Automation has emerged as a transformative force in the supply chain industry, reshaping the operations of Logistics Providers. Consequently, automation can profoundly impact logistics providers and it can revolutionise efficiency, cost-effectiveness, and customer satisfaction.
Introduction
The global logistics industry is a dynamic and rapidly evolving sector that plays a crucial role in the movement of goods across the globe. In recent years, the logistics industry has witnessed a transformation with the advent of digitalization and with the integration of digital technologies and automation, traditional logistics models are being reshaped. The Global Logistics Costs reached around 13.8% of the global GDP in 2019 (source: World Bank) and the market size has also witnessed substantial growth due to increased trade and globalization; the global logistics market was valued at $8.1 trillion in 2020 and is projected to reach $12.2 trillion by 2026, growing at a CAGR of 7.5% during the forecast period (source: Transparency Market Research). The market size of 3PL and 4PL providers (Figure 1) has also witnessed robust growth in recent years and their market reached a value of $1.3 trillion in 2020 (source: Armstrong & Associates).
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Figure 1: Categorizing various logistics providers (source: Warehouse Anywhere)
Strengthening Operational Management in SCM
Automation can significantly impact Logistics Providers by empowering them to streamline operations and achieve greater efficiency. Logistics providers can optimise inventory management, enhance route planning, and improve overall operational efficiency by automating critical processes. Startups are leveraging automation technologies to transform first-mile, mid-mile and last-mile delivery operations. Through the implementation of route optimisation algorithms, real-time tracking systems, and automated delivery notifications, they are significantly improving delivery efficiency as well as visibility. Furthermore, automation can enable logistics providers to enhance their supply chain visibility. Logistics providers can gain real-time insights into their operations by integrating data from various sources, such as transportation systems and inventory management platforms. This visibility allows for proactive decision-making, timely issue resolution, and improved overall supply chain performance.
The impact of automation extends beyond operational efficiency. It can enable logistics providers to meet evolving customer expectations. Today’s consumers demand transparency, flexibility, and convenience in their shipping experience. Automation technologies, such as real-time shipment tracking, automated notifications, and self-service options, can enable logistics providers to provide seamless and satisfying customer experiences. According to a DHL report, shippers who utilise automation technologies for route optimisation and real-time tracking achieve an average reduction of 30% in delivery time.
Optimising Resources in Scaling Global Operations
According to a study by Aberdeen Group, shippers using automation technologies experience an average order accuracy rate of 99.5% compared to 97% for those relying on manual processes. Automation can prove to be cost-effective for supply logistics providers. It can also play a crucial role in scalability. As demand fluctuates, logistics providers can leverage automation to adjust capacity efficiently. According to our analysis, there are startups that offer digital freight platforms that optimise the booking process, provide transparent pricing, and match shippers with carriers that help achieve scalability. This scalability allows logistics providers to handle increased volumes without compromising efficiency or customer satisfaction.
TMS solutions help in optimising transportation routes, consolidating shipments, and negotiating favourable rates with carriers, which result in reduced transportation costs. A study by Aberdeen Group found that companies using a TMS achieved an average 7.5% reduction in transportation costs (source: Aberdeen Group). We can infer from Figure 2, India (currently 5th Largest economy) which is projected to become the third largest economy in the world, has shown tremendous growth in merchandise trade with the US, an allied and strategic partner for India.
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Figure 2: India-US Merchandise growth in the last three decades (source: Ministry of Commerce and Industry, Government of India)
Impact on Workforce and Collaboration
The logistics industry employs a significant number of workers worldwide, contributing to global trade and supply chain operations. According to the International Labour Organization (ILO), the logistics and transport sector employed around 65 million people globally in 2019 (source: ILO). Whereas the logistics industry in Asia-Pacific alone employed approximately 20 million people in 2019 (source: DHL). Automation is reshaping the workforce landscape in supply logistics. While some repetitive tasks can be and are being automated, new roles and skill requirements emerge. Logistics providers can be focusing on upskilling their employees to utilise and manage automation technologies effectively. This shift can lead to a more agile and tech-savvy workforce capable of adapting to the evolving industry.
The global warehouse management system market size was valued at $2.75 billion in 2022. The market is projected to grow to $7.30 billion by 2030 (source: Fortune Business Insights). Automation is also facilitating collaboration and communication across the supply chain ecosystem. Digital platforms like TMS (Transportation Management Systems) and WMS (Warehouse Management Systems) are enabling seamless information exchange and real-time collaboration between logistics providers, suppliers, and customers. This enhanced collaboration improves coordination, increases efficiency, and reduces delays.
Conclusion
The impact of automation on Logistics Providers is undeniable. Through automation, logistics providers are achieving streamlined operations, enhanced efficiency, and improved customer satisfaction. Industry figures show the positive impact of automation on the industry. As the industry continues to evolve, it is crucial for logistics providers to embrace automation and leverage its benefits. By doing so, they can stay ahead of the competition, meet customer demands, and drive long-term success in the supply logistics industry. The global stage is ready for adopting automation in their business models to achieve results beyond current capabilities.
Startups that are leveraging automation have disrupted traditional models and are providing innovative solutions and in doing so they are reshaping the industry landscape. Furthermore, automation can facilitate transparency, scalability, and collaboration within the supply chain ecosystem. In conclusion, automation can now help achieve logistics providers meet customer expectations for real-time visibility, convenience, and flexibility in an efficient ecosystem.
The views expressed above belong to the author(s) itself and do not reflect any stance of the company.