Rethinking Logistics
Traditionally, industry stalwarts such as Royal Mail and DHL owned and maintained physical assets like warehouses and fleets of trucks. However, digitisation has led to the popularity of asset-light logistics, driven by software firms like Flexport and Project44.
The retail and e-commerce industries have already been completely transformed by the digital revolution, which has improved customer satisfaction and spurred expansion. As an illustration, consider Walmart, which carried out a multibillion-dollar e-commerce strategy demonstrated by the purchases of Eloquii[3], Bonobos[2], and Jet.com[1]. Due to this tactical change, Walmart’s fastest-growing category in Q2 2023 was e-commerce, expanding by 26%. Nike has also had success with its digitalization initiatives, which were sparked by early investments in direct-to-consumer channels and a break from retail behemoths like Urban Outfitters, Dillard’s, and Zappos. In 2022, 42% of the company’s income came from digital sales.
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Another noteworthy development is the rise of “Just in Case” (JIC) elements in supply chain management systems. This marks a substantial divergence from the traditional “Just in Time” (JIT) methodology, which has long been a mainstay of manufacturing and logistics. In addition, in order to mitigate the risks associated with supply chain interruptions, businesses are putting more of a focus on diversifying their supply sources as opposed to depending solely on one cost-effective provider.
In order to address the problems posed by these two disruptive movements, physical and digital supply chains must be integrated. This allows for the blending of physical and digital techniques to improve sustainability, cost flexibility, and efficiency.
Combining Digital and Physical Supply Networks
The constraints of traditional asset-heavy services with little to no digital capabilities have been exposed by the changes occurring inside supply chains. Phygital is a hybrid operating paradigm that combines state-of-the-art digital software systems with physical assets including distribution centers, cars, and warehouses. With the help of this hybrid approach, service providers may synchronize different aspects of their digital and physical operations, making it easier to fulfill client demands and supply services that were previously challenging or unattainable. These include the integration of third-party service partners, the effective utilization of fulfillment centers, and enhanced data analytics for tracking and sharing.
Predictive Modeling and Advanced Analytics
The integration of advanced software provides notable benefits, especially in anticipatory resource allocation and proactive decision-making to mitigate and manage possible hazards. One notable instance is DHL’s use of demand-driven asset maintenance plans, which optimize inventory levels to anticipate seasonal variations, optimize delivery routes, facilitate preventive maintenance, and improve vendor due diligence. With the addition of more than 230 data scientists to its staff, DHL has further enhanced its analytical skills.
Similar to this, a lot of retailers have adopted these technological developments. In order to take use of IoT devices and cutting-edge software for demand forecasting, accurate product availability, and localization, Nike has undertaken key acquisitions such as Zodiac and Celect. These functionalities strike a compromise between preserving sufficient stock levels and maximizing expenses, guaranteeing that goods are available when and where they are needed. Retailers and fulfillment companies have also come to rely on platforms like Alloy.ai, Transmetrics, and Vekia because they allow them to better understand demand dynamics and extract insightful information from their data.
Supply chain and inventory management
Over the past ten years, the logistics sector has seen a dramatic technological transformation, mostly brought about by the spread of modern industrial robots and IoT technologies. Notable purchases include the acquisition of Mobile Industrial Robots by Teradyne, a renowned provider of automation equipment for test and industrial applications, and the acquisition of AMRs (autonomous mobile robots) for collaboration. Also, the business led a $20 million financing round for Machine Metrics, a start-up that provides industrial data.
Shopify paid $450 million to purchase 6 River Systems, an AMRs solutions supplier to the retail non-grocery and logistics industries, in late 2019. After a wave of mass layoffs, 6 River Systems was eventually purchased by Ocado, the leading supermarket chain in the UK.
