Logistics is keeping its wheels of innovation turning

The pandemic has accelerated the digital transformation of the logistics sector, resulting in a more innovative, flexible, and resilient supply chain.
Industries: Logistics
  • The pandemic’s impact on logistics
  • Remarkable innovations in challenging times
  • Visions and predictions for the logistics sector
  • Closing thoughts

With many countries across the globe slowly but surely entering what looks like the start of a post-pandemic phase, attention will be focused on recovery and a return to normal operations. The logistics and supply chain sector will play a critical role in this effort, and is expected to emerge reinvented, with its wheels of innovation turning at full speed.

The pandemic’s impact on logistics

Pre-pandemic, about 20 per cent of global trade manufacturing took place in the Hubei province in China, where the novel coronavirus originated. Once the entire region was closed off to curb the spread of the virus, many companies experienced production, distribution, and supplier issues. Companies also singled out inefficient digital technologies in the supply chain as a pressing concern.

The pandemic has also initiated some structural changes in the logistics and supply chain sector that are bound to remain permanent. For instance, with supply chain conditions becoming increasingly volatile, companies are turning to artificial intelligence and machine learning technologies to predict how consumer demand will be affected by economic, political, climatic, and geographical events, a methodology known as demand sensing. The past year has also brought the proliferation of other digital technologies within the logistics sector, including data analytics, blockchain, automation, robotics, and 3D printing. The temporary interruption of trade relations with China has once again highlighted the pitfalls of overreliance on single-sourcing strategy, forcing companies to shorten their supply chains and look for alternative suppliers closer to home. Ultimately, all of these changes should result in a smarter, more flexible, and more resilient supply chain moving forward.

Remarkable innovations in challenging times

It’s often said that difficult times bring out the best in people and this old saying has been proven true once again. Despite the sudden onset of the pandemic, many companies managed to respond to the challenges it brought about with decisive action. 

Electronic proof of delivery

The Indonesia-based startup Kargo Technologies, founded by former regional Uber executive Tiger Fang, employs an electronic proof of delivery mechanism as a way to reduce physical contact between delivery workers and minimise their risk of contracting the virus. As an additional security measure, the company also makes sure to disinfect all stops on its delivery routes. These measures are critical to the ongoing provision of essential services, ensuring that there are as few disruptions to logistics services as possible.

Streamlined inventory management

Looking to digitise its supply chain operations, the global delivery service FedEx joined forces with the tech giant Microsoft. The new partnership bore fruit in the form of a tool named FedEx Surround, which uses AI, IoT, and real-time analytics to streamline inventory management and enhance shipment tracking through real-time updates about various conditions that might affect delivery, such as the weather. This enables companies to anticipate future disruptions and take steps to address them before they cause a delay. Similarly, the software development company Llamasoft has launched an AI-powered platform that allows companies to make better-informed decisions by conducting what-if analyses and predicting future outcomes.

Warehouse drone systems

Drones are yet another technology that has witnessed wider adoption in the logistics sector during the pandemic. The new warehouse inventory automation system developed by the San Francisco-based tech company Ware is a case in point. The system features a drone that navigates around the warehouse and captures images of the bins contained within. The images are then conveyed to a sophisticated software that analyses the footage to identify gaps in the inventory. With such a system in place, companies would be able to conduct an inventory count each month, as opposed to doing it on a yearly basis as is often the case with a manual count.

Visions and predictions for the logistics sector

When questioned about the future of the logistics and supply chain sector, most experts agree that the pandemic has accelerated its digital transformation. “There are lessons to be learned from this pandemic,” says Vanessa Miller, partner and co-chair of Foley & Lardner’s coronavirus task force and supply chain team. “Among them is that cost may not be the only consideration, that companies can stabilise their supply chains by bringing on alternative suppliers or moving certain functions in-house, and that technology can help stem future disruption.” Andy Borchers, Professor and Associate Dean at Lipscomb University, is likewise very enthusiastic about technology and predicts that “the limitations of current legacy systems will give way to a data driven future where artificial intelligence-based systems smoothly manage the flow of goods and services.”

One of the most significant developments to arise from the pandemic, according to Ted Stank, Professor of Supply Chain and Logistics at the University of Tennessee, is the growing regionalisation of the supply chain. “The forces that have driven globalisation over the last 70 years appear to have reached a zenith and now seem to be trending back toward a more happy medium position where commodities may be sourced globally (or in multiple global locations) but more value-added elements of the supply chain are located in geographical regions to support regional demand,” explains Stank. Similarly, Mark Mobius, founder of Mobius Capital Partners, believes that “there’s going to be a diversification where these supply chains get moved into places like Vietnam, Bangladesh, Turkey, even Brazil, so that these companies can have a more diversified supply chain.”

Futurist and trendwatcher Richard van Hooijdonk expects AI technology to become the driving force behind tomorrow’s supply chains. Robotics, drones, self-driving vehicles, and 3D printing will also have a more important role to play. “All of these technologies are not mutually exclusive. Taken together as a technological amalgamation, they will drive the biggest changes and disruptions in supply chains over the next half a decade,” says futurist and consultant Tamara McCleary. And as consumers become increasingly mindful about the products they buy and where they come from, companies will need to find a way to increase the transparency and traceability of their supply chains, with blockchain technology offering a potential solution to this issue.

Closing thoughts

The accelerating digital transformation of the logistics and supply chain sector will be characterised by a more widespread adoption of emerging technologies like artificial intelligence, machine learning, robotics, drones, IoT, and data analytics. With the dangers of overreliance on single-sourcing strategy now fully laid bare, there will be increased focus on the regionalisation and diversification of the supply chain. Companies will also have to find a way to increase the transparency of their supply chain in response to growing environmental concerns. Evolving consumer demands, such as the growth of online shopping, will lead to a major rethink of last-mile delivery, with home delivery and click & collect models becoming increasingly sought after. The end result will be a more flexible and resilient supply chain capable of withstanding similar disruptions in the future.

Industries: Logistics
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