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Supply Chain's Most Under-Appreciated Pillar Put In The Spotlight: Logistics Digitalization Progress Update

Mac Sullivan, Head of Technology and Digital Promotion and And Sean Tang, Business, Trade, and International Relations, NNR Global Logistics

Mac Sullivan, Head of Technology and Digital Promotion and

The cataclysmic dominos continue to topple in as a series of events leading up to where we are today has accelerated the modernization of the logistics pace at an unprecedented speed. Three events have had a significant impact:

1.) The U.S. – China trade war

2.) COVID-19 and the work from home movement

3.) The Suez Canal paralyzed by the container ship the Ever Given

In this article, we will evaluate how these events are driving an expedited digitalization of one of the world’s oldest industries, one that had barely just caught up to the Third Industrial Revolution (3IR). We have made this abundantly clear in our new book, which talks about many of the challenges and opportunities facing us moving forward.

What the U.S. – China trade war did was bring the back office compliance and supply chain functions related to customs clearance and associated sourcing documentation to the forefront of board-level conversations. As the threat of 40% increased landed cost weighed heavy, CFO and COO’s alike tried to run simulations on how these duty increases would affect their global supply chains as upstream suppliers and downstream end customers would not only have to share the burden but be put in a new negotiating position. The subsequent analysis highlighted the lack of digitalization in the logistics industry. From the

U.S. Customs to company warehouses, there was a large growing gap between what companies could do and needed to do in terms of forecasting and adjusting to changes,

Unsure of the long-term effect, some U.S. importers frantically looked outside China for suppliers. Others doubled down on orders fearing further tariff increases, causing a seismic capacity shift and freight volumes spiking during traditional non-peak season in 2018 and complete disruption in regions like Vietnam, India, and the U.S. domestic trucking market. As rumors of the COVID-19 disease became reality and China went into its week-long New Year break, the tumultuous supplier and related freight capacity issues began to become increasingly out of balance. As Covid spread, companies were forced to figure out alternative solutions to having their staff working closely together in factories and offices alike. A new work style was born which disrupted workflows and affected how the logistics industry was treating Digitalization as a priority. Covid-19, as shown in the graph below, is being evaluated as a crucial tipping point where the hype of automation, artificial intelligence, and other 4IR technologies will subside and we will see an accelerated adoption of these tools in the business- to-business (B2B) logistics industry.

"For a digital transformation to be successful, company leaders must see past the financial pressures that push their focus to gain new business the old fashion way"

When the 20,000 TEU capacity containership the Ever Given got stuck for five days in the Suez Canal, it was the perfect symbol of how far the logistics industry has to go as a single disruption like these caused shockwaves throughout the global supply chain. Similarly, logistics organizations are scrambling to throw a variety of solutions at this increased pressure from modern disruptions in WFH, heightened customer expectations, and the normal unexpected events that always happen in our industry. Logistics companies are now more serious about implementing novel technology solutions, from RPA and chatbots to white-labeling off-the-shelf plug-n-play SaaS offerings in a variety of areas. These techniques aren’t new, but the velocity and urgency of the widespread adoption, implementation, and normalization are.

The discomfort highlighted by the shift to WFH is daunting as the failure to address it will lead to staff turnover, inefficient processes, unsatisfied customers, and expensive consultants and analysis.

So, what can companies do?

Pragmatize Digital Transformation

Technology budgets are being scrutinized as the current state of digital transformation is scrutinized because of the skyrocketing utilization of the technology and related vendors. By focusing on Creating a Friction-less Digital Environment where IT steps into the shoes of employees and customers to ask the question: are our process and applications good enough? How can we methodically remove friction points in daily interactions with our mostly homegrown systems? In response to continued disruption, many organizations have undergone a healthy re-negotiation of their relationship to digital technology and prioritizing “hey, it works!”, or otherwise known as the Minimal Viable Product (MVP).

The end goal but the toughest to achieve is Automating Rote Work. It is fair to say that no one in 2021 wants to do brain-less work full-time. We have to free up our staff to do what they do best: solving complex problems that our competitors cannot; or even better: solving customer problems before the customer is even aware of them.

For a digital transformation to be successful, company leaders must see past the financial pressures that push their focus to gain new business the old fashion way. Instead, they must see the underlying value in serving current customers better, and thus, making them more attractive moving forward. Make digitalization a top priority for the company, since without this expenditure and focus, you will not find the needed talent to support these initiatives

Weekly Brief

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