Digitization had been slowly progressing in the global logistics market prior to the pandemic. However, the operational changes brought on by COVID-19, subsequent macroeconomic issues such as resource shortages, and heightened demand for goods have all increased awareness about the value of digitization and accelerated its impact.

In fact, 77% of the respondents in Descartes’ 7^th Annual Forwarder and Broker Benchmark Study cited investing in technology as the top strategy to accelerate digital transformation and address the challenges they face today. 

More than the automation of existing processes, digitization is about foundational business transformation and reinvention,. Digitization strategies and innovative technologies are rapidly evolving beyond addressing resource capacity and distributed work environments: they’re changing how customers are engaged, enhancing the productivity of knowledge workers, and providing insight into sustainability performance and other critical aspects of the business. In the end, the impact of digitization on global logistics organizations may be just as fundamental and lasting as the pandemic.

The reach of digitization in the logistics market is now extensive. Following are some illustrations that highlight its value and where it’s been applied.  

Customer engagement. Customer engagement and many back-office practices have been largely manual efforts for global logistics organizations. Examples of manual efforts that continue to dominate include the use of phone or e-mail to obtain rates and quotes, and paper manifests. Manual practices like these are characterized by a lack of responsiveness and an inability to react to today’s changing environment. In addition, they inherently involve too many people executing low-value processes. Digitizing the customer experience allows customers to “self-serve” their requests for rates and quotes on demand. Digitization also streamlines back-office processes, eliminates manual and error-prone paper-based practices, and enables distributed workforces to collaborate seamlessly. 

Communication and collaboration.  Because logistics is a multi-party process, communication, collaboration and status reporting are critical for well-orchestrated operations. Digitization of communications with carriers and other logistics partners reduces latency and improves accuracy, allowing logistics organizations to be more agile and precise. Digitized communications as the foundation for collaboration enables better coordination across parties to ensure successful shipment execution and address inevitable disruptions. Gone are the days of solely relying on manual searches in carrier, port and terminal systems to determine the status of containers. Digitization of shipment visibility ensures that both logistics organizations and their customers have ready access to important status information, such as real-time location, updated ETAs and customs clearance status, to make better deployment decisions in advance of goods arriving at ports.

Rate, capacity and allocation management. Digitization of rate, capacity and allocation management addresses one of the most challenging processes logistics organizations face. Rates and capacity are changing at unprecedented levels that can’t be managed by legacy solutions, spreadsheets and lingering paper-based processes. Digitization accelerates the capture of rates and capacity information and ensures that the proper rates are quoted, while considering capacity and allocation relationships to automate and streamline the generation of quotes. It makes the quote-to-booking process highly responsive for customers, while helping logistics organizations to maximize margins on bookings that accurately reflect available capacity based on contractual commitments.

Advanced performance analysis and reporting.  Advanced analytics, artificial intelligence (AI) and machine learning are allowing logistics organizations to gain a better understanding of themselves, customers and partners. All of these technology innovations, however, require lots of data delivered in a timely fashion and with good hygiene. An important byproduct of digitization is the large amount of timely and accurate data it generates, which feeds intelligent analysis and reporting solutions. The result is that managers and analysts spend less time collecting and cleansing data to produce reports and more time reviewing results, analyzing trends and identifying exceptions. They also gain higher-value productive time to expand their focus on growing customer requirements such as reporting on sustainability efforts.

Security and customs filings. Governments have been an important element in the digitization of the global logistics market. Their transition to electronic security and customs filing processes has helped to accelerate digitization. If logistics operations don’t employ digitization strategies and technologies, the data collection processes that facilitate filings become highly ineffective and prone to inaccuracy, and slow down the flow of shipments. Much of the data required for filing comes from outside customers, their trading partners, carriers and others. Using digitized communications and filing applications, logistics organizations can more easily gather and validate data to keep goods flowing compliantly and seamlessly. 

Sanctioned and denied party screening. Increases in sanctioned and restricted parties as a result of global unrest has driven digitization further into the compliance and risk operations of global logistics organizations. To avoid fines and reputational damage, organizations need to screen not only their customers, but also the business partners and carriers they use. With a large number of organizations, ownership structures and people to screen, combined with a rapidly expanding number of lists that can change frequently, manual screening is essentially impractical. Digitization transitions manual and batch screening into a real-time, on-demand proactive screening practice that reduces manual intervention and validates parties before commitments are made through advanced algorithms. 

Sales and sourcing. The digitization of government customs filings also has a data derivative that’s helping global logistics organizations to digitize sales and sourcing efforts. The aggregation of import and export data from across the world in cloud-based big-data systems allows global logistics organizations to understand trade and transportation flows. With detailed digitized global trade data, sales organizations can better target potential customers for logistics services, and sourcing organizations can do to the same for potential partners.

The Role of Technology

Digitization and its accelerated pace of adoption in global logistics wouldn’t be possible without the convergence of advanced technologies and investment in the companies that are creating them. 

Consumer-based user interface concepts have found their way into logistics applications, with many benefits. The most innovative applications enable self-service for customers, their trading partners and other users, eliminate low-value tasks, accelerate service and automate inquiries. Robotic process automation is taking on repetitive tasks typically conducted by knowledge workers, freeing them up to focus on higher-value activity such as managing exceptions and analyzing operational performance. Networks now connect hundreds of thousands or even millions of shippers, their trading partners, logistics services providers and carriers to streamline communication and facilitate collaboration.

The explosion of real-time internet of things devices is closing shipping information gaps and enabling automation of more logistics processes. Data derived from networks and IoT devices is feeding AI-based systems to further automate decision-making and provide insight into operational performance. Much of these advances are the result of the widespread adoption of cloud-based platforms that provide greater scale, and allow logistics technology providers to focus more of their efforts on creating advanced logistics tools, as opposed to building and maintaining technology infrastructure.

Many of the advances in logistics technology wouldn’t be possible without sizeable increases in capital from private investors and public organizations. The pandemic catalyzed a greater logistics investment opportunity when it became apparent that supply chain performance had become a board level discussion at shippers.

As a result, the logistics community at large has benefitted financially from the global upheaval in supply chains. While investment in digitization technologies for logistics was increasing before the pandemic, according to PitchBook Data, Inc. and The Wall Street Journal, logistics startup funding rose 58% in 2021 to over $24.3 billion, and larger “strategic” logistics technology providers continued their acquisition and organic development spending. This degree of investment will accelerate innovation and open up new areas for logistics organizations to apply new technology-based innovations to spur further digitization transformation.

Riding the Digitization Wave

Global logistics organizations have recognized that changes to their market are coming fast and furiously, and that digitization is one of the fundamental strategies to becoming more customer-centric, agile, productive  and profitable. Rather than slowing digitization, global upheaval has accelerated it. The ability to digitize much of a global logistics organization exists today and, given the increased investment in the logistics industry, digitization technologies will increase in capability and offer new ways to transform operational performance. Like all technology waves, some organizations are riding on top, using digitization to create competitive advantage, while others are in the trough about to be overwhelmed by its swell. Where is your organization on the digitization wave?

Chris Jones is executive vice president of industry and services, and Ken Wood is EVP of product management, with Descartes.