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Making the physical digital (Part I)

Blog post   •   Jan 27, 2016 08:35 GMT

September 5, 2020, 8 AM, somewhere in a village in Switzerland

Sandra, who works for a global logistics and freight forwarding company, finishes breakfast at home, turns off the morning news and opens her tablet. Responding to the chat from her friend has to wait because her work dashboard displays two alerts that require her immediate attention.

According to the first alert, a temperature-controlled shipment for her pharmaceutical customer in Basel is stuck in transit in Bangkok due to bad weather and is about to go out of range, which is likely to damage the product. With the click of a button, she joins a virtual conference room to talk with her colleagues in Thailand. They have already organized temporary storage in a temperature-controlled warehouse, as well as onward transportation. There’s no need to inform her customer. Even though flight schedules out of Bangkok have changed too, the system in the background automatically re-booked the cargo on the next plane out, and her customer has already been notified on his smartphone. Despite the complications, the planned arrival date and time at the hospital in Cambodia will still be met.

The second alert affects more shipments: there’s around an 85% chance that a port strike in Panama will delay three containers en route to São Paulo by five days – and there’s a good chance the delay could take as many as eight days. There are no good options to get these shipments to her automotive customer, who needs the parts for his car manufacturing facilities in Latin America. With the click of a button, she forwards a system-based proposal to have five days’ worth of product stock produced by her company’s 3D printing machine in Brazil. All she needs is the GCode file from her customer. The parts that are stuck in Panama can be used in production later.

A quick glance at her all-encompassing operational dashboard reveals that everything else is running smoothly. More than 150 new transport requests received from other customers have been confirmed and booked through ocean and airline carriers in the most cost- and time-effective way: without human intervention. At the transit warehouse in Zurich, 87 shipments are being consolidated and prepared for uplift by air. Another 1,349 shipments are on their way all across the globe, many of them passing through the company’s uncongested Luxembourg air freight gateway. All in all, 98% of events are happening as planned; the other 2% are non-critical events that will be put on the watch-list.

One inventory replenishment order for the Japan warehouse was just automatically sent to her fashion and retail customer; since the launch of a new social media campaign yesterday, demand is expected to increase by 250%. All of the other warehouse inventories are synchronized with the forecasted demand – no exceptions or potential problems have been flagged by the system.

At 9 AM Sandra leaves for the office to prepare for a visit to the company’s largest customer; there, she and her team will discuss the outcome of recently conducted strategic supply chain network analysis and modeling. A potential savings of 25% in direct and indirect supply chain costs was identified. She’s confident that she and her colleagues, who handle five times more shipments than they did five years ago, have a good value proposition for their customer.

Digitization

In five years, Sandra’s day could be a typical one for an employee of a third-party logistics provider (3PL); after all, many of the technologies and tools she uses already exist today. By 2020, we’ll be living in an environment where automation, connectivity, visibility and agility have advanced considerably – thanks to information technology. In the coming years they will be perfected, as digitization in the freight forwarding and logistics industry continues to make great strides.

Today, 3PLs’ work is still very much physical, and international freight forwarding and transportation remain labor intensive. Huge advances in technology over the past 200 years – from the train to the automobile to the airplane – have brought transportation to its present state: specialized and relatively inexpensive. Transport options have proliferated and increased in complexity during the past two centuries, but since the invention of the airplane, there have been few advances in creating new kinds of transportation. Sure, we are figuring out ways to move things more quickly, in larger conveyances, and we can build better and more efficient infrastructure to do so. But new modes of transport dedicated to moving physical goods are not where the frontier of transportation lies. Digital transformation is.

There are many ways to buy a product via the internet today, and new solutions for last-mile delivery are being explored. Traditional logistics and transportation players are being challenged as new competitors inundate the market with innovative business models and approaches that improve upon the old way of doing things. Many of these new pioneers – from Amazon to Uber – use information technology and digitization of services as a core pillar of business.

In part two of our blog post we will highlight five major trends that are shaping the freight forwarding and logistics industry – all of them linked to digital transformation.

In the meantime, this two-minute video gives a first impression of what digitization can do for 3PL customers.