Supply chains are poised for a sea-change that will transform them into forward-looking and more collaborative set-ups, according to pundits as well as logistics executives. This metamorphosis is going to be driven by a groundswell in information moving through supply chains thanks to Big Data.
This is expected to foster better customer retention, as logistics providers and shippers move towards a more collaborative approach facilitated by larger and more efficient data flows.
Shippers and 3PLs are looking to leverage data at their disposal to optimize supply chains and cope with fluctuations in capacity and demand, according to the 2017 Global State of Logistics Outsourcing study published by Capgemini Consulting. Its research found that both sides are increasingly using data and analytics to drive their decisions, and both see the use of Big Data as an emerging core competency of their supply chain organizations.
In this process the logistics providers are expected to take the lead. Capgemini reported that 71% of shippers rely on real-time analytics from 3PLs to understand shipping alternatives, and 61% lean on 3PLs to assess trade lanes and origin-destination pairs.
To illustrate the wealth of data that is waiting in the wings, Christopher Shawdon, vice president, logistics solutions, global transportation at software provider Unisys, pointed to a Volkswagen Polo. Equipped with 700 sensors and 54 CPUs, it generates six gigabytes of data in an hour, which allows the car maker to spot emerging problems early.
At this point the potential of Big Data is virtually untapped. A year ago, only a fraction of a percent of all the devices that could be connected to the internet were on stream, but the penetration is going fast. According to one estimate, 5.5 million new devices are connected every day. Last year’s update of DHL’s Logistics Trends Radar cites an estimate that by 2020 over 50 billion objects will be connected.
In the logistics sphere itself the Internet of Things (IoT) is hooking up pallets, lifts and trailers as well as – down the road – robots, autonomous guided vehicles and smart trucks and trailers. However, the relevance of this sector extends far beyond its providers. In fact, logistics is emerging on shippers’ radars as a key battleground in the new war of data-driven decision making, as the supply chain is one of the largest sources of Big Data.
A white paper on data-driven insights into supply chains that DHL published last year argued that strategic use of Big Data has the potential to reduce inventory by as much as 20-30%. According to Kristi Montgomery, vice-president of IT at Kenco Management Services, harnessing the IoT potential of logistics could slash supply chain waste by US$2.7 trillion over the next 10 years.
Beyond these savings, Big Data is poised to change the nature of supply chains themselves. Combined with data analytics tools, it opens the door to a transformation from reactive to forward-looking operating models. According to Lisa Harrington, president of the LHarrington Group and author of the DHL white paper, companies are set to change their approach fundamentally.
“The old ways of doing business are changing as a result of data analytics. No longer can companies run their businesses by looking through the rear-view mirror – they must now look ahead and use the supply chain data available to them to foretell the future if they are to keep up with the competition. Technology has provided a new means to achieve that possibility,” she said.
To make this happen, the data available today have to be made accessible. Zvi Schreiber, CEO of pricing platform provider Freightos, commented that much of the data bonanza in the logistics industry is still offline. “To get data online in real time is a very big transformation,” he said.
Marcel Fujike, senior vice president for products and services, global air logistics at Kuehne + Nagel, noted that the flow of information also leaves much to be improved. “Often data flows today are either not accurate or they come late,” he said.
Shawdon argued that the issue is not so much with the technology. “Data is a mix of technology and business. It is not a technology challenge,” he stated. “You need some systems expertise and structure, but the real ownership should be in operations or sales.”
Clearly connectivity is key in this migration, and IT providers like Unisys stress the need for a cloud architecture to make this happen. A white paper tabled last September by Transport Intelligence labelled cloud platforms as vital in an environment of increasing customer demands and social media feedback loops, arguing that they improve visibility as well as maintain coherence across supply chains.
This points to a need for a greater degree of collaboration along the supply chain, which in turn stands to benefit from improved data flow between the partners. In a recent study by SCM World, 93% of respondents said that greater collaboration leads to faster resolution of supply chain problems.
All of this works to engender closer ties between shippers and logistics providers. The DHL Logistics Trend Monitor sees increased customer loyalty and retention through data-driven logistics services as one impact from the advent of Big Data.
Turning on the data tap will not be enough, though.
By Ian Putzger
Air Freight Correspondent | Toronto
