The technological innovations of the past few decades have revolutionised almost every business sector. From digital transformation, cloud-based technologies to blockchain technology, businesses now need to put technology at the heart of what they do to remain competitive in their markets. In the case of the logistics sector, it has arguably been most affected by these changes, transforming the entire face of the industry.
Logistics is the critical backbone to almost all the major global sectors– from retail to pharmacy, construction to energy, F&B, automotive and more, the industry has had to evolve with changes in each of their clients’ sectors to meet their unique needs. As a result, industry leading players are among the most innovative technology-based businesses today. Logistics is such a core and profitable function for businesses, that many global companies with the capability to do so, are venturing into the sector. One of the most prominent examples of this being Amazon, which considers its logistics as key to the company’s competitive edge. With Amazon’s shipping costs increasing from $11.5 billion to $21.7 billion in the two years from 2015 and 2017, the move to set up their own in-house logistics function was the most logical decision for the business.
So what technologies are currently keeping logistics executives awake at night? The following innovations are those touted as having the most potential to push logistics well into the fourth industrial revolution. From 3D printing through to drone technology, automated vehicles and blockchain, these technologies offer the sector ever greater improvements in speed, efficiency and accuracy, adding considerable value to the industry.
Automation and Robotics
Automation and robotics are now well established in their use in the supply chain, particularly in warehousing. The trend is only going to continue, with the number of robots operating in warehouses predicted to increase roughly 15 times in number from 40,000 in 2016 to 620,000 in 2021. Today, they are part and parcel of cutting edge distribution centres, shipping yards, and other logistics hubs. Complete automation of the distribution centre, however, will require higher precision technology. For example, robotics is not yet able to effectively assemble individual packages, a critical function for the e-commerce industry, which demands smaller packages at greater speeds. The technology is also yet to be able to offer a workable solution for the loading and unloading of freight in the case of larger loads. Progress, however, is being made and advanced robotics are becoming ever smarter, more ergonomically designed for greater flexibility, and able of managing heavier loads. One company, Fetch Robotics, for example, is developing autonomous mobile robots that can move large pallet loads between vehicles and warehouses in shipping yards, one of the more challenging terrains for robotics to conquer. Robotics company VECNA on the other hand recently created an entire division to focus solely on solutions for the logistics sector and among other things, is working on robots for picking to pallet moves. Companies that can custom design and build their logistics hubs are best placed to take advantage of a fully automated centre. Outside the warehouse, automation is also being considered for delivery solutions. Drone usage for delivering critical products to remote locations is a solution which not only covers long distances without consuming large amounts of fuel, but is also able to overcome issues of a lack of infrastructure, accessing sites that may not otherwise be reachable by road. This solution has for example been trialled by the Rwandan government to deliver medical supplies to those in need.
Due to the globalised free-market, our goods cross over more terrain than ever before. Supply chains have become ever more complex, with industry players in specialised roles making up the wider logistics network. With the number of organisations involved, transparency has become a more significant concern for all stakeholders. From clarity over the origin of goods, through to the cost of logistics services, and even monitoring networks for illegal products, the logistics chain is currently lacking reliability and integrity. Blockchain offers a simple solution by providing a digital record of transactions for a particular asset, with all relevant parties having access to this information. For example, such technology can be particularly critical for supermarket chains. Walmart has implemented the solution to track the import of its meat products. In the case of faulty produce, it can locate from where it originated. Companies such as Unilever and Nestle are also using similar solutions.
While the current solutions explored offer far higher levels of efficiency and value in the supply chain, these advances only go so far as to improve essential logistics functions – i.e. transporting goods and services between locations. 3D printing offers the potential to entirely disrupt and overhaul the logistics sector, and beyond that even our entire global economy. The ability to fully automate manufacturing via 3D printing promises not only a major reduction in the need for labour, but also potentially eliminates the need for transportation, with the ability to produce goods closer to their intended destination. Other major selling points include a reduction in waste, solving the issue of the inefficient use of materials on the traditional production line, as well as the ability to customise products without huge cost. Although the technology still has a way to come before its mass adoption, it is already being used in the aerospace, automotive and mobile telecoms industries to produce various components for its products.
Market expectations, what next?
In the GCC, the sector is one in which the government has heavily invested, and one which has delivered fruitful returns. This is the case for example in the UAE, where the government is expanding its already robust network of logistics facilities, with expansions underway in Jebel Ali Ports and Khalifa Ports. The sector is one of the leading industries driving growth, and the value of the industry in MENA is touted to reach $200 billion by 2020. Globally the sector is also buoyant, with 284 Mergers and Acquisitions deals in 2017, an increase of 18% on the previous year, accompanied by a 5% increase in deal value to $125.5 billion. As innovations continue to drive the sector toward accelerated efficiency, greater transparency, and better integration of industry players, it seems there are many more exciting technologies in the pipeline to come, which offer to add even greater value to the industry and its stakeholders. The challenge now is how logistics players will keep their edge in such a competitive market, when more and more companies are wanting a stake in the sector, and are building their own logistics functions. Alongside the well-known example of Amazon already mentioned, we saw Google partner with Chinese e-commerce giant JD.com earlier this year, and invest $550 million into the company’s plans to expand into overseas logistics. Alibaba, having recently purchased a multi-country site, seems likely to follow suit, as the two e-commerce giants compete in the South East Asian markets. Dnata and Emirates are other big names carving out their place in the market, leveraging their already existing networks and infrastructure.
The logistics sector is rapidly transforming and may be close to a tipping point in a paradigm shift in how the overall industry not only functions but shapes the global economy and markets.
January 31, 2019
CEO at Awad Capital