The Supply Chain Management and Logistics market, valued globally at $6 trillion, is facing significant challenges due to the COVID-19 pandemic, a unique disruption witnessed in the recent times. Such is the effect of the pandemic that the topline of core industries such as Retail, Consumer, Manufacturing, Technology, Medical devices, and Travel etc. have shrunk by at least 15-35%. As they strive to regain their mojo, Supply Chain Management (SCM) and Logistics will be the epicenter of focus with allied industries aiming at optimizing their supply chain with minimum investments for maximum returns.
Transforming the ‘new normal’ to meet challenges
The SCM & Logistics market is gearing up to the growth challenge with autonomous vehicles (drones for delivery), driverless rapid transport systems, driverless cars etc. as the industry moves towards being digital via operations.
With adoption of autonomous vehicles, the US SCM & Logistics industry is set to witness a decline of 45% in operating costs and save the US trucking industry between $85-125 billion annually. Asset sharing is gaining ground in logistics, i.e. third party logistics (3PL) companies are aiming to be asset light in terms of investments on trucks, warehouses, trains and ships etc. and consumer companies are participating in asset sharing to optimize total cost of operations (TCO).
Focus on these transformation areas is helping the industry regain the momentum:
- Last mile - the new first mile: Retailers, Consumer Packaged Goods companies, communications services providers, manufacturers, and e-commerce market players are focusing on last mile deliveries, as last mile delivery costs can range from 25-30% of total transportation costs globally. Last Mile delivery issues such as delayed, damaged, misplaced and lost deliveries can be addressed if shippers improve their internal logistics and SCM processes via either transformation, process simplification or standardization for delivering goods along with 3PLs that they rely on because of their strength of network for last mile deliveries.
- Same day delivery a reality: Algorithmic tracking and route optimization enable logistics companies to increase profits up to 16% and reduce up to 3.6% in line haul network cost.
- Analytics & technology-driven logistics: Artificial Intelligence (AI), Internet of Things (IoT), Augmented Reality-Virtual Reality (AR-VR) are coming to the fore as shippers and 3PL companies make investments to increase strength of their supply chain. They are investing in supply chain visibility/control towers and predictive analytics to forecast demand, and optimize route planning and load balancing of their vehicles. Data suggests that 3PL firms find that analytics tools can produce additional efficiencies of up to 25%.
- Omni-channel experience: Enabling seamless and consistent experience across all interaction channels (Mobile Apps, Email, Phone, Chat, Web etc.) within the supply chain for drivers, carriers and end consumers continues to be at the forefront of service providers’ needs
- Need for instant gratification: Near real time tracking of shipments by customers (Business to Business & Business to Customer) is no longer a luxury considering that ~ 50% of global population would shop online by 2021.
The opportunities for transformation
Let us examine a typical logistics value chain comprising of order entry, fulfilment, dispatch and customer support (Depicted in Figure 1). Within the value chain mapping, there exists several opportunities for transformation. Shippers/carriers can use various technologies to drive wide range of efficiencies and automation in areas such as route planning, load balancing, track and trace, optimal fleet utilization, designing of right network for delivery etc. This will reduce overall TCO while providing optimal services to end customers.