5 Ways to Cut Logistics Costs and Improve Efficiency through Digital Innovation
Logistics is ripe for reaping the benefits of digital innovation. Here are 5 ways your operation can benefit, plus the first steps your company needs to take.
Does your logistics operation use vehicle trackers or a telematics system to log miles and monitor fuel consumption? Do you have an analytics dashboard that keeps you up to date on shipments, inventory, and costs? How about equipment sensors that let you know when a piece of equipment needs maintenance?
These are all well established uses for digital innovation in the logistics industry, but they’re less commonly used than you might think. Historically, logistics has tended to lag behind in the arena of technology innovation. That’s because the daily demands of a logistics operation revolve around physical (as opposed to digital) processes. Logistics professionals work with products, packages, and delivery vehicles, and many of them have not experienced a pressing need for updated strategies.
But all of that is changing. Companies like Amazon, Uber and Coca-Cola have sprinted to the front of the digital pack, pushing the boundaries with supply chain innovations and new shipping and delivery models based on data and automation.
The bad news is that 30% of supply chain and logistics companies are falling behind the digital innovation curve. Half of companies surveyed aren’t taking steps to implement new technology, and most of those aren’t concerned about it. But that needs to change—as you’ll see.
Better Results With Digital Innovation
On the positive side, companies that implement new technology have seen excellent return on their investment. Technology enables them to get more done faster, meet customer demand more efficiently, and reduce waste. Let’s take a look at five ways digital innovation achieves those results.
1. Operational Improvements
Logistics consists of many manual processes designed to coordinate supply chain and transportation functions. Picking and packing, loading, shipping, warehousing, and other processes all depend on the physical management of goods and equipment. It’s one of the reasons many logistics companies don’t place more value on digital technology. But the truth is that all of those individual operations generate reams of data that can be leveraged to cut costs, save time, and improve efficiency. Here are just a few examples:
Vehicle Tracking—Today’s fleet managers depend on data to monitor routes, fuel consumption, delivery speed, and scheduling. Using data collected from GPS trackers, companies can assign loads based on proximity and driver availability and can also plan the most efficient routes to reduce fuel consumption.
Shipment Tracking—Digital shipment tracking systems give you the information you need to manage shipments from start to finish, saving time and money by enabling more efficient planning and annual projections. They also give customers the ability to track shipments, receive notifications, and generate reports.
Equipment Performance Monitoring—IoT technology has given us the ability to monitor equipment remotely, without the need for extensive manual oversight. For example, a network of equipment sensors can monitor output, operational efficiency, asset utilization, and diagnostics. You can also use the technology to pinpoint maintenance needs and alert technicians when a piece of equipment isn’t functioning at full capacity. By identifying anomalies before the machine sustains damage, you can reduce downtime and minimize maintenance and repair costs.
Inventory Management—IoT sensors can keep track of incoming and outgoing stock for more efficient demand forecasting, warehouse management, and turnover analytics.
2. Risk Management
Supply chain disruptions can wreak havoc, costing companies millions of dollars in lost revenue. Whether these events are caused by preventable breakdowns in the supply chain or unpredictable disruptions like natural disasters, big data gives companies a significant advantage toward anticipating risk and mapping out response strategies. For example, some solutions use data analysis to anticipate risks, helping companies identify proactive actions and residual supply sources that can be implemented to avoid disruptions that impact production.
3. Process Automation
Process automation reaches to every corner of the logistics industry, driven largely by innovations like the Internet of Things. IoT technology can help you:
* Monitor machine performance, making adjustments to maximize efficiency and reduce cost
* Identify and track containers and their contents
* Sort and distribute shipments
* Manage inventory by tracking incoming and outgoing stock
Automation increases speed of task completion and boosts productivity across the entire supply chain. It also reduces the potential for error and provides the data needed to capitalize on cost-saving measures, expand service offerings, and monitor supply/demand trends.
Data collected from your machines, trucks, warehouses, and conveyors serves as the basis for better decision-making across your logistics enterprise. Advanced analytics tools pull insights out of that data to streamline your operations, identify cost-saving measures, consolidate shipments, and create better customer experiences. Here are just a few applications:
* Performance optimization
* Route planning
* Safety management
* Inventory management and optimization
* Predictive maintenance
* Vehicle and equipment diagnostics
* Cost projections
* Demand forecasting
* Volume and consumption trends
Digital analytics tools give you the deep insights you need to make faster, more accurate decisions than you could by analyzing the information manually. They also provide access to larger data sets so you can gain a clearer picture of how changes in one part of the supply chain affect outcomes in other areas.
Customer-facing analytics also help you create better customer experiences by providing convenient access to shipment information and improving communication and response times.
5. Next Generation Warehouses
In the very near future, robotics, artificial intelligence (AI) and machine learning will create automated warehouses that require very little human interaction. It sounds futuristic, but they’re already being designed. Robots will handle picking and packing, and machine learning technology will support better forecasting, compliance, safety, and inventory management.
Stepping Into Digital Innovation for the Logistics Industry
So what’s the next step? If you are among the two-thirds of logistics companies who have yet to invest in digital innovation, where do you begin?
Start with strategy—Determine where you are now and project where you would like to be in ten years. Where are your opportunities for growth, and where can digital innovation provide the greatest benefit to your company? That might include building a team of digital specialists who can support new technology advancements and thinking through not only the logical next steps for innovation, but also the potentially disruptive ideas that could make you a market leader.
Invest in data quality—Digital innovation starts with data. The quality of your data will determine the success of any new tool you hope to implement. To achieve digital innovation maturity, you need integrated data storage solutions, reliable quality control methodologies, and security protocols to protect the integrity of your data.
Develop sustainable digital platforms—Innovation isn’t just about investing in the latest AI tool. It’s also about building a digital architecture that can serve as the structural support for both current and future digital solutions. That may include updates to legacy hardware and software, cloud deployments, and digitally enabled interfaces. The goal is to build a platform that can weather future technology developments while incurring a minimum of technical debt.
Foster a culture of innovation—Ultimately, the success of any new digital platform or tool will depend on successful change management. Your team members need to understand the pressing urgency for innovation, and they need training and support to use new tools productively. Innovative cultures embrace change from top to bottom and are willing to invest in the resources needed to get the best results.
The logistics industry may not be adopting digital innovation as quickly as finance or IT, but it is still evolving rapidly. As companies leverage new technologies to make improvements in efficiency, productivity, customer service, and resource investment, the gap between those who embrace innovation and those who don’t will grow progressively wider.