With 2017 over, it’s worth looking back at a few of the trends that have shaped the logistics industry. In particular, The Logistics Bureau predicted a few trends in its report 6 Key Supply Chain and Logistics Trends to Watch in 2017.
As the U.S. Chamber of Commerce Foundation explained in one of its articles, in the late 19th century, when transportation became cheaper and technology enabled mass production, we entered the first era of globalization. No longer did customers need to be nearby, in walking distance or horse and cart range, they could be reached efficiently even across states, across the country, and now across the world.
Logistics as we know it is a result of this process of globalization. Thanks to continuously evolving technology, we can expect rapid changes and the need for industry to adapt to these new circumstances. This ongoing adaption is what is driving many of the trends this year.
Amazon is playing a key role in the reshaping of the industry and is, therefore, a good indicator of trends in the industry. Two of Amazon’s competitive advantages are its fast delivery service and excellent customer service. Amazon is in the race to become the first $1 trillion company and it has the financial means to implement innovations along with the interest.
Another good indicator is Uber, the company which developed the well-known taxi app. Although originally their business strategy had little to do with logistics, they saw the opportunity and have entered the market.Last mile delivery can make up for 30% of all logistic costs - there's a lot of potential for savings to be made. Click To Tweet
With that context, here’s a brief overview of some of the trends we saw in 2017…
Warehouse Robotics in the Supply Chain
We saw the growth of warehouse robotics. Innovative warehousing is driving increasing efficiency. Amazon has re-conceived the structure and organization of the warehouse with its chaotic storage system. This system relies on barcodes and scanners to identify the location of items. Amazon also leverages robots in its storage management system, with 45,000 robots and is looking to expand its automation program with new robots. So robots are definitely taking off and are set to grow.
Autonomous Road Transportation
The trend in developing autonomous vehicles continued to heat up. Both last mile delivery and long-haul transportation are aiming to make use of autonomous vehicles. In 2016, Uber bought the self-driving truck startup Otto and has since been developing its technology, but had yet to make an impact in 2017. An Otto truck did successfully drive 132 mile fully autonomous journey in 2016, but since then progress has been marred by a series of legal disputes over trademarks and intellectual property.
On a side note, Tesla has shaken up the trucking industry with “Semi,” its electric truck. While autonomous technology is sure to be a part of it in the future, Tesla is focusing on proving the efficiency and superiority of its electric truck. Major companies like Walmart, Pepsi, Anheuser-Busch and UPS have placed orders for Tesla’s truck, so we can expect to see them on the road sometime in 2019.
The Blurred Line between Logistics and Technology Services
The predictions highlighted a merging of logistics and technology services, because “sometimes it’s hard to know if you’re dealing with a business entity or a software platform”. Consider Uber again. Uber launched a platform called Uber Freight this year which is already connecting American truck drivers with available shipments, in the way its taxi app connects riders with drivers. One Network recently announced it’s Global Logistics Gateway, which will provide a network of networks to unify popular logistics systems and networks into a global “meta network”.
There are many other logistics and freight-forwarding networks, which continue to gain in popularity and grow. These types of services make it much easier for shippers and logistics companies to find a match, helping speed up logistics while lowering costs. We can expect this trend of close partnerships between logistics and technology to continue.
The Call for Supply Chain Transparency
Supply chain transparency and accountability is becoming more important. End consumers want to know what they are buying and where that product is coming from, driving an increasing call for transparency in the supply chain.
This has led to innovations in product labeling, RFID tags and real-time data feeds from products on the move, giving a full picture of the product’s life cycle from the factory through to shipping to the shelf. This is especially valuable for perishables and pharmaceuticals, which require specific conditions to retain their freshness and effectiveness. Shipping container locations and conditions can be monitored and the data fed into supply chain systems, allowing managers to ensure that cargo is properly handled and preserved during shipping. With food and drug safety such a concern, this trend will only grow.
The Race for the Last Mile
Both Amazon and Uber launched a last mile delivery service in 2015, Amazon Flex and Uber Rush. Both are using freelance drivers to deliver goods with their private vehicles. At the moment, Amazon Flex only deals with Amazon packages, Uber Rush is open to everyone. Uber has also teamed up with Walmart, allowing Walmart customers to shop online and have their groceries delivered by Uber for a small fee.
Last mile delivery can make up for 30% of all logistic costs so if Uber and Amazon can make it economical, they could gain a significant competitive advantage for themselves and Amazon and Walmart.
Drones have dominated the headlines for several years now, with early experiments in using them for last mile delivery. UPS is making progress, along with Google and its Project Wing, and Amazon with Amazon Prime Air.
Despite the fact that Amazon has made its first U.S. drone delivery, we are still far from an efficient last mile drone delivery system. Amazon Prime Air seems to have stalled since its initial announcement in 2013.
One of the stumbling blocks is strict FAA regulations, which for example required drones to fly daylight hours, fly within the operator’s line of sight and forbid drones to fly over crowds of people. This severely limits the use and practicality of drones in last mile delivery. Recently regulations have changed under the Trump Administration but the implications are still unclear.
Regulatory concerns have driven some companies to experiment with drones in other parts of the world, for example, Ziplines delivery of drugs in Rwanda.
Apart from regulations, there are practical difficulties that drones have to deal with while flying, such as weather conditions such as rain and strong winds. There are also birds, and other drones, the latter will become a major factor as their drone use increases.
Drones offer exciting possibilities, but due to the hurdles yet to be overcome, it may be years before they conquer the last mile and become a common sight in the sky.
The Rise of Networks and Virtual Logistics Team
Thanks to fast and efficient communication channels, business relationships can be distributed and remote. Logistic providers don’t have to be in direct contact with customers, there is no need for a central office anymore. Technology is changing too, as networks are growing and replacing traditional behind-the-firewall logistics solutions. These networks are reducing implementation risks and lowering costs with real time supply-demand match. Due to their advantages, companies like Amazon, AirBnB and Uber have based their entire business model on the cloud and networks.
To transition legacy systems to a more modern approach, businesses should look to cloud-based management solutions to integrate all areas of supply chain, both internal and external, to gather real-time data and enable a more holistic view into the supply chain. – “Supply Chain’s Future Rests in the Cloud” Albert Chiang, Material Handling and Logistics
Today we are seeing a rapid rise in artificial intelligence and machine learning in all industries, logistics included. With networks, artificial intelligence and machine learning are easier to implement and deploy across businesses. With a real-time and more comprehensive view of the supply chain, managers have a better understanding of their logistics and supply chains. This is a trend we can expect to continue.
With the pace of innovation in technology and business models, the logistics industry is difficult to predict. However certain trends, like robotics, autonomous vehicles, have certainly lived up to the hype and have “grown up” and proved they can deliver real value in the real world. Supply chain transparency also gained traction. We can expect it to continue, and cloud solutions which make data more readily available, will likely help enable and accelerate this trend. The question remains though: Will the market keep focusing on these market segments in 2018 as well or will the next year hold a twist no one expected?
If you’re interested to find out more about Amazon and Uber’s activities in the logistics segment, take a look at the infographic Amazon and Uber in Logistics.