Top 10 Digital Ecosystem Trends In Supply Chain And Logistics
By Mike Walker
The supply chain and logistics industries are exploding right now while also being in the midst of a dramatic digital transformation. As of 2017, the logistics industry was valued at a staggering $8.1 trillion, but it's projected to nearly double that valuation by 2023.
Digital giants like Amazon, along with a whole host of startups, are exposing entirely new business models and using emerging technologies like blockchain, AI, IoT and many others to change the face of logistics going forward. Gartner’s 2019 CEO and Senior Executives Survey supports this: "With 87% of survey respondents identifying that they expect some form of change to their business model by 2021."
As customer expectations evolve, so does the global supply chain and logistics organizations. The driver of this unprecedented change has been the broad sweeping effects of Covid-19, a global economic recession, trade wars and new customer expectations. While these factors have ushered in unforeseen challenges, they have also presented enormous opportunities for the supply chain and logistics industries. After all, these factors raise the stakes of this 4.6 trillion industry.
Over the next five to 10 years, the effects of these disruptions will usher in a wave of digital transformation for both the supply chain and logistics industries fueled by digital ecosystems. From now to 2025, digital ecosystems represent approximately $60 trillion in global revenue. Organizations have a tremendous opportunity to take a concept that has a 2% global market share to approximately 30% by 2025.
Digital ecosystems provide a digital foundation for new business model designs and address adapting existing business models to future multisided businesses. According to one IDC prediction, "By 2023, 25% of organizations will ship freight using an independent, SaaS-enabled ecosystem platform, resulting in improved efficiencies in load matching and reduced shipping costs."
Here are my top 10 supply chain and logistics trends fueled by digital ecosystems.
1. Digital Giants Incursion
Traditional logistics providers are under attack. With parcel volume expected to reach 6.5 billion packages for Amazon Logistics by 2022, the company could take away a large share of e-commerce packages from the likes of FedEx, UPS and USPS. Across the sea, Alibaba is aiming to "build a global logistics network."
2. Rise Of The Startups
The Covid-19 pandemic has not slowed but accelerated digital transformation in logistics, which has already drawn large sums of venture capital (VC) and private equity. According to McKinsey, around $11.1 billion was raised by startups offering last-mile delivery services to retailers and individuals.
3. Pandemic-Proof Supply Chain
The global pandemic has had pervasive and deep impacts across material availability, labor support, asset tracking and security of logistics services. Greater durability and resilience are now required, as demonstrated by vaccine delivery across cold chains across the globe.
4. Sustainable Logistics
Growing Co2 emissions, noise pollution and waste generated by global logistics are putting more focus on the logistics industry’s environmental responsibilities. According to Frank Appel, CEO of Deutsche Post DHL, sustainability is an essential issue for logistics. This could result in 90% of organizations mandating reusable materials in IT hardware supply chains by 2025.
5. Blockchain-Enabled Digital Ecosystems
Logistics juggernauts like FedEx, UPS, and Uber Freight are just a few that have joined the blockchain-enabled logistics digital ecosystem called the Blockchain in Transport Alliance (BiTA). BiTA, like other ecosystems, was created to enable the logistics industry with standards, approaches and even solutions to maximize the benefits of blockchain ledger technologies. Blockchain provides transparency, auditability, tracking and peer-to-peer data interoperability to solve many of the traditional problems in the logistics supply chain, including tracking, fraud detection, contract management and cash management.
6. Logistics As A Service (LaaS)
Logistics has become a vital capability to companies — so much so that, according to a 2020 list of outsourcing trends from Gartner, "Over 80% of professionals indicate that they plan to significantly increase logistics outsourcing budgets beyond warehousing and fulfillment in 2020." These companies are looking to catch up with the growing market share being acquired by the “digital giants” and emergent players like logistics tech companies. Just-in-time LaaS providers like Just In Time or BluJay Solutions allows organizations to rapidly catch up by acquiring the capability quickly versus building their own to gain further control over their supply chain. This shift to LaaS is due to the growing costs associated with logistics.
7. Computing Is Pushed To The Edge
Edge computing has made its way to the supply chain through the evolving nature of operational technology (OT) sensors, the Internet of Things (IoT) and 5G. Unlocking how data is obtained, processed and analyzed enables for the required low-latency processing and real-time analytics needed.
8. Digital Twins Of Everything
As the physical and digital worlds begin to converge, organizations are digitally unlocking new insights, simulations and real-time tracking. Creating digital twins pulls relevant data that is captured across the supply chain through IoT sensors and other technologies to be represented in virtual or simulation environments.
9. AI Driving Logistics
From self-driving trucks and virtual assistants to robotic-powered warehouses and drone delivery, AI enablement will change the face of logistics. It’s also a race to acquire these capabilities. According to another IDC prediction, "By 2023, driven by the goal to embed intelligence in products and services, one-quarter of G2000 companies will acquire at least one AI software start-up to ensure ownership of differentiated skills and IP."
10. Predictive Logistics Insights
With 93% of shippers and 98% of third-party logistics firms feeling like data-driven decision-making is crucial to supply chain activities and 63% of the largest and most impactful logistics organizations saying investment in predictive analytics is optimal to organize newly digitized fleets, it’s easy to say that data the competitive differentiator.
As a leader in the logistics and supply chain industry, you have a fiduciary responsibility to act on these trends. The innovative trends in this article will only continue to grow, and as they do, it will be up to you to disrupt or be disrupted.
Mike Walker is Sr. Director of Applied Innovation at Microsoft and a member of Forbes Technology Council. Bringing paradigm-shifting digital transformation through emerging technologies. Connect with Mike on LinkedIn.