Disruptive trends that are changing the Logistics Industry Forever
Logistics has ancient origins and a future in the becoming. What is the origin of this activity and what are the future trends?
In ancient Greece, the word Logistikos identified the process of computing and military art which was adopted by the French. "art of moving, quartering, and supplying troops," in 1846, (l'art) logistique. Before the 1950s, logistics was thought of in military terms. It had to do with procurement, maintenance, and transportation of military facilities, materiel, and personnel.
When the meaning of logistics was broadened to the industrial production, it was in any case limited to the distribution of the finished product until the 1970s, when the first forms of evolution began. Companies were committed to improving the scope of physical distribution: from warehouse management to the entire distribution cycle. These challenges, to a large degree, are delineated by logistics modeling in the 70's. That decade can be characterized as the period in which the greatest strides in the development of computer models applicable to logistics took place. The areas of logistics where efforts have been concentrated can be divided into facility location, terminal operations analysis, routing and scheduling, and logistics system design.
In the 80s the focus shifted from the distribution process to the management of materials: the term "materials logistics" was coined, replacing the previous "distribution logistics". Materials logistics is the interface between physical distribution, manufacturing and purchasing. Supply chain management, although it may not feel like it to those toiling in the field, is a relatively new concept. One of first instance of the term supply chain management appeared in the early 1980s, in an article of The Financial Times, although it wasn’t until the mid-1990s that the concept gained mainstream recognition.
The next phase of the development is still in progress. The globalization of markets, the consequent increase in the level of competition, a stronger focus on customer satisfaction, the diffusion and a more advanced use of technologies: all these factors have undergone a radical change. Logistics is transforming itself from a set of operating activities to a system to achieve higher levels of performance: the so-called "integrated logistics".
The logistics industry has become a complex, articulated and strategic structure: a critical success factor in the modern economy.
The change has already begun, and the next 10 years will open the door to a new era: the ability to adapt to the new factors that dictate the rules of the game will establish winners and losers in the logistics industry.
Below are the major trends:
The peaceful technological innovation revolution, and the speed with which it is adopted, will heavily influence the activities, processes and people in the supply chain. The technological paradigm, therefore, will include: Technological advancements will take logistics & supply chain industry to the next level. Technology is being used to provide faster and reliable delivery services.
- Autonomous vehicles (IoT). A network of interrelated objects and devices such as vehicles, workplaces, homes, warehouses with unique identifiers that aid in transferring data over the network without any human intervention and efforts. Autonomous vehicles can scan the environment through radar and GPS: thanks to these systems, the means have the ability to understand and adapt to the environment, completing the predetermined tasks. The IoT revolves around an enhanced device to device function. It is built on cloud computing and networks of data-gathering sensors. It is a mobile, virtual, and instantaneous connection and it is going to make everything in our lives “smart.” Companies like Google, Intel and others are working in collaboration with few automobile giants in giving the final touch to autonomous vehicles. Amazon has already announced that they are going to use drones to deliver products within an hour.
- AI, Artificial Intelligence and Machine Learning will set the platform Artificial intelligence can be defined as human intelligence exhibited by machines. AI is a constellation of technologies—from machine learning to natural language processing—that allows machines to sense, comprehend, act and learn. Many enterprises treat AI as a software program, a learning tool. A software that represents the “brain” of autonomous vehicles uses artificial intelligence: a more complete way of analysing date and draw conclusions through numerous and complex algorithms
that approximate, mimic, replicate, automate, and eventually improve on human thinking.
In 2019, chip manufacturers such as Intel, NVIDIA, AMD, ARM and Qualcomm will ship specialized chips that speed up the execution of AI-enabled applications. These chips will be optimized for specific use, cases and scenarios related to computer vision, natural language processing and speech recognition. Next generation applications from the healthcare and automobile industries will rely on these chips for delivering intelligence to end-users.
- "Uberisation". This new technological paradigm is taking the economy by storm. The Uberization of the economy, and indeed logistics market at large, was driven largely by the success of Uber. Its model is one everyone wants to replicate. Uber has launched its “Uber Freight”, reinventing the logistics of the transportation industry.
Thus, we can draw the conclusion that mobile apps targeted at the logistics industry represent a niche in the market. A mobile app for logistics has the potential to make the industry more efficient by instantly matching consumer demand for packaging services directly with source, and further cuts out the middle man. This optimizes the associated cost and time taken to deliver and receive packages. And why not replicate Uber’s on demand model for logistics that can offer shared transport solutions, an instant match between supply and demand and prices in real time?
- 3D printing. 3D printing has captured the interest of everyone. In fact, 3D printing is already a major disruptive trend in some industries, and it will certainly disrupt others. It is likely to impact logistics and especially the design of supply chains. 3 D printing is a process of making three dimensional solid objects from a digital file. Logistics providers should embrace this change and anticipate the implications of 3D printing on global supply chain dynamics. Accenture believes that digital supply networks are the backbone of this new ecosystem: worldwide conduits that streamline and accelerate the exchange of products, materials, components and (perhaps most important) information. 3D printing will offer opportunities for mass customization and decentralized production. Presently the value of the transferred production is of approximately 4,000 billion Euros, and the impact forecast by the new technologies (3d printing, but IoT as well) will bring about a reduction between 2.3% and 3.9% in 2025. Fewer products will be shipped from far away, but “last mile” shipping could increase.
- Big Data. Since its appearance half a decade ago, Big Data has revolutionised everything; transportation, and logistics is one of the fields where big data brings an incredible potential. The complex and dynamic nature of logistics makes it the perfect use for big data application, and it is changing the way a lot of organisations operate. It has changed the way we collect, process and analyses data, and its disruption is so essential that some even call it “the electricity of the 21st century”. Advanced algorithms to adapt loads and automatic processing of data, all supported by APP for mobile devices: here is an alternative to more manual merchandise brokerage models. The ability to extract information through logistics processes is one of the main challenges for reducing risks, optimizing resource utilization and ensuring greater supply chain flexibility.
- Alternative fuels. The use of alternative fuels can revolutionize the transport economy, as energy technologies and practices have weakened the link between energy price and logistics costs. Alternative fuels such as ethanol, natural gas, biodiesel, hydrogen, and electricity are providing an increasing share of transportation energy. With energy production (e.g., solar panels) and the cost to manufacture storage (e.g., batteries) declining quickly, the trucking industry is on the cusp of substantial change. These technologies are already being adopted and will grow quickly in the next 5-10 years. The economics are most compelling for short-haul city distribution, as alternative fuels also help compliance with increasingly stringent emission standards.
2. Consumer needs
"Quality is not only reflected in the product, but in the whole customer experience." Changes driver are:
The way to maintain the company’s position within a changing market and increase profit starts by focusing on the service provided to the customer and on decreasing the cost, logistics activities became the backbone of these organizations that target the customer satisfaction while achieving competitive advantage. The desire of consumers to have the products available at any time affects the whole logistic process, and more generally on commercial activities. In fact, the expectations of consumers accustomed to the advantages introduced by e-commerce become more and more evident: Typically, they wish to receive deliveries as quickly as possible and at the lowest cost. In this highly competitive environment, sellers have no choice but to try to optimize the management of stocks in their network, to quickly deliver and reduce the costs of making available products
- “I want it now” and personalization. The consumer wants the products to always be available and personalized: e- commerce solutions with ever faster delivery times have accustomed people to limited waiting times, and the market must adapt accordingly. Shared warehouses and 3D printers are the first solutions born to meet these needs.
- Millennials preferences. Millennials, those born between the years 1981 and 1997, are made up of technologically savvy, yet often financially cautious, folks. At 25%, they currently form the single largest generational cohort and account for billions of dollars in purchases each year, making them one of the most powerful buying groups in today’s consumer market. And yet, Millennials are a tricky demographic for merchants to categorize given their high student-loan debt and healthy dose of financial skepticism. Here are the challenges for the sector: one-day deliveries, simplified payments and increased loyalty.
- Omnichannel Shopping. Omnichannel Shopping is a multichannel approach to sales that seeks to provide customers with a seamless shopping experience, whether they're shopping online from a desktop or mobile device, by telephone. Instead, brand coverage, social media presence and overall lifestyle affinity wins Gen Z from their one-click purchase on Amazon or through the newest drop app. An omnichannel customer experience is made up of individual customer touchpoints, over a variety of channels that seamlessly connect, allowing customers to pick up where they left off on one channel and continue the experience on another to increase the amount of goods they can order online. Omni-channel refers to retailers with both a physical and digital presence. The biggest challenge is to maintain price / supply consistency across the different channels, especially digital ones.
- The need to Appeal to the Affluent Older Consumers. Besides millennials, there are older consumers too: human life expectancy is increasing in industrialized and developing nations. The population over 60 is almost 1 billion. Consumer goods industries have a huge and rapidly growing opportunity to provide these people with the right goods and services that meet their needs and expectations. “This older generation, those over 50, 60 and 70, they have computers, they have smartphones, and very directly they’re using them for everything, from canned tomatoes to television sets, to order those things online,” Wayne Best, chief economist at Visa, told The Street in mid-December. He also pointed out that boomers generate more than 51% of the spending in the United States. Regardless of where or how that 51% of spending occurs, the fact is older consumers represent a sizable and potentially lucrative long-term market base for digital retail. Boomers are going to be with us for a while, so online experiences should evolve with a mind toward their aging needs.
3. Macroeconomic trends
Global macroeconomic trends have a strong influence on economies, people, the environment and society. Identifying and rolling with these trends is important to the future of companies, governments, families and investors. These trends are not your hot idea of the month, but rather changes that span multiple decades. In particular, there are four factors that can most influence the distribution logistics sector:
- Globalizzazione. The growth of economic integration between states has led to the formation of a macro-market, in which the logics of distribution vary from nation to nation. Globalization has impacted people and communities across the globe and has significantly influenced sustainable development. Fueled by fast-paced changes in technology and the increased mobility of goods, services, capital and labour, over the past decades’ globalization has greatly changed economies, societies and the natural environment and has made our world more interconnected than ever before. These trends have presented a wealth of opportunities.
Globalization and increased economic interdependence have accompanied — and facilitated — rapid economic growth in many countries and regions, helping world GDP grow from around 50 trillion USD in 2000 to 75 trillion USD in 2016. Yet, globalization has also presented significant challenges, including an uneven distribution of its benefits and costs.
- Volatile commodity prices. It is a rate at which the price of a security increases or decreases for a given set of returns. Volatility is measured by calculating the standard deviation of the annualized returns over a given period. It shows the range to which the price of a security may increase or decrease. High and volatile commodity prices have returned as a significant global issue. The exposure to the risk of price volatility can be direct, because it is linked to the cost of undifferentiated or indirect goods, i.e. caused by an increase in energy and transport costs. A topic of great importance not only for supply chain managers, as the volatility of commodity prices can have important effects on profitability and company cash flows.
- Climate Change. Climate change due to polluting emissions from transport hit above all the logistics sector: The transportation sector is one of the largest contributors to anthropogenic greenhouse gas (GHG) emissions. It will be essential to find solutions to reduce greenhouse gases, rethinking some dynamics within the transport sector. Ships account for 90% of the global transport of goods. In order to reduce CO2 emissions, shipping could be adjusted to better planned routes and logistics. This could save 10-15% of CO2 emissions. In addition, real-time distribution path planning and guidance for logistics vehicles could be utilized on network. Yet another, zero inventory management model could be achieved through a network. In this process, real-time scheduling of transport vehicles can fully meet the needs of consumers for the timely change of logistics demand. Take logistics for instance, sources of information of vehicles in transit could be offered by cargo loading data in the Internet located in logistics center so as to reduce the rate of empty vehicles; furthermore, with the communication technology team, the itinerary of the vehicle could be changed when consumers issue a change in the d goods. All of these could improve logistics efficiency and enhance the capabilities of meeting the changes of market with a minimum energy consumption. Technological progress could kick off the use of drones and alternative means.
- Urbanization. An increase in a population in cities and towns versus rural areas. Urbanization began during the industrial revolution, when workers moved towards manufacturing hubs in cities to obtain jobs in factories as agricultural jobs became less common. Increasingly congested cities involve more traffic, and consequently more logistical problems. It is therefore a matter of identifying and implementing new models of development and cooperation on the territory, through a transversal approach concerning the problems of transport dispersion.
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