Inside Logistics

The digital imperative

Third-party logistics increases its reliance on new technologies


(Image: thitivong, iStockimages.com)

June 18, 2020
by John Tenpenny, with files from Emily Atkins

Digitization is not a new trend for third-party logistics, but it has suddenly taken on greater urgency in the Covid-19 world. Shippers, carriers, and logistics service providers have long been seeking enhanced technologies that empower them to reduce costs, create efficiencies, and make more informed business decisions. Now they are adding business continuity to the list of digital benefits.

According to the CSCMP’s 2020 Third-Party Logistics Study, digital capabilities are now a key differentiator. “Shippers are increasingly using data to optimize their networks and drive supply chain decisions, and the availability of capable IT technologies and competencies in the IT area has become a key selection criterion in shipper bid and RFP processes,” the report notes.

Shippers are primarily looking for 3PL providers with electronic data interchange (EDI), transportation scheduling and planning (TMS), warehouse management (WMS), and visibility tools at their disposal, the report says.

According to the MHI 2019 annual report, Embracing the Digital Mindset: “In the future supply chains will likely integrate real-time supply chain visibility tools and predictive analytics capabilities to create transparency for all stakeholders. Information about companies, suppliers, and sourcing locations can be readily available and accessible to all stakeholders across the entire supply chain.”

And while new technologies such as blockchain, artificial intelligence, machine learning, automation and robotics are all in use to varying degrees across the globe, these have yet to gain wide acceptance.

Recent events have proven to some in the industry that having a plan is the most important aspect of the digital transformation.

Drivers for DHL Express are on the frontlines during the Covid-19 pandemic and the company’s ability to respond quickly to changes is in some part tied to investments DHL has made in digitized solutions.

“From the perspective of being on the frontline at DHL Express I can say that digitization has absolutely been critical for us in terms of our ability to mobilize and then execute the plans we have for business continuity,” said Andrew Williams, CEO of DHL Express Canada.

Drivers, out on the road every day, need to secure proof of delivery. Through the technology already employed, DHL was able to have them take pictures of customers’ signatures on a piece of paper. Customers didn’t need to touch the driver’s scanner anymore.

“This is something we would not have been able to do, even just five years ago,” Williams said. “We implemented this within 48 hours, so that there was no impact on being able to secure and collect the proof of delivery that is such a critical part of the commitment that we make to customers.

“We will, through our logistics network, move things that are critical that will make the world a better place, faster. So, we absolutely have to be in a position to respond at a time like this and digitization has helped that.”

People first

Whatever digital technology is applied, it’s important to realize that it doesn’t run itself. You need people.

“It’s having people with the depth of expertise in what you’re doing and what your customers are doing and what the data means,” said Russ Felker, chief technology officer of GlobalTranz, a 3PL with a network of more than 34,000 carriers and more than 25,000 shipper customers. “Until you have that you can’t actually build the machine learning model, you can’t build the artificial intelligence pattern, like the chatbot that interacts with customers. You can’t build that to interact with logistical data unless you have logistical expertise.”

Felker pointed to Uber Freight, which started up as a completely digital platform, like the original ride-sharing app. “Now they’ve opened operational centres – with people. They figured out what most of us in the industry already have: that you have to have good people sitting behind the data.”

Freight doesn’t work seamlessly. Disruptions – like Covid-19 – happen. “If you don’t have people and relationships built up you can’t just digitally figure out how to handle everything that is going on, from a driver who has decided ‘I’m not going to deliver a load into that hotspot,’ to a lineup of container ships at a port,” Felker added.

A purely digital system can work well in understanding how to move freight in a “normal” environment, but these times are anything but normal, Felker noted.

Getting workers onboard

One of the challenges of automation and digitization, according to Williams, is getting employee buy-in. The challenge is amplified by the company’s high hiring rate. During the past year Deutsche Post DHL Group added over 30,000 jobs worldwide.

“Automation, digitization and improvement of processes actually drives productivity, which has the impact of spurring growth and that then creates more employment,” Williams said. Companies that can digitize and get their workforce onside with the idea that it will improve the business, and unlock further growth, will move a lot faster than companies that perhaps face internal resistance because people fear for their future.

While companies can be focused on big-picture projects, like robotics, autonomous vehicles, and big data, Williams said, they need to ensure attention is paid to the frontlines, with projects that improve the employee experience, for example.

“For us at DHL Express that has meant the creation of an employee app that allows an employee, and the company, to automate many processes such as requesting vacation time and booking shifts. These digitization projects don’t always have to start at the most complex level, like drone delivery, but sometimes it’s best for it to move through all parts of your business.”

A strategic approach

Both Williams and Felker feel digital transformation is not just adopting latest digital technologies, but establishing a digital strategy.

3PLs transform digitally to differentiate themselves in a competitive market and to provide end-to-end visibility and timely, accurate information for customers’ critical decision-making processes. According to recent McKinsey research, companies that aggressively digitize their supply chains can expect to boost annual earnings growth and revenue by around three percent.

Digitization is a core piece of DHL’s strategy. “It’s a primary feature in our strategy and a big part of the future that is really shaping our business and the logistics space in the coming years,” Williams said.

With many global studies suggesting that a significant percentage of the world’s logistics business remains quite manual, “there’s a huge opportunity for digitization, and the companies that get it right are going to go a long way.”