THE FUTURE OF LOGISTICS: FIVE TRANSFORMATIVE TRENDS

THE FUTURE OF LOGISTICS: FIVE TRANSFORMATIVE TRENDS

TABLE OF CONTENTS 01 Introduction 05 The Power of Big Data, Increased Collaboration and Data Sharing Moving Towards Sustainability 02 06 due to Government Regulations Reshoring as Americans Favor Home-Grown Solutions 03 The Rise of the Internet of Things (Iot) 07 Conclusion 04 Augmented Reality and the Drive Towards Smart Warehouses

01 INTRODUCTION While innovation has long been a hallmark of the logistics industry, five key trends are dramatically reshaping the way supply chains operate. Some companies will embrace change and prosper, while others will resist and struggle. But these key trends are having an impact on the industry right now. Governments are pushing for, and in some cases forcing, logistics organizations to become more sustainable. However, this trend pales in significanceto the widespread changes technology is causing throughout the industry. The Internet of Things (IoT), augmented reality and big data are driving the advent of the smart warehouse, improving efficiency and helping organizations reduce costs while meeting customer demands. Lastly, after decades of offshoring following the start of NAFTA and the rise of China, companies are now reshoring, bringing their manufacturing facilities back to the US. Read on to discover how five key trends will impact logistics businesses across the US.

02 MOVING TOWARDS SUSTAINABILITY DUE TO GOVERNMENT REGULATIONS The United Nations predicts that the world population will increase to 9.7 billion by 2050 and world food production will need to rise by 70 percent to meet the ensuing demand. Governments all over the world are becoming increasingly concerned by both this population growth and global warming. A significant proportion of consumers have been concerned about these trends for some years, and many companies have already sought to differentiate themselves by greening their supply chains. Now, governments are following suit with the US government introducing a number of regulations. As more governments and companies advocate a push towards sustainability, it s clear that the responses and scale will vary. Some may utilize the substitution method. For example, the replacement of diesel and petrol with natural gas for delivery vehicles. In time, there s no doubt that electric vehicles will become the dominant mode of transport, at least for urban deliveries. There s also the potential for the substitution of packaging, using more durable and recyclable materials.

The other major responses are managerial and technological, whether it s changing shipping schedules from every day to every other day, or dynamically re-routing inventory to minimize shipment miles. Cubing algorithms are reducing costs, as well as CO2 emissions, by packing to maximize efficient use of space within cases, pallets and trucks. The EPA has released new data that assigns carbon ratings to providers, so logistics companies will be under more pressure from their customers to reduce their environmental footprint. Logistics providers who refuse to become more sustainable will be penalized by the market for not keeping pace with the times, and may also receive fines for breaching government regulations.

03 THE RISE OF THE INTERNET OF THINGS (IOT) Industry experts across the tech space have frequently predicted that the IoT will have a widespread impact on businesses and consumers alike. Logistics companies could risk future growth opportunities if they re not prepared to embrace the IoT. While machine-to-machine communication may not sound like much, the reality is that it is already driving a wave of innovation. As RFID sensors become cheaper and more capable, they re being embedded in smaller and smaller units. Starting out on containers, it s now commonplace to see RFIDs on pallets with cartons, and it s predicted that individual boxes won t be far behind. Autonomous vehicles are becoming increasingly common in warehouses, and remote vehicle monitoring and automated safety systems are being rolled out in fleet after fleet.

As the prevalence of such systems on our roads increases, traffic management will be improved as every delivery van, truck, train, airplane and ship becomes just another node on the IoT network. Each of these delivery methods will contain packaging units that are RFID tagged, creating nodes on the network within the vehicles. As a result, logistics providers will be able to track inventory in real-time in highly urbanized areas, with somewhat more lag in rural and regional areas. Additionally, efficiency will increase even more in distribution and transport yards, saving logistics providers money and giving consumers faster shipping times and higher delivery-time accuracy.

04 AUGMENTED REALITY AND THE DRIVE TOWARDS SMART WAREHOUSES The launch of gaming-focused virtual reality headsets such as the Oculus Rift may be grabbing all the headlines, but cutting-edge manufacturing facilities and warehouses are already deploying 3D smart glasses. Also known as augmented-reality glasses, pickers and packers at Volkswagen s main plant in Wolfsburg, Germany, receive order information directly into their field of vision. The glasses incorporate a camera able to read a barcode that alerts the person if they ve picked the wrong part. As the IoT and augmented reality drive the development and adoption of the smart warehouse, manufacturers and logistics providers will need to collaborate and communicate more than ever before. Unlocking the benefits of the technology will streamline manufacturing and shipping processes all over the world. Logistics companies will be able to refine their delivery schedules and transportation routes to an unprecedented degree, whether it s a new scheduled route or a re-route in response to a problem. Whatever the application, virtual or augmented reality promises to be a game-changer for the industry.

05 THE POWER OF BIG DATA, INCREASED COLLABORATION AND DATA SHARING In recent years, logistics industry experts have been predicting that logistics providers will need to collaborate more. The logic seems inescapable. Companies have the opportunity to develop new revenue streams through the utilization of unused capacity and reduce overheads by sharing infrastructure. There s also the opportunity to take on larger contracts both in terms of geography and capacity through collaboration. The reality, however, has been somewhat different as 3PLs steadfastly refuse to share both physical resources and their data. While it s hard to say if this blockage will shift anytime soon, the increasing use of big data and predictive analytics is a major trend. The most meticulously worked-out schedules will break down catastrophically if a key machine fails at the wrong time. While regular maintenance seeks to reduce the risks of this happening, the combination of sensors with predictive analysis is proving to be a vital part of foreseeing and avoiding failures.

As the cost of sensors drops, manufacturers and logistics providers will be deploying this technology in their production lines, their vehicles and their warehouses. Saturating the environment with sensors and analyzing the data from those sensors will provide new insights into the performance of the machines. For example, analysis of the data may show that the gearbox of a van running hot when only under light load indicates it will fail sometime in the future. As the sensor is transmitting this information in real-time or at least every time it enters its depot maintenance crews can pull the vehicle off the road to investigate. Proactive maintenance in response to data will ensure that machinery breakdowns don t impact the supply chain, either by replacing the part before it fails or by replacing the machine.

06 RESHORING AS AMERICANS FAVOR HOME-GROWN SOLUTIONS When it comes to supply chains, the major trend in the late 20th and early 21st centuries was the advent of offshoring manufacturing. First it was to Mexico in the wake of NAFTA, then to China as businesses sought to lower production costs by moving to a low-wage country. However, this trend is starting to reverse as more companies explore the idea of reshoring or nearshoring, which involves moving their operations closer to where their customers are. The reasons for this are many. The iron law of supply and demand has kicked in and Chinese labor costs have quadrupled since 2006, while continuing labor unrest suggests wages may rise even further. Other issues with offshoring include the risk of political instability and vulnerability to natural disasters, such as the Japanese tsunami in 2011, which shut a variety of manufacturing plants. The time-zone difference between Asia and America makes communications difficult, and many American companies have struggled to maintain quality standards and protect their intellectual property rights.

American consumers are also concerned about the exodus of jobs overseas and are actively demanding home-manufactured products. Whatever the reasons, reshoring is an established trend with companies like Apple, Electrolux, NCR, Whirlpool, GE and Zentech choosing to resume manufacturing in the United States. Near-shoring, which more often than not means Mexico, is also a rising trend. Mexico has the advantage of proximity, with shipping times measured in hours rather than weeks or months. Despite this and other advantages, many experts argue that Mexico lacks the highly trained and motivated workforce that America and China offer. To discover for yourself, register for the Powerlinx platform.

07 CONCLUSION These five trends will shape the way US enterprises choose and manage their logistic partnerships for the next few decades. The trends in technological advancements and sustainability are here to stay and will only intensify as global warming s impact becomes clearer and technology becomes cheaper and more efficient. The challenge is how businesses can get ahead of these trends through strategic partnerships and clever collaboration, and like most challenges these days the answer can be found through analyzing big data. Want to find out more? Register for the Powerlinx platform at no cost, and find the right logistics partners for your business. The Powerlinx platform uses big data and some very clever algorithms to match businesses with potential partners all over the world.

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