The logistics industry is in a state of ongoing transformation as a variety of new technologies are coming to market. All of these logistics trends are changing the way companies interact with their products, suppliers, customers, and business partners.
Over the last two decades, the logistics industry has been in the process of undergoing early-stage digitalization. Many companies are migrating away from paper and spreadsheet-based management systems and embracing emerging technologies like mobility and the cloud.
Now, we are moving into a new phase of digital transformation—one that will be defined by systems and processes that are smarter, faster, and more reliable than anything we have seen to date.
In fact, there is a tremendous amount of innovation happening in the industry today, with the global logistics market on pace to be worth about $75 billion by 2030—more than doubling from the $32 billion the market brought in last year.
Modernizing the Logistics Industry
This is not to say the whole logistics industry is up to speed, though—far from it. Believe it or not, industries like media, finance, retail, and even telco are far more advanced at this point than logistics, according to a recent report by the Boston Consulting Group (BCG).
“Facing fierce competition from a host of newcomers, logistics organizations trail behind the digital curve compared to other industries,” BCG explains. “From strongly funded and scrappy startups, to customers-turned-competitors and shrewd competitors hatching completely new business models while partnering with—or acquiring—other players in the space, rivalries are fierce in the logistics ring.”
According to BCG, poor transparency is exacerbating an industry that is already highly fragmented. Traditional logistics companies are struggling with outdated customer interfaces, inefficient manual processes, and underutilization of assets.
Add it all up, and a digital divide is growing. Technologically advanced companies are pushing forward with new technologies and far surpassing the capabilities of non-digital competitors.
Key Logistics Trends for 2020
Here is a breakdown of some of the top logistics trends to know about for 2020.
1. Software-Defined Everything
Connectivity is critical for success—especially for supply chain providers that are pushing forward with cloud deployments and IoT systems.
Yet connectivity can be very difficult to establish and maintain. It's even harder for large, multi-site organizations or companies entering into new markets.
Traditionally, logistics providers used multi-protocol packet label switching (MPLS) connectivity—which is expensive, inflexible, and slow due to limited bandwidth constraints. Now, we are seeing a growing shift to “software-defined” technologies like software-defined interconnection (SDI) and software-defined wide area networking (SD-WAN) which allow companies to establish connectivity between cloud locations and data centers and deploy virtual networks without having to invest in any underlying hardware.
As a result, companies are able to lower networking costs while maximizing uptime and system resources.
2. Artificial Intelligence (AI)
AI involves instructing machines to perform tasks and think like humans. The technology is now being used in a multitude of ways in the logistics industry, such as predicting weather forecasts and market conditions, sourcing materials, and improving the speed and accuracy of backend processes, among other things.
Right now, AI is still in its infancy stage. It will likely be many years before it becomes widely deployed and integrated into mainstream applications. That’s largely due to the fact that AI is highly resource-intensive. It requires the attention of trained and experienced data science professionals.
A growing number of companies, however, are investing in platforms with embedded AI. These systems allow them to leverage advanced intelligence without having to actually develop it on their own. Looking ahead, we will see increased dependency on third-party platforms with embedded AI capabilities.
3. Security Information and Event Management (SIEM)
Logistics providers are prime targets for cybercriminals as they store tremendous amounts of data yet often lack modern and robust safeguards. It’s no secret that companies often store loads of data on spreadsheets and insecure, outdated portals—providing an enticing target for hackers.
Over the past few years, we have seen noticeable growth in SIEM systems which aggregate data from multiple systems for real-time security alerting and management. SIEM systems provide network security operations teams with enhanced visibility and control. This allows them to shorten the amount of time that a bad actor can sit inside of an exploited database.
Without a SIEM system in place, a hacker may lie dormant for years inside a backend system without being noticed, pilfering data at will. On the other hand, with a SIEM system, a network team can reduce this time to minutes or even seconds—enabling them to respond faster in the cybersecurity “kill chain” or intervention process.
4. Refrigerated Shipping
Thanks to the internet, customers have the ability—and the desire—to order perishable, non-local food. This is great for business. But it’s also putting increased pressure on logistics and supply chain partners to transport items quickly and safely.
As a result, logistics companies are pumping a significant amount of resources into refrigerated shipping. In fact, the refrigerated shipping containers market is now the fastest-growing container segment.
This, in turn, is fueling investment in connected sensors and IoT devices, which are important for both regulating temperatures during shipping and reporting data.
5. Digital Twins
A digital twin is a replica of a physical asset that exists in the real world.
Think of it like a sophisticated version of a mathematical model that’s connected to a physical object with sensors and network technologies. All changes and fluctuations impacting the physical model are made to the digital twin, enabling researchers and data science teams to gain valuable insights and experiment with different outcomes.
For example, a logistics company might build a digital twin of a jet engine to study. That way, it could improve its performance under certain conditions in a way that is more cost-effective than testing physical models.
DHL predicts the digital twin market will grow at an annual rate of 38 percent, reaching $26 billion by 2025. So, this is something that we will start to see much more of in the logistics industry for 2020.
“While the digital twin concept has existed since the start of the 21st century, the approach is now reaching a tipping point where widespread adoption is likely in the near future,” says DHL.
6. Paperless Transactions
Numerous problems in the logistics industry stem from legacy administrative processes. For example, every day there is about $140 billion tied up in payment disputes. And a significant amount of transportation costs are due to processing and administration fees from paper transactions.
To streamline transactions, a growing number of logistics companies are embracing blockchain technology. Blockchain-enabled platforms featuring distributed ledgers eliminate the need for paper. They also enable advanced mechanisms such as smart contracts and custom clearance systems. It will take some time for blockchain to proliferate. Over the next decade, however, it could very well become the industry standard for processing transactions.
A growing number of companies are also turning to automated billing solutions to remove paper from the transaction process altogether.
Vector, for instance, offers a platform that allows providers to set individual customer preferences and automate billing with push-button ease. This type of system can expedite payments, preventing companies from having to wait weeks or even months for transactions to clear.
Technology Is the Future of Logistics
Any way you slice it, technology is having a transformative impact on the logistics market. Companies that fail to adapt to this new reality will have a hard time staying relevant. At the same time, companies that modernize their operations with modern tools, technologies, and processes put themselves in a great position to thrive for the foreseeable future.
This post was written by Justin Reynolds. Justin is a freelance writer who enjoys telling stories about how technology, science, and creativity can help workers be more productive. In his spare time, he likes seeing or playing live music, hiking, and traveling.