Various new technologies, new market entrants and players, new customer expectations and new business models — could you assume that we are talking about the global logistics industry here? Probably not, but this industry confronted massive change, and such terms like “disruptive innovations” can now be used alongside the “global logistics industry”. Facing changes is never an easy thing, especially when it comes to logistics. But the good thing is that meeting challenges usually means development — and some key areas to focus on if you want to make the best of it. Let’s look at the global logistics industry more closely and find out what really happened there.
Experts say that key disrupting factors for the logistics industry can be identified easily: changing customer expectations, technological breakthroughs, new entrants to the industry, and new ways to compete or collaborate. The most important thing is that all key areas are very different, and this means that they have different implications for individual companies in the sector, depending on which segments they operate in, their type of ownership and even the location. Did you know that the estimated revenues at stake equal $4.6 trillion? Companies in the sector simply couldn’t afford to wait and watch what will happen next or how one of the factors affected them — they needed to embrace the changes and react proactively.
Let’s start with technology. The global logistics industry is all about technologies now. Why, you might wonder? This sector has turned to a new and different prospect: can you imagine that not so long ago — in 2016 — 43.3 percent of logistics companies selected people as the most important aspect of a logistics organisation? Technology took second place, with a bit more than 27 percent. However, last year was the time when the situation changed completely, shifting the most important indicator to technology — it got more than 42 percent, pushing the people factor — with 26.9 percent — to second place, followed by process rate with 23.1 percent.
If these numbers seem a little overwhelming to you, let’s talk about the overall changes in the logistics industry for a second. Simple truth: logistics companies are getting better at coping with threats and that has a strong influence on a growth factor. In 2016, the primary way logistics businesses were gaining new business was through outbidding competitors. 2017 showed us some interesting results: logistics companies faced growth mostly in the e-commerce section, and this fact is accompanied by a clear statement that the overall situation and understanding of the sector has shifted, and innovation became a key driver for new business.
Technology simply changed the way logistics companies operate, and a whole new range of technologies was adapted: think data analytics, automation and platform solutions. This sector has never had access to more data than it has now. It helps to improve the overall performance of companies, as well as provide better service to the customers. Adding machine learning and artificial intelligence techniques to data analytics also resulted in delivering an innovative approach to the whole sector, taking it to the higher level of dynamics.
Logistics companies faced slow technology and innovation development for quite a long time, and when you look at it historically, challenges that were caused by these main factors were hard to overcome. Think efficiency, technological advancement and automation — all these aspects play major roles in the game where the main goal is increased numbers of technological advancements in the industry. After years of investment, the overall situation has changed, and one of the key changes seems to be the success of technology-driven logistics providers. Interestingly, asset-light logistics companies that utilise technology as the central offering of their business are gaining noticeable traction within the industry. And this is the point where the increased numbers that we mentioned earlier go alongside the general technological advancements, adding more perspective and a higher level of development to the global logistics industry.
Another important thing that truly influenced the global logistics industry and all companies in it was the change of an old supply chain. At first, this seemed like a big challenge to the whole industry — looking for possibilities to cut costs resulted in a leaner supply chain, which — naturally — came with some big difficulties. However, this was also the point when the whole logistics industry was introduced to the technological advancements and automation of processes, allowing businesses in the industry to strongly differentiate themselves. Logistics providers took the biggest advantage of all, turning to non-traditional areas of their businesses to separate themselves from other companies.
2017 showed enormous potential in the digitisation sector, but the logistics industry has not seized it all yet: only around 28 percent of companies in this sector rated themselves as “advanced” on digitisation. This remains the biggest challenge to logistics companies, and the next few years are about to be critical, so companies that don’t start soon risk being left behind. Interestingly, the global logistics software market is growing at a faster rate with each passing year, and the growth shows no signs of stopping. The increased role of software in logistics has drawn more investment from Silicon Valley venture capital firms, and as a result over 90 percent of global investments in logistics start-ups are made in the U.S and Asia, while only 5 percent are made in Europe.
Technological changes have been the main topic in the global logistics industry for a long time. Commoditisation itself continues to be a hot topic, adding more focus on technologies and innovations, naming them as critical differentiators and enablers to grow businesses. Strategies have also changed due to these processes, and traditional business is shifting towards the idea of expanding services by leveraging thought leadership, best practices and technology to add more value to the relationships. Offering non-traditional logistics services is a popular strategy now — think forecasting, inventory management and light manufacturing, which deliver high-impact bottom-line results for the logistics companies. And let’s not forget strategic relationships, as this aspect is redefining the usual service-oriented partnership, transforming it into a more solution-oriented and collaborative relationship.
The global logistics sector recently went through some exciting changes. Automation re-shaped the entire workforce, and now helps companies to provide a much better service and save money at the same time. The best part is that the level of sophistication is about to increase further: automated loading and unloading systems are available now, but in the future these are likely to be able to bypass obstacles and adjust routes automatically; advances in data processing and optics now allow tasks to be automated; package delivery is about to get smarter as well; Google has already started working on self-driving lockers; augmented reality also provides new solutions here, as engineers are working towards giving drivers more information about their environment and the packages. Almost sounds like magic, doesn’t it? We certainly like the perspective of the global logistics industry, as well as the results that it has already achieved.
It’s about to get even more exciting, so keep your eyes on this one.