DHL is ramping up its digitalization push with the coronavirus prompting it to rethink how supply chains work and expectations that the “new normal” in logistics will involve more use of robotics and automation.

Terry Ryan, CEO, DHL Supply Chain, Asia Pacific, said the group has committed to set aside €2 billion (US$2.3 billion) on its digital transformation over the next five years, but noted that while these technologies are not meant to replace employees, they could help plug talent gaps, increase efficiency and productivity, as well as make work more ergonomic, lighter and less repetitive.

“Even before the pandemic, digitalization has been high on the group’s agenda, and toward the end of last year, accelerating digitalization throughout the entire organization was named a key focus in our Strategy 2025,” Ryan told Asia Cargo News.

“While we have been testing and implementing several technologies including robotic process automation, robotic arms, data analytics, and leveraging the internet of things technology to create smart warehouses, this pandemic has certainly accelerated digitalization in a traditionally manual-intensive sector,” he added.

Digitalization plan

The DHL executive noted that part of the group’s digitalization efforts includes putting up smart warehouses using IOT technology, integrating warehousing management for its Japan operations, adding robotic arms in Thailand and digitalizing the warehouse slotting process, including categorizing and organizing inventory throughout the warehouse by using the software.

DHL has also partnered with Microsoft and Blue Yonder, an AI-driven fulfilment provider to deploy tailored robotic systems into its warehouses, which Ryan said is expected to be rolled out in warehouses in Asia Pacific “upon demand.”

In transportation, the logistics company employed “track and trace capabilities” for every shipment on the road while using data analytics to optimize routes and reduce transit times.

“The future supply chain industry will be heavily dependent on robotics and automation to boost efficiency and productivity. When we have enough data to make data-driven decisions and deploy technologies at scale, this will be the game-changer for DHL and for the sector,” Ryan said.

“We will continue to implement best practices based on data-driven metrics, and maintain a strong focus on digitalization and automation, including an investment into 1,000 new robots globally, which will operate and help to improve productivity throughout the supply chain,” he said.

For DHL Supply Chain, he added, the agenda item has been largely focused on “improving operational efficiency in the warehouse as well as transportation system with the adoption of new technologies.”

Supply chain regionalization

Ryan noted that while it is still too early to fully grasp the full impact of the coronavirus on the global economy, the ongoing pandemic has highlighted the “interdependencies of supply chains” worldwide.

“We hold the view that while we will continue to see more regionalization of supply chains in the near future, global supply chains will continue to evolve and uphold their importance,” he said.

DHL proved to be resilient to the downturn caused by the coronavirus the past months, with the group recording a 3.1% revenue increase to €16 billion (US$18.8 billion) in the second quarter, although Ryan said that’s not to say the global logistics company was unaffected.

“We have not remained unscathed, but our diversified portfolio and incredibly committed workforce have managed to help us through the most challenging period of the pandemic,” Ryan told Asia Cargo News.

He said DHL saw “tremendous increase in volumes” in the life sciences and healthcare segment, pharma, and e-commerce, while heavy industries, automotive, fashion and aviation saw declines.

“We remain optimistic that we are in a positive and relatively resilient position given our robust business model, strong market position, long-term contracts, global footprint and diversified customer based across various sectors,” Ryan further said.

Logistics post-Covid-19

DHL said there will be a “pre-new normal” phase that will bridge the gap between the lockdown period and the “new normal” for the industry as the sector starts to recover from the disruptions brought by Covid-19.

“This interim phase will see businesses examine their suppliers beyond Tier 1, strengthen and reconfigure their supply chain, consider alternative distribution channels and, underlying it all, drive the adoption of automation and digitalization,” Ryan said.

“As business models change, the logistics sector will be the lynchpin to help businesses transform and build a more resilient supply chain network.”

Diversification of operations

In the new normal, the DHL executive said “diversification will be key” – whether it relates to geographical spread, multiple tiers of reliable suppliers, or additional distribution channels and greater product lines and, therefore, spheres of customers.

“We foresee a greater shift toward companies outsourcing contract logistics as supply chains grow more complex and specialized knowledge is required,” he said.

For DHL, he noted that a strong focus will remain on digitalization and automation.

“We have kept our investments in the collaborative robotics agenda with further investments into data analytics,” Ryan said.

“Overall, we do not think that supply chains will drastically change post-Covid, as business models have been evolving for some time now. Having said that, changes along the global supply chains are not threats to our business – they are part of our business.”

By Charlee C. Delavin

Asia Cargo News | Hong Kong