Future Of Logistics: Five Technologies That Will Self-Orchestrate The Supply Chain
From unmanned mobile robots in warehouses to drones for online fulfilment, the current supply chain is undergoing a major transformation. With the possibilities in artificial intelligence, the future supply chain holds the promise of being completely autonomous and self-orchestrated. A fleet of trucks using a swarm algorithm could increase throughput in cargo yards; a trusted peer-to-peer ledger on the blockchain architecture could revolutionize the meaning of compliance in the industry, and a host of wearables, mobile robots, as well as machine learning approaches, could rapidly fasten the pace of order fulfilment. Furthermore, IOT platforms for e-brokerage could connect retailers to couriers and transporters with a single click.
The supply chain of tomorrow will be leaner, faster and most importantly, self-orchestrated. This unprecedented pace of change will be driven by a few radical technologies that will be cautiously adopted by industry participants over the next 15 years. Here is a view of the top five Frost & Sullivan has identified from its comprehensive analysis on the Future of Logistics. While the study looks at three scenarios for the industry—technology, business and market/industry, this post will detail the research’s key findings on the technology-driven 2030 logistics scenarios.
Technology Scenario 1: Autonomous Fleet Brings Greater Efficiency
Drones are definitely the poster child at the moment and have stirred up a lot of conversation since Amazon announced its plans to launch drones for last-mile deliveries. While this is and will be an integral part of our view of the future, I would like to focus on the other types of fleets within the industry that could become completely autonomous. Before drones were experimented with, the first “vehicles” to become autonomous in the supply chain were actually forklifts. Man travel is among the most unproductive, time-consuming tasks within a warehouse; the new forklifts, called “vision-guided fully autonomous mobile robots,” not only address this specific issue, but also have the ability to process orders (pick and on-board for delivery) four times faster than a human.
Source: Frost & Sullivan
There is a real possibility of fleets becoming totally autonomous as well. Truck platooning and autonomous trucks could be a reality by 2030. Semi-autonomous trucks will reach a penetration rate of 5 percent by 2030. Rolls Royce has announced plans to launch autonomous cargo ships (or as The Economist called it, “Ghost Ships”) by 2030. While replacing or aiding man was a critical criterion for autonomous technology in material handling, for fleets, the value of autonomy centers around fuel economy. Truck platooning, for example, could mean saving as much as 20 percent on fuel costs.
While fuel is still the most overbearing influence on the assets and fleets of the industry, with all this autonomy and technology, a new influence is emerging that could have a far-reaching impact on the supply chain— Big Data, well not only Big Data, but “Good Data.”
Technology Scenario 2: Data Replaces Fuel as the Biggest Influencer
With big data we are seeing the conversation shift from estimating the volume of data, or Big Data, to the variety and value of data. This is a useful conversation to have because an unbelievable 90 percent of data sometimes captured is pure spam. Amazon, for example, is building capabilities to cull out that spam and create predictive analytics around your shopping behavior.
Source: Frost & Sullivan
Amazon wants to ship your products even before you know you want it. In its current model, Amazon receives an order and delivers the order through UPS or UPSS. It has been trying hard to compete with brick and mortar stores to provide instant gratification, the one thing it cannot provide right now. All of its efforts with drones and robots have been focused on cutting that delivery time and getting you what you want as soon as you want it. Last year, Amazon said it is working on drones that could make deliveries of small packages directly from warehouses to homes.
Its current patent on “anticipatory shipping” exemplifies a strategy where Amazon will send out deliveries to partial street addresses or zip codes to get the products as close as possible to the consumer and then in-transit complete the address and route it to someone who has placed the order. This might work well for new product launches such as the iPhone 7s. How many people have searched for the iPhone 7 recently using the keyword “launch rumors?” Interest in the item is shown even before any sort of buying decision. Anticipatory shipping is coming; Predictive models combined with new-age fleets could lead to zero fulfillment time.
Another interesting prospect this creates is the possibility of logistics becoming a data-centric industry where information takes precedence in logistics services’ value propositions over the actual ability to move cargo.
Technology Scenario 3: New Breed of Technology Players is Less Asset-Centric
To say the logistics industry is becoming non-asset based or less-asset centric is a stretch because someone has to own and operate the assets; however, what is interesting to see is the rise of the new breed of logistics providers that own no asset (fleet or warehouses), but are able to provide logistics services by aggregating “information about assets” from people who do own them through leveraging data. For example, Shyp and Zipments are logistics companies that provide logistics-related services like offering freight quotes or trucking capacity, but neither own assets and are therefore able to offer more cost-competitive services at almost 50 percent less than industry averages, because they don’t have the costs associated with maintaining assets or dealing with the pressure to ensure economies of scale.
Source: Frost & Sullivan
This is indicative of an interesting future where your typical logistics provider and vendor in the market will evolve to a more consulting-driven approach and become more like project managers, rather than actual movers of cargo, leading to new models such as E-Brokerage.
Technology Scenario 4: E-Brokerage Platforms (Uber of Trucks)
Growth in e-retailing, coupled with connectivity technologies, will usher in new solutions for freight and logistics firms. The proliferation of digitalization in trucking will force traditional freight brokers to align their business model toward mobile-based, freight brokerage-type solutions. Mobile apps are critical to a seamless, on-the-move brokerage system, also known as the "uberization of trucking." In the future, mobile-based freight brokers are expected to develop in-house software solutions by creating potential synergic partnerships with traditional freight brokers, OEMs and telematics providers to facilitate this change.
Imagine a scenario where a mobile app is incorporated to match truck drivers to shipper needs on rates, routes, and schedules. This is expected to automate a number of processes pertaining to delivery status, dispatch, load-finding and driver payment, apart from providing critical real-time information on consignments right from pickup to delivery. With approximately $20 billion lost in revenue from empty miles and excess capacity issues, the payoffs arising from such business models will result in minimizing operating costs by improving asset utilization and fuel efficiency. The future will witness online services, eliminating traditional freight brokerage firms by offering more agile services in this space.
As new players emerge and the industry unbundles to niche pockets, general operational hurdles of commerce and trade could multiply. For a 150-year-old industry that has been trading in “trust,” this herd of new players will cause new compliance complications. The industry will look toward smarter ways of doing business to avoid paperwork, such as the use of blockchain, which is quickly emerging as a great tool for driving quicker compliance.
Technology Scenario 5: Smart Commerce with Blockchain
Just as the Internet has triggered the evolution from client applications to web-based apps, cloud solutions and SAAS, the peer-to-peer model of blockchain is exhibiting the potential to generate new innovation channels on how logistics applications can be developed and deployed. In that sense, the blockchain technology could emerge as the new operating system for supply chain networks that combines B2B connectivity with software apps.
For instance, if you are the warehouse head responsible for flow of goods, there could be occasions where suppliers fail to deliver goods intact or on time, leading to potential time consuming disputes and punitive legal recourse measures. Blockchain technology will avoid such scenarios as it would allow you to negotiate smart contacts with suppliers that clearly define terms, conditions and the mode of functioning between the two parties, while further mandating the sensorization of all goods to generate critical information on the state of goods and the time of delivery. A pre-condition percentage fine is levied and the amount is withheld from the final contacted price in case there is a delay in delivery if goods are not found intact.
The blockchain implication is expected to have a wider reach when compared to any other supplier management tools given that it is expected to track details right from order initiation at the customer level to shipment information, resulting in creating more visibility within a supply chain not seen before and further allowing all parties to access accurate real-time information anywhere, anytime.
With the evolution of blockchain expanding its applications to future supply chains, another prominent aspect is the possibility of supply chain becoming more compliant, transparent and having innovative payment processing that is expected to create more traction in new types of services, such as mobile freight brokerage systems.
The Future: Self-Orchestrated Supply Chain
These five technologies showcase that in today’s dynamic world, intelligence-embedded supply chains offer a competitive advantage. In this digital age where the mantra is “transform or be redundant,” companies will leverage these technologies to create a self-orchestrated supply chain and previously unimaginable efficiencies. Some predictions we could make on these gains are enumerated below. Imagine:
- Gestation gap between ordering and possessing a product is now within seconds; same-day delivery becomes same-hour delivery
- Value-added services such as “trade facilitation,” no longer exist as blockchain enables all payments upon approval for letters of credit and issues port payments upon custody changes, etc. Supply chain unbundles from “end to end” and “point A to point B,” as business models shift from integration to aggregation
- 50 percent of all fleets will have some level of autonomy between being semi-autonomous to fully autonomous
- Transport volumes in warehouses are reduced by 50 percent and warehouse sizes decreased by 30 percent, with more smaller spokes closer to consumers than large, central hubs in city outskirts
If even one of these predictions come to fruition, it would mean we have come a long way from our existing cumbersome models and will be in a future that favours data and technology to hedge uncertainty, rather than expensive reactionary methods. It means in the future digital realm, the rewards will be tremendous and companies will gain significant advantages. The supply chain is ripe for transformation and first-mover advantage is up for the taking.
This article was written with contributions from the Visionary Innovation Research Team members, Archana Vidyasekar, Research Team Lead, and Vijay Narayanan, Senior Research Analyst.
(20min delay)
