Driven by the Covid-19 pandemic for two years, the digitalization of logistics in the months and years to come is expected to accelerate further due to the Russian invasion of Ukraine. Whoever implements innovations faster can earn a lot.
- According to Axios, the trend to shorten supply chains started even before the pandemic.
- Above all, it is a question of striving to reduce dependence on China for the supply of components and finished products, and on Russia for the import of raw materials.
- For businesses, the idea behind the selected technology solutions is more important than the technology itself.
Spending on the global digital transformation of logistics will reach $75.5 billion by 2026, an average annual increase of 8.8%. $45.6 billion in 2020, according to ReportLinker’s latest report. In the United States alone, digital transformation spending in logistics in 2021 was $14 billion, while in China it reached $13.7 billion.
The software is supposed to develop faster. In terms of hardware, the compound annual growth rate (CAGR) is expected to be 8.2% over the period in question, while in the case of software it is expected to be 8.9%.
The Americans want to resume production
Over the past four years, the trade war between China and the United States, as well as the Covid-19 pandemic, have caused serious disruptions in global supply chains. Another shock for them was the Russian invasion of Ukraine and the sanctions imposed on Russia for this attack. These events will have serious long-term ramifications, according to NFQ, an international IT company that helps global brands create technological innovations.
This is mainly to strive to reduce their dependence on China for components and finished products, and on Russia for the import of raw materials. “All of this will lead to shorter supply chains and more localized production, which will be further supported by increased investment in digital transformation,” the company reads.
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The trend towards localizing supply chains is exemplified by recent announcements of resumption of production in the US solar, semiconductor and biotechnology industries. A similar move can also be expected from German automakers who have so far used Ukrainian components. The war hit their suppliers hard in the country, causing car production to stop. German companies are currently trying to reorganize their supply chain, which will most likely lead to bringing production and operations back to Germany or other EU countries.
It’s time to shorten and digitize supply chains
Axios survey, which was conducted in 2020 among 3,000 companies from all sectors – including semiconductors, automobiles and medical equipment – showed that the process of shortening supply chains has been going on for a while. time. The study found that companies in about half of all global sectors in North America planned to offshore production two years ago to shorten their supply chains. The pandemic and the war in Ukraine have made these plans urgently needed.
– The trend towards the localization of supply chains is linked to the increase in spending on innovation and digital transformation. This is due to the need to modernize existing business models and increase operational flexibility to enable multi-channel delivery, reduce costs and meet ever-changing consumer needs. This is the reason for the digital transformation indicated by 65%. Administrators responsible for logistics, supply chains and transportation in a recent study by Forbes Insights, says Paulius Insoda, CEO of NFQ Technologies, an international IT company that recently opened its Polish subsidiary in Krakow.
It’s not the specific technologies that count, but the idea
Among the technologies cited among those that can best help the logistics industry to optimize and stabilize the functioning of supply chains are the Internet of Things (including autonomous delivery vehicles, smart warehouses), the artificial intelligence (used, for example, in data analysis or automation), as well as Blockchain (including the use of self-fulfilling digital contracts in the distribution of goods). However – as Paulius Insoda points out – it doesn’t matter which technologies we choose, because what we do with them matters.
– The most important thing for companies is the idea behind the selected technology solutions. Choosing one technology or another and saying that the technology itself is the key to success is simply not true, says Paulius Insoda.
He adds that a good idea is the key that opens all doors, and cites the German digital logistics and warehouse management system Alaiko, created in 2020, as an example. e-commerce companies a platform that automates same-day delivery of goods – was so innovative that NFQ from the company implementing this technically also became one of its investors.
Where scanning produces the fastest results
According to Paulius Insoda, companies that want to stabilize and optimize their supply chains through digitalization and build competitive advantage should first and foremost focus on anything related to process automation and manual labor reduction. It is innovations in these areas that can bring the most benefit to companies operating in the logistics market.
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– This is due to the fact that through automation, logistics companies can definitely increase the speed of operation, reduce dependence on human labor, and thus also increase the scale of their business. For example, our client Atlantic Express’ implementation of an automated order processing and driver assignment solution enabled the company to quadruple the number of orders processed each day, while relieving customer service to an automatic tracking tool for deliveries by customers, says Paulius Insoda.
The importance of artificial intelligence is growing
Solutions supporting sustainable development as such, such as electronic and autonomous vehicles or mobile solutions in line with the shared economy trend, can lead to major changes in the distribution of forces in the logistics market.
– In the future, solutions based on artificial intelligence (AI) and machine learning (ML) should also be increasingly important to limit manual work in supply chains. At this point, AI in logistics is mostly driving solutions that transform massive amounts of data into visual decision support content and used by other analytical systems. However, the scale of applications of AI-based solutions is expected to grow rapidly, concludes Paulius Insoda.
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