Transforma Insights’ recent report, ‘Digital Transformation in the Transportation and Storage Sector’ identifies seven key digital solutions in the transportation and storage sector enabled by disruptive technologies such as Artificial Intelligence and the Internet of Things. In this blog post, we explore each of these digital solutions and delve into their potential effects in real-world implementations.
This solution area refers to real-time monitoring of the location of assets to make supply chain operations more efficient. Companies implement these solutions to increase their operational efficiencies and reduce their emissions (transportation accounts for around 20% of the global CO2 emissions, out of which over 35% is caused by freight transportation).
Some of its benefits include route optimisation, freight network planning, identification of sites, and logistics planning. Route optimisation can reduce fuel consumption by 15-20% by planning the most efficient routes (often using AI) across the entire supply chain journey. Route planning software plans delivery routes and supports road freight network planning, solving crucial problems like “empty miles” which can be as high as 20% in some places like Europe. Location intelligence applies to routing vehicles and for companies trying to identify optimal locations for distribution centres, warehouses, and stores. It also helps companies predict demand and better manage their inventory. Logistics planning increases efficiencies at docks, warehouses, retail stores, and other facilities. For example, Walmart has installed ‘NTransit’ in all its private vehicles, thereby increasing its driver retention rate and Net promoter Score (NPS) , and reducing dwell times by 13%.
It refers to monitoring the condition of goods (especially perishable and refrigerated goods) while they are in transit and after their arrival to prevent tampering, spoilage, and breakage.
Roughly, 33% of the total food produced in the world gets wasted and a significant amount of this wastage happens in the post-harvest agricultural supply chain. Similar issues are faced by the pharmaceutical industry and WHO claims that every year 50% of vaccines are wasted globally. Low-cost sensor devices are one of the most useful technologies to address these challenges and it is estimated that around 30% of food loss can be prevented by monitoring temperature in the supply chain, indirectly reducing GHG emissions (by reducing the amount of landfill which produces greenhouse gases such as methane which is 25-times more potent than CO2). Condition monitoring also increases profits, supply chain efficiency, and enhances customer satisfaction due to precise location visibility, theft reduction, and increased potential to ensure quality.
This comprises close and detailed monitoring of supply chains, potentially using permanently immutable records of goods that move through them. It can also include information about the raw materials used to make any components included in a final manufactured product. SCT is gaining interest as customers demand greater transparency in sourcing, production, packaging, transportation, and distribution. A Food Industry and Association report notes that 65% of shoppers would switch to a brand with more transparency in product origin and supply chain cycles.
Distributed Ledger/Blockchain is one of the important technologies in SCT since it securely records supply chain data using digital tokens. Companies like Walmart, Carrefour, Nestle, Unilever, Kroger, and Tyson Foods are heavily investing in blockchain-based solutions for tracking and transparency of products.
SCT solutions increase customer loyalty and profits. Research at MIT Sloan School of Management claims that consumers are willing to pay 2-10% more for products supplied by companies that provide more supply chain transparency. They also improve the efficiency of the whole supply chain by reducing fraud and error, thus ensuring a more ethical and sustainable process.
The Warehouse Management solution area refers to technologies deployed in warehouses that make the processes automated, efficient, and intelligent. It includes the use of automated guided vehicles (AGVs), robots for automated picking, packing, sorting and inventory replenishment, and more. Some common processes in warehouses and fulfilment centres that are automated with robots include robotic picking, automatic sorting, and wearables.
Autonomous mobile robots (AMRs) are automating the process of picking goods, significantly improving worker productivity and operational savings. For example, by deploying AMRs, Ryder System increased its productivity by 25% and operational savings by 20%. The use of robotics in parcel sorting processes reduces the probability of mis-sorting and significantly increases the speed of the process. For instance, DHL has deployed an AI-powered robot, ‘DHLBot’ which can sort 1,000 parcels/hour with 99% accuracy. Wearables are used to optimise worker movements, enable picking and packing automation, and ensure worker safety in warehouses. They are often equipped with AR/VR technology for navigation and guiding employees. DHL and Ricoh deployed an augmented reality-based vision-picking system combined with smart glasses in Ricoh’s warehouse, which enhanced its picking efficiency by 25%.
Inventory Management refers to the use of technologies to ensure optimal inventory by efficiently tracking, monitoring, and storing inventories. Some digital solutions that enable efficient inventory management are RFID, Sensors, drones, and Artificial Intelligence.
By deploying RFID tags, inventory scans, check-ins, and counting and shipment verifications can be quickly done in real-time. Sensors can be used to track the movement of assets within and across premises. In case of low stock, theft, incorrect temperatures, and other events (such as mis-stocking), sensors can alert warehouse managers. Drones are used in warehouses for inventory counting, item search, cycle counting, reconciliation, and auditing. Besides, the information collected from various devices can be combined with AI algorithms to highlight trends and consumer buying behaviour, make demand predictions, and analyse which items should be dispatched first. It is estimated that with AI-based inventory applications, On-Time-In-Full deliveries can be improved by 10-20%.
The above-mentioned technologies reduce error rates, labour, out-of-stock situations, and improve shipping time. Digitally enabled inventory management also reduces inventory levels by 20% on average, which increases the utilisation of warehouse floor capacity.
This refers to the use of digitally transformative technologies to improve last-mile delivery, which is the final step when a parcel is moved from distribution hubs to a customer’s doorstep. Last-mile delivery is one of the most expensive journeys of the supply chain accounting for 40-50% of total parcel delivery costs and around 50% of delivery vehicle carbon emissions (according to Stand.earth).
Digital solutions like drone delivery, sidewalk autonomous delivery robots, robotic stores, and smart lockers and smart mailboxes can transform the last mile of supply chains and address the above-mentioned challenges. e-commerce giants such as Amazon, Walmart, and Alibaba are already using drones for delivery and Walmart made around 6,000 deliveries through its partners in 2022.
Sidewalk delivery robots make autonomous last-mile deliveries of small packages using pedestrian areas alongside roads. Robotic stores enable customers to call retail stores on-board autonomous vehicles to their location through a mobile application. Smart storage systems or lockers are technology-enabled systems whereby delivery agents can drop their packages and customers can pick them up at their convenience.
These delivery solutions are fuel-efficient and can save labour costs. It is estimated that autonomous vehicles and sidewalk robots can reduce the last-mile delivery cost by 40-50%. Besides, drones are highly time-efficient, and Walmart claims to deliver products within 30 mins of ordering (using drones). Smart lockers decrease last-mile carbon emissions and the cost of handling parcels.
This incorporates the use of digital technologies to support supply chain planning operations like demand planning, supply planning, coordination, and alignment of planning decisions both internally and externally.
This solution area particularly focuses on digital twins, whose benefits are complemented by using augmented and virtual reality. As per research conducted by HVM Catapult, 80% of engineers see value in using virtual reality or augmented reality with digital twins. Although the business impact of using digital twins in supply chain operations depends upon the process it simulates, in most cases, they increase the productivity of planners and reduce the planning cycle times.
Further insights on the evolution in the Transportation and Storage sector are contained in the report, ‘Digital Transformation in the Transportation and Storage Sector’