Supply chain integration—with sensors.
IoT technologies enhance logistics companies’ efficiency by improving visibility into the supply chain. Firms can, for example, use sensors to monitor and optimize transportation conditions to prevent perishable goods from spoiling. Sensors on individual items can even alert the logistics firm if a package has been opened, which can help deter theft. These applications offer companies ways to provide new value to customers and generate more revenue.
The capabilities can also help logistics companies and their customers comply with regulations on food safety, pharmaceuticals, and more, according to Alain Louchez, principal research associate for the Georgia Tech Research Institute’s Information and Communications Laboratory.
“Integration is a good description of what the injection of these technologies in the space can bring about,” Louchez says. “IoT technologies, especially for the supply chain, allow you to connect things that perhaps before were siloed. And that’s very important for logistics. If you can efficiently integrate the different components of your chain, you’re halfway there.”
Innovation breeds vulnerability.
While enhanced connectivity solutions have their advantages, they also raise concerns over standardization and security of IoT devices.
“People are saying, ‘It’s fine and dandy that you’re promising a new world with everything connected, but the flip side is that we’re becoming more vulnerable,’” Louchez explains.
In response, Congress passed the IoT Cybersecurity Improvement Act in December 2020, requiring all government-operated IoT devices to comply with National Institute of Standards and Technology requirements. Although this law doesn’t currently apply to IoT devices available to consumers and businesses, some experts believe that day isn’t too far off.1
Louchez maintains that security needs to be a top concern, regardless of mandates. “You want to make sure nobody has access to the information related to what you’re transporting in your supply chain.”
Despite these potential challenges, Louchez remains confident that IoT technologies are extremely beneficial for logistics companies. “These technologies will transform your company,” he advises. “Be prepared for that. The transformation of these processes requires a different type of expertise and training, and we talk a lot about reskilling. Companies need to be attentive to these issues now so that they can be competitive tomorrow.”
The future of logistics will incorporate more than IoT technologies, adds Benoit Montreuil, Coca-Cola chair of material handling and distribution at the Georgia Institute of Technology. Large-scale improvements will be necessary to address traceability, security, carbon emissions, resilience, employee quality of life, and much more.
Expanded applications for the physical internet.
You’re already used to logging on to the internet from your computer or mobile device. The physical internet (PI), a concept developed by Montreuil, takes a similar approach to physical goods. That’s because this concept mirrors how the digital internet works: carrying standardized data packets along open routes from one user to another.
The PI is meant to help redesign how goods are produced, moved, stored, and supplied throughout the world. For logistics, that means moving away from dedicated distribution networks to a distribution web of open and connected networks. In this environment, companies gain insight into their transportation options and more easily see the advantages in partnering with other firms to better use available capacity.
Augmenting distribution services using smart lockers.
According to Montreuil, the United States alone currently has almost 550,000 warehousing and distribution centers—most of which serve only a single company each. Companies also tend to use only one distribution center, and almost no company operates more than 20 centers. In addition, third-party logistics providers that serve more than one company frequently have unused capacity. In the PI, many of these centers would offer services to any company, dramatically reducing delivery times to consumers or retail locations as well as offering logistics companies additional revenue potential.
Delivery lockers, like those Amazon has in some areas, offer more opportunities to reach PI potential. For instance, consumers can have their purchases delivered to these lockers rather than their homes—usually in return for faster service times or lower shipping costs—or even return purchases at these lockers.
Applying the concept of PI to smart lockers could result in one shared bank of lockers that follow the same usage protocols, helping to reduce logistics companies’ and retailers’ costs and avoid wasted space.
In addition, implementing PI principles in transportation could lower systemwide costs by at least 30% and reduce greenhouse gas emissions by 30% to 60% while preserving service levels, Montreuil says.
The importance of collaboration.
The move from current logistics system to the PI will require a new kind of collaboration. “Collaboration in industries is often associated with strategic alliances, consortiums, big contracts, things like that,” says Montreuil.
When, for example, distribution centers open their doors to new customers, they are creating new potential revenue streams and offering valuable services—not entering alliances. “In the physical internet, we are going after open-asset sharing and open collaboration, where you’re using platforms that make collaboration no big deal.”
Still, transitioning to the PI will require cross-company coordination to both showcase the PI’s potential and lay the foundation for the necessary infrastructure. As such, IoT technologies and digital interconnectivity will be key because they enable visibility, interactivity, and real-time decision-making.
To prepare for the future, Montreuil recommends logistics executives consider how the IoT and PI will affect their companies. “Understand the capabilities that the market is going to ask you to have,” he says. “What are the physical things that are going to be requested of you in terms of customization, agility, and responsiveness? Then ask yourself, ‘Will I make this happen if I keep doing the same things?’” He also suggests defining what the company’s long-term vision would be in a completely PI-run world and designing short-term actions that can advance that vision.
At the heart of a successful transition will be capable, adaptable employees, Louchez says. “Having the right people, with the right qualifications, in the right spots should be the most important thing to focus on. The technologies will evolve, but you have to make sure you have people who are flexible and who can move and adjust to the changes.”
Updating efficient operations with simplified payments.
As logistics firms invest in ways to enhance their supply chains, they may forget about the substantial benefits of modernizing their financial systems. Corbin Hankins, group vice president, head of specialized sales consulting for Truist, finds many ports and logistics firm leaders are unaware of the hidden costs of common payment and treasury practices.
For example, ports and logistics companies often pay employees and vendors with manual paychecks, a costly and unstable process. Check preparation is not only time-consuming and prone to errors—risking potentially long reconciliation periods—but it also leaves firms vulnerable to fraud.
Streamlining payment and treasury practices through automated clearing house or payment cards present the additional benefit of freeing up funds that could be invested in new advances, sharpening a company’s competitive edge. One trucking company Hankins worked with found that paying vendors by card rather than check would earn the company as much as $80,000 annually in card rebates.
Transactions such as fuel, travel, office supplies, and utilities can go on a card.
“If companies don’t invest in back-end efficiencies, they’re unfortunately doing themselves a disservice,” Hankins says. “They can make their back end just as efficient as the front end.”
Making that transition isn’t like flipping a switch, however, and the process includes asking questions about how well new systems will work for the business and how the role of employees may change. Outside firms can ease the transition, and Hankins recommends logistics firms follow a four-step process to ensure they find the right partner.
- Step 1. Ask yourself what you want to achieve. You have to be able to define your goals.
- Step 2. Ask yourself how you’ll measure success. Identify the tools, technologies, and reporting capabilities that may be needed to help you gather this data.
- Step 3. Analyze your data. This step will confirm the necessary capabilities to reach your defined goals. Then you’ll be ready to search for and interview outside organizations that specialize and excel in those areas.
- Step 4. Implement. Ask for specific examples of any outside organizations’ work with similar firms, including any challenges they faced during the process and how they were overcome. When it comes to implementation, make sure you have somebody that knows what they’re doing.