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Supply Chain 4.0 - Unlocking Opportunities through Digitalization and Innovation

By Kalyan Sakthivelayutham, VP IT, DHL Supply Chain

Kalyan Sakthivelayutham, VP IT, DHL Supply Chain

Today’s global supply chain industry is undergoing a most disruptive era, yet presented with vast opportunities for transformation. Digitalization is being the backbone and the driving force for embracing the Supply Chain 4.0 transformation. This digitalization culture opens up the doors for businesses to reach their customers at an individualized fashion, say B2I (Business to Individual), which was not prevailed even a decade ago. Personalization is the new norm demanded by the customers, both individuals and enterprises. Once I quoted the following statement during my speech at The Ohio State University’s Leading—Through- Excellence Summit as part of their Center for Operational Excellence, “It’s not a question of “if ” the digitization revolution is going to transform the future of the supply chain industry. It’s a question of how.”

Though logistics has existed for centuries, it has rarely made headlines, and the great innovation is often regarded as the shipping container in the 1950s. Now, innovations and digitalization coupled with globalization are pushing the logistics and supply chain industry to the frontier. A myriad inflow of venture capital funding especially for the startups evidences the reality of focus on logistics industry. “All businesses are interested in unlocking the strategic value in their supply chain. However, those that acknowledge the supply chain as a strategic asset achieve 70 percent higher performance on average,” according to a global supply chain survey from PricewaterhouseCoopers (PwC).

Customers are most demanding ever, rightfully, and the real-time visibility of their products and parts is becoming a requirement rather than a nice-to-have feature for their supply chain divisions and supply chain partners. The availability of traditional lead times and reaction times for logistics are constantly shrinking, which in-turn driving the supply chain lifecycle to be smarter, faster, and more customer centric. To put that in to a perspective for the next five years horizon, a few key innovative trends shaping the logistics industry include digital work, green energy logistics, logistics marketplace, omni-channel logistics, bid data analytics, cloud logistics, Internet of Things (IoT), and robotics & automation. To expand the horizon beyond five years horizon, the watch-out list includes Supergrid Logistics, 3D Printing, Artificial Intelligence (AI), and Self-driving Vehicles. Still there is handful of other trends to be mindful of including Batch Size One, Connected Life, Fair & Responsible Logistics, Fresh Chain, Sharing Economy, Augmented Reality, Blockchain, and Unmanned Arial Vehicle.

Digital Work: As I’m being part of the global logistics leader organization, which has more than 500,000 workforces (one of the largest employers in the world) including temporary and seasonal workers, I see the digital work as a fundamental shift in the human resource paradigm. Our aging population, the raise of the millennials workforce, and automation of repetitive and physically intensive labor will in future greatly transform the logistics industry. Robots designed to work collaboratively with humans—both physical devices and software (virtual bots)—are on the increase. “An estimated 49 percent activities that people are paid to do today can potentially be automated by adapting current, demonstrated technology”, according to McKinsey. Human-machine collaboration will greatly influence the future of digital work. In operations robots designed to assist workers with manual handling activities will prove critical to supporting an aging workforce. Software robotics will be essential, particularly in the back office to handle significant amount of manual and repetitive date entry (spreadsheet data entry, custom document processing, etc.). Here, technologies such as Robotic Process Automation (RPA) in combination with AI can automate many tasks. This enables both time and cost savings, and allows workers to do more meaningful and skilled activities such as process innovation.

Flexible, on-demand workforce models in logistics will become common place as sharing economy principles gain adoption in the enterprise. Key concepts include crowd-sourcing delivery (e.g., Postmates) and on-demand staffing to cover operational peaks with unprecedented speed (e.g., Shifgig).

Nevertheless, the digital work model comes with its own key challenges such as—achieving harmonious balance between human workers and physical/ virtual robotics—ensuring sufficient wages and job security when deploying or utilizing on-demand logistics concepts— enable relevant training and upskilling for exiting logistics workers particularly for technical tasks.

Supergrid Logistics: To take a long-shot view beyond five years horizon, Supergrid Logistics is one of the key trends to be understood. It will indeed raise a new generation of logistics companies with primary focus on the orchestration of global supply chain networks that integrates swarms of different production enterprises and logistics providers. This opens up new business opportunities for different logistics branches—4PL providers, companies with special expertise in complex or specific services, and even small local couriers and startups. In the future, customers can increasingly choose from a large variety of logistics services globally, thanks to cloud-powered online market places and startups that are unbundling traditional logistics integrators. A logistics supergrid concept spanning the entire globe can smoothly and flexibly integrate all parties along multiple supply chains enabling collaboration of modular services for all types of customer, maximizing efficiency and reducing cost. The future market segmentation splits the logistics provider market into new actor categories such as services specialists, users, configurators, orchestrators of logistics solutions, and service mall owners. Logistics malls will establish a new degree of market transparency and give small local companies access to the global market. Global players will focus primarily on cross-border integrations, premium services and orchestration of regional and local service providers in a global supergrid.

A testimonial to this supergrid logistics is Alibaba—who is building a Global Logistics Network. Within 18 years, Alibaba has risen to become the world’s largest and most valuable retailer with operations in more than 200 countries. Whereas, DPDHL operates in 220 countries and territories, which has 500 years of postal history—from the founding of the modern postal system to the establishment of the world's leading logistics group.

However, a few key challenges are yet to be overcome including easy interoperability of services from different providers is a major challenge as only a few standards exist—there are only a few cross-country cross-industry supergrid pilots—full logistics-as-a-service model is yet to be validated.

Beyond all these opportunities and challenges, the alarming truth for any logistics company, who stills wants to exist and lead, is that they can’t wait for someone else to test the water before they decide to invest. Let me conclude with what I urged the industry experts many years ago during one of the premier 3PL / CSCO Summits in NA, “It’s no more about what is the ROI for investing in Technology, it’s about what is the price your organization is willing to give (including potential non-existence) by not investing in Technology.”

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