4 technologies transformation third-party logistics

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The third-party logistics (3PL) sector is going through a major growth spurt. This is being fueled by companies looking to subcontract logistics in specialist areas where they have less expertise and the unstoppable rise of e-commerce, which is demanding faster delivery and efficient inventory management. How can blockchain, robotics, DevOps and predictive analytics help firms become data-driven and keep pace with customer expectations?

The global third-party logistics market is on track to exceed $1.1 trillion in revenues in 2022, up from $800 billion in  2016, according to supply chain research firm Armstrong & Associates. Globally, Asia Pacific is the largest 3PL market, accounting for thirty-eight per cent of total global 3PL revenues.

The 2018 Annual 3PL study highlights two key trends in this sector – the ever-closer relationships between shippers and 3PL providers , and the significance of emerging technologies, including blockchain and automation.

Consumers now expect to benefit from ever shorter delivery windows when they shop online. Many retailers now offer one-hour, same-day or next-day deliveries . Increased package volumes are driving changes in distribution networks. Shippers now need to enhance their fulfillment capabilities with strong ‘last mile’ delivery capabilities and make better to use of data to optimize routes and improve operations.

Chain reaction

Blockchain, the application first associated with bitcoin, promises to be a game changer in the logistics sector, allowing shippers and 3PLs to drive additional value from supply chain data.

The beauty of blockchain is that every time a product changes hands, a permanent history of the transaction is created that cannot be altered. The technology improves security because each transaction is validated and recorded by an independent third party and all players can access this distributed ledger that records the transactions.

This helps to reduce time delays and human error while improving security, transparency and governance. It can even help brands meet regulatory requirements, ensuring that they do not unwittingly use banned products, such as conflict minerals, and enable them to check the provenance of raw materials, providing irrefutable evidence that wood and paper pulp has been sustainably produced. Blockchain can also help reduce counterfeits in the pharmaceutical supply chain by putting under-regulated wholesalers and re-packagers and online pharmacies under the spotlight.

Among respondents to the 2018 Third Party Logistics study, 65 percent of 3PLs said they were interested in the potential of blockchain to provide visibility into product supply chains and for data sharing. There are, however, challenges with blockchain that need to be ironed out – including the development and governance of blockchain data sharing to comply with global data privacy and security regulations.

Robot power

Robots are already widely in use on assembly lines around the world and are increasingly entering the logistics workforce – driven by the product picking needs of the e-commerce sector. There will be 620,000 robots shipped annually for use in warehousing and logistics tasks by 2021, up from 40,000 in 2016 according to market research firm Tractica.

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"There will be 620,000 robots shipped annually for use in warehousing and logistics tasks by 2021, up from 40,000 according to forecasts by Tractica."

For example, DK Fulfillment and Intelligent Robots are trialing an intralogistics robot transport system at DKF’s 3PL fulfilment facility in the UK. Once workers have picked orders, they are delivered to a designated picking zone, where the robot will take the trolley to the dispatch area, saving time and increasing efficiency.

DHL has also successfully piloted robots at their supply chain warehouse in Umna, Germany. The robots follow the pickers through the warehouse, taking care of the heavy lifting tasks and dropping off orders once loaded. This can help reduce the risk of injuries in the workplace, and improve  productivity and employee welfare. 

Accelerating new applications

By getting software development and IT teams to collaborate using DevOps and agile methodologies, the delivery of new applications can be accelerated to deal with logistics challenges coming down the pipe.

“Customers want things fast and they want us to forecast,” explains May Chew, CIO of APL Logistics, which is currently looking at DevOps. “The business is moving fast and technology has to move even faster”.

Transnet, which operates an integrated freight logistics company in South Africa, understands it needs to innovate fast to stay ahead of the game and has been working with Microsoft to deploy an end-to-end DevOps process. It will help Transnet to reduce the cost of delivering products and create scalable IoT solutions that will help it make its assets more efficient.

Finding value in the data

Predictive analytics is helping improve supply chain visibility for 3PLs, enabling companies to collect and analyze data to make informed management decisions. Predictive capabilities enable 3PLs to address traffic patterns, weather and port timings, for example.

In the 2018 Third Party Logistics study, roughly two thirds of 3PLs said they have or plan to invest in big data analytics. Surprisingly, only 4 percent of them said they’re investing in digitization and automation to collect and analyze data, even though they recognize that the effective use of big data will be imperative to supply chains moving forward.  

3PL companies are already using predictive analytics to their advantage. C.H. Robinson Worldwide Inc, for example, is analyzing historical customer data with artificial intelligence (AI) technology to look at supply chain threats, such as cyber-attacks, traffic disruption or extreme weather, to make quick decisions about how problems can be avoided.

The future for 3PLs

As Chew points out, customers increasingly want to collaborate and work together with their 3PLs long term. “They expect us to be part of their organization, to embrace changes and to plan with us for the next four to five years”.
Efficient and accurate 3PL processes that support 24/7 services are now essential to meet customer demand. This is driving the adoption of new collaboration and communication technologies.

When IoT and cloud-based logistics management systems communicate, they turn data into actionable, value-added information, increase visibility and maximizing productivity. Proactive information can help shape advanced planning and strategic decision making to minimize disruptions. Increasing communication and collaboration between all parties within the supply chain improves the ability to plan and execute shipments, leading to better decision making.

The smartest 3PLs will be the ones that can use technological developments to provide “value added services”, such as returns processing and inventory management, to differentiate themselves from the crowd in what is a fiercely competitive marketplace.

In the digital economy time and speed are crucial, forcing the transport industry to transform to retain its competitive edge. Read this whitepaper to discover how you can continue your digital journey.
Jan Howells

Jan has been writing about technology for over 22 years for magazines and web sites, including ComputerActive, IQ magazine and Signum. She has been a business correspondent on ComputerWorld in Sydney and covered the channel for Ziff-Davis in New York.