for logistics service providers. However, integrating new customers typically takes a significant amount of time, money, and effort for 3PLs. A delay in the process equals lost customers.
The solution? Codept's SaaS logistics platform for 3PLs. Here's how:
What distinguishes Codept? Four key advantages:
Navigating the digital disruption in the supply chain management industry isn't easy. Here at Codept, we are committed to helping you streamline your operations through data integration - and make them scalable - as we guide you through a new era of competition.
To learn more about how we help 3PL providers improve the digital onboarding of customers, download our FIEGE case study here.