KEARNEY & CSCMP: 6 Technologies Driving Logistics and Supply Chain Forward in 2020

New insights from Kearney and CSCMP show how technology is helping the logistics industry work smarter, better, and faster in today’s challenging business environment.

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In 2019, organizations around the world were dealing with trade wars, electronics component shortages, labor crunches, and geopolitical issues like Brexit. By early-2020, the entire world’s attention shifted over to fighting a global pandemic and coping with the steep toll it took on human life, livelihoods, businesses, and industries.

In response, the logistics industry has spent the past few months dealing with crises. Now, it’s carving out a path forward in a VUCA (volatility, uncertainty, complexity, and ambiguity) world, where new challenges continue to surface daily.

Some signs are optimistic, according to Kearney and CSCMP’s 31st Annual Council of Supply Chain Management Professionals (CSCMP) State of Logistics Report. For example, e-commerce continues to boom, amplified by the online shopping of those sheltering at home. Some carriers maintained profits despite declining volumes in 2019, suggesting a commitment to pricing discipline that may help them survive the bigger drops of 2020.

“An economic slowdown damaged most sectors of the economy, including logistics,” Kearney points out in its report, which covers the macroeconomic factors affecting logistics, insights from industry leaders, discussion of important trends, detailed analysis of each major logistics sector, and a strategic assessment of the industry.

6 Ways Tech is Making a Difference

In its report, Kearney discusses how the implications of the COVID-19 crisis have reemphasized the value of technology in logistics. Here are six advanced technologies that it says will continue to positively impact the industry for the near term:

1) Artificial intelligence and machine learning: Artificial intelligence (AI) and machine learning (ML) are broad categories, which companies across all stages of logistics are already using to make smarter and quicker decisions. AI and ML directly address the data challenge, helping companies turn existing data into better insights and competitive advantage. “Their importance to the industry is why 20 percent of the AI-100 are in logistics,” Kearney points out, noting that companies can use AI and ML to:

  • Anticipate market changes to make better planning decisions
  • Predict high-demand products, so that warehouses can move them to easy-to-access locations
  • Optimize delivery routes based on real-time traffic and weather conditions
  • Recognize damaged goods before they get delivered
  • Automate simple, repetitive back-office tasks to reduce paperwork, improve productivity, and reduce errors

Calling AI and ML “dominant disruptive forces in logistics,” Kearney says the value they bring is clear. “Barriers to entry are lowering, computing power continues to grow, and ever more data is ever more widely available.

2) Robotics and automation: Kearney breaks robotics and automation technologies down into two categories: moving goods and handling goods.

  • Autonomous trucks are likely to develop in stages: first platooning, then driverless platooning, then full-blown autonomous vehicles operating at scale without drivers all the way from loading to delivery. Similar, but lower-impact, effects can be expected in rail, air, and warehouse drones.
  • In warehouses, robotic shelves can move goods to picking stations, picking systems can use robotic arms with sensors to effectively grasp many shapes of objects, and autonomous palletizers can robotically build pallets from units and cases.

Noting that autonomous vehicles still need to make significant headway on safety and regulatory issues, Kearney says stakeholders need to come together to build the vision of a driverless world, which is likely still years away. “Platooning will come first, in three to five years, and fully autonomous vehicles will become a reality in about 10 years,” it concludes. “However, the handling technologies focused on picking, sorting, and palletizing are already in full swing.”

3) Augmented reality and virtual reality: Augmented reality (AR) and virtual reality (VR) can make processes more efficient, thus improving productivity, especially in warehousing and delivery. The earliest examples have focused on aiding warehouse product picking by displaying instructions on smart glasses for items in the field of vision. Glasses can also provide instructions for employees performing maintenance tasks.

“Eventually they could even help employees find the right pallets when loading or unloading a truck,” Kearney adds. “The approach can reduce lead times, error rates, and job training requirements.” Similar approaches on vehicle windshields could aid delivery people, perhaps even by showing a picture of the package’s intended recipient.

“In the near term, AR and VR will likely remain limited to existing use cases in warehouse product picking and training,” Kearney predicts, “although it will likely expand from early adopters to other competitors in those areas.”

4) 5G and the Industrial Internet of Things: Companies can use the new 5G wireless standards in three key ways:

  • End-to-end visibility. 5G will enable companies to deploy many more devices, creating an Industrial Internet of Things (IIoT) that can provide real-time data for container-, truck-, and SKU-level tracking.
  • Enhanced routes and schedules. Better tracking will help organizations avoid delays, eliminate unnecessary trips, and optimize routes and schedules in real time.
  • Improved maintenance. The 5G network will support VR and AI technologies to improve on- and off-road maintenance.

“5G networks will soon be ubiquitous,” Kearney predicts. “However, beyond the 5G-powered infrastructure on which copious devices can communicate, achieving full IIoT benefits also requires easily available low-cost devices and the emergence of standards for their communication across the network.”

5) Renewable energy: Logistics companies can benefit from renewables through savings in fuel and power, reducing emissions to meet consumer preferences, and potentially increasing delivery windows through quieter electric fleets. Kearney sees three clear innovation areas within the logistics space:

  • Electric trucks rely on battery innovations that reduce costs and charging times (for example, swappable batteries).
  • Electrified last-mile vehicles may include handcarts, tricycles, or medium-sized vans.

Green warehouses reduce carbon footprints through rooftop solar panels, smart motion sensors to reduce illumination requirements, and forklift charging in off-peak hours.

6) Blockchain: Kearney says that while blockchain’s decentralized nature and transparency can improve tracking and reduce inefficiencies in logistics, advocates often overlook the foundation of digitization needed to extract the full potential of the technology. “There are also technical issues,” it points out. For example, a smart contract won’t self-execute without connectivity at the point of delivery to log the fact that the goods were delivered.

Before blockchain can become ubiquitous in the supply chain, Kearney says there are also trust issues to work through. “Making all data in a network transparent to all users can undermine trade secrets. These and other issues surrounding blockchain in logistics are certainly solvable,” it explains. “But it may take years for the solutions—and the changes in a wider ecosystem that they require—to be ready to live up to the hype.”

Stepping up to the Plate

The COVID-19 crisis serves as a reminder of the world’s reliance on logistics to deliver regardless of circumstances. It also accentuates some of the industry’s challenges, especially in meeting increased e-commerce demand from customers. “It highlights the need for modernization and technological advances,” Kearney states.

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KEARNEY & CSCMP: How the Logistics Industry is Navigating the COVID Crisis

New report from Kearney and CSCMP paints a picture of a resilient industry that’s increasingly turning to technology and automation to help navigate the COVID crisis and subsequent economic downturn.

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Coming off a very strong year in 2019, the logistics industry is proving itself to be both adaptive and resilient in the face of major adversity in 2020. Impacted by the convergence of a global pandemic and economic downturn, the industry is in the process of shaking off these negative impacts and learning how to operate in the “new normal” business environment.

These and other insights were recently unveiled in the 31st Annual Council of Supply Chain Management Professionals (CSCMP) State of Logistics Report. Developed by Kearney, CSCMP, and a team of industry leaders, the annual report covers the macroeconomic factors affecting logistics, insights from industry leaders, discussion of important trends, detailed analysis of each major logistics sector, and a strategic assessment of the industry.

“Globally, countries are grappling with halting recoveries of supply, ongoing demand destruction, and secondary waves of infection—and the U.S. is no exception,” Kearney points out. “This painful and chaotic period is causing logisticians and all who depend on them, to adapt and evolve. As they fight to survive, to operate, and then to win anew, both shippers and carriers will depend on more quickly adapting logistics capabilities.”

Recovery Ahead

In 2019, U.S. business logistics costs (USBLC) rose 0.6 percent to $1.63 trillion, or 7.6 percent of 2019’s $21.43 trillion GDP. “Yet in mid-2020, that all seems like history,” Kearney points out. “The pandemic, and global measures taken to reduce its further spread, have decimated supply chains, scrambled logistics capabilities, and destroyed huge swaths of demand. The size, shape, and timing of a recovery remain in question.”

According to Kearney, the pandemic has also highlighted the value of the logistics industry. “Whether it’s delivering critical medical supplies or allegedly hoarded toilet paper, logistics is essential to national security and wellbeing,” it says. “Many of its employees were rightly labeled as essential workers.”

Some signs are optimistic. E-commerce continues to boom, amplified by the online shopping of those sheltering at home, Kearney reports. And, some carriers maintained profits despite declining volumes in 2019, suggesting a commitment to pricing discipline that may help them survive the bigger drops of 2020.

Going forward, it says supply chains will need to become more resilient, better able to adjust to, and recover from future difficulties. “The shift away from single-source, cost-focused supply functions may pose new challenges to logistics,” Kearney cautions, “which itself is having its resilience tested in this crisis.”

Warehousing is a Bright Spot

According to Kearney, the warehousing market continues its growth. In 2019, rents kept rising and vacancy rates stayed near historic lows. E-commerce continued to drive growth, especially in smaller, high-amenity urban warehouses. “The fourth quarter of 2019 represented the highest square footage completed in a single quarter on record,” it says, “and the vacancy rate barely budged.”

In 2020, the disruption of consumer supply chains caused by the coronavirus pandemic is expected to drive a new surge in warehousing demand, especially for temperature-controlled warehouse space, as more consumers order food online. “Pandemic e-commerce is leading to an expected increase in adoption of warehouse automation solutions to keep costs and operational complexity in check even further,” it says.

For example, sales of autonomous mobile robots (AMRs) are estimated to double to $27 billion by 2025. Overall, it is estimated that a 5 percent bump in safety-stock inventory will require about 750 million square feet of industrial space as companies soften their lean-inventory strategies.

“The rise in stock levels should spur industrial activity,” Kearney predicts, “given the expectation that the warehouse construction pipeline will remain full and warehouse availability will remain tight.”

Agility Trumps Forecasting

In a recent article by Supply Chain Dive entitled Unilever CSCO: Agility beats forecasting when the supply chain is stressed, Chief Supply Chain Officer Marc Engel emphasizes the need for an accelerated digital transformation during these challenging times. He comments why

“Agility does trump forecast[ing],” the CSCO said. “At the end of the day, every dollar we spent on agility has probably got a 10x return on every dollar spent on forecasting or scenario planning.”

Unilever is working toward automating processes and leveraging the data collected to become more agile and accelerate its supply chain.

Technology Drives Logistics

The implications of the COVID-19 crisis have reemphasized the value of technology in logistics. Even providers previously hesitant to invest in digital yard management solutions, shipment location tracking, or electronic signatures, claiming such digital technologies were unnecessary, are now embracing them as table stakes.

With rising labor costs, and despite the COVID-19-induced recession, shippers and 3PLs are looking to automation to make logistics more efficient. While a serious uptake of autonomous trucking is still five to 15 years away, legions of mobile robots are already working alongside humans in warehouses and automated systems for yard and transportation orchestration are enabling those organizations to gain agility.

“In general,” Kearney says, “winners will emerge from this crisis with more digitally savvy logistics operations, especially in the areas of creating transparency and interfaces while reducing needs for physical labor across modes and nodes.”