Inside Logistics

Digitization is driving informed decision making across the supply chain

The pandemic taught us that the entire supply chain would benefit greatly from digitization


September 18, 2020
by Matt Goker

Matt Goker is chief operating officer, ATA Freight

The pandemic hit the world like a giant meteorite, causing colossal upheavals. Production lines came to a screeching halt as manufacturers could not get raw materials. Retail shelves began emptying as distributors’ orders went unfilled. Ports saw too few or too many containers and/or ocean carriers at any given time, and truckers were hard pressed to reach their destinations with nations closing their borders.

The ripple effects resonated across all industries. While some disruptions were unavoidable, the entire supply chain – importers/exporters, freight forwarders, third party logistics firms, air cargo carriers, ocean carriers, freight railroads and trucking companies – would have benefited greatly from digitization.

Going forward, digitization can effectively transform the supply chain, delivering a powerful value proposition for all of these stakeholders, and facilitating future resiliency. Deriving the maximum benefits from digitization, however, requires that it be better understood and more broadly applied.

Dispelling the Digitization Myths

Digitization is big business. An Adroit Market Research study projected digital transformation in the transportation and logistics market to reach US$145.28 billion by 2025. For this to happen however, the misconceptions regarding digitization must be dispelled.

The first misconception relates to its scope. Too many simply regard digitization as a tool to facilitate reduced paperwork. This is far from the truth. While storing data digitally is necessary, it is not sufficient. Processing and making sense of data and then transmitting it the right way, at the right time and to the right parties are critical steps for going digital; something too often overlooked.

Another misconception is that digitization is a destination when, in fact, it is a never ending journey. You cannot be done with it at any point. Rather, think of digitization as a continuous improvement process.

Then there is the belief that going digital is the job of some, but not all. Building silos that are responsible for conducting digital processes actually inhibits the critical, necessary cultural transformation that a company needs to foster for digitization to succeed.

This cultural transformation requires a well laid-out master plan and high level of commitment at the executive level; ideally, a governing body such as an “excellence center” promoting full alignment across the entire organization. By building a shared commitment aligned with continuous improvement goals, transformative digitization can be achieved, providing dynamic process automation. This, in turn, will deliver key benefits including: streamlined processes, reduced costs, enhanced customer experiences, and smarter, more informed data-driven decision making.

Driving Better Decisions

 A Deloitte Insights report titled, “How are global shippers evolving to meet tomorrow’s demand?” highlighted the three key components that the future movement of goods on the supply chain will require. Cited were: holistic decision making, a connected community and intelligent automation. A complete paradigm shift must occur for these components to converge.

What we are currently seeing in the business-to-business supply chain is a growing macro trend of, “I want it now.” This is being propelled by advancements in the business-to-consumer sector. Today’s commercial buyers have similar expectations of the supply chain as consumers do from e-commerce platforms. This is where digitization makes the greatest impact since it is essential for the efficiency needed to drive better decisions at every step of the way – from production through to the client’s door.

Advanced Technologies Converge to Create an Agile Supply Chain

An agile, digitized supply chain provides access to conducting exception management at a level not possible without it. When digitization is done correctly, leveraging advanced technologies such as Artificial Intelligence (AI), Machine Learning, predictive analytics and the Internet of Things (IoT), breakdowns are quickly identified, corrective actions determined more efficiently, and respective solutions promptly deployed.

The deliverables are clear: real time access to important data (e.g., rate information, bookings, routes, a shipment status, etc.), better decision making, optimized processes, reduced paperwork, reduced costs, improved customer service, and greater connectivity and collaboration.

Digitization as the 21st Century Industrial Revolution

A McKinsey & Company study found that the average supply chain had a digitization level of 43 percent and that just two percent of the surveyed executives indicated that the supply chain was the focus of their digital strategies. That same study estimated that companies that took an aggressive approach to digitizing their supply chains could increase their annual growth of earnings before interest and taxes by 3.2 percent – the largest increase from digitizing any area of operations – and achieve a 2.3 percent increase in their annual revenue growth.

Putting these projections aside for a minute, what is clear is that digitization of the supply chain would have helped many businesses better address the unprecedented upheavals caused by the pandemic.

New 360-degree, end-to-end digital platforms will lead the way. These next-generation platforms, incorporating powerful proprietary algorithms and smart prescriptive analytics, will drive real-time operational decisions. They will provide access to instant rates and optimum routes, and facilitate the best and fastest bookings.

Additionally, they will enable shipments to be tracked in real-time, visible through an online global map accessible at anytime, from anywhere using any desktop or mobile device. Communications will be streamlined and document sharing and storage vastly improved.

The trend toward digitization is accelerating, but we still need more elements to come together such as computing power, financial resources and hardware capabilities. It is reasonable to project that the current business environment will continue gravitating toward supply chain digitization at an exponential pace due to the advancements and shifts we are now experiencing in these areas.