Why Is It High Time to Introduce Digital Technologies in Logistics?

Evgeny Kuznetsov

Evgeny Kuznetsov

Technical writer

Feb 8, 2022
8 minutes to read
  1. Brief market overview
  2. Reasons for logistics digitalization
  3. Digital development areas in logistics
  4. Digital technologies in logistics
  5. Benefits of digital transformation in logistics
  6. Conclusion

The world has become digital. Businesses introduce innovations in order to meet market demands and withstand their more advanced competitors. The logistics industry is also aspiring to implement IT solutions for managing orders, vehicles, warehouses, or inventories. Let’s take a look at what technologies underpin digitalization and why it is worth investing in custom logistics software development.

Brief market overview

Over the past two years, digital transformation in logistics has been fueled by a pandemic. Logistics companies have been suffering due to flight cancellations, social distancing, and quarantine measures. It took time to adapt to the new working conditions, update the rules for employees, and open the borders.

Covid-19 has boosted digital sales. There has been an uptick in the demand for medical products and pharmaceuticals. These demands have helped the industry get back on track and even ramp up. In 2020, the global logistics market was estimated at $205.44 billion, and Grand View Research predicts its Compound Annual Growth Rate will be 11.8% by 2028.

Business executives report that Covid-19 has accelerated the digital transformation in logistics by an average of 5.3 years.

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Global spending on the digital transformation of the industry will grow from $45.6 billion in 2020 to $75.5 billion by 2026.

Accenture has stated that if cargo companies continue doing business using traditional ways, they will lose their competitiveness and value. By incorporating digital technologies into their operations, enterprises will improve their market position and increase profits by an average of 13% per year. This is one of the reasons why it is worth investing in custom logistics software development. However, there are more reasons for that too.

Reasons for logistics digitalization

With the help of digitalization, logistics firms are striving to solve the following global problems:

  1. Reduce fuel costs.

Fuel is a large expense item. Price increase incurs losses if the organization doesn’t manage to raise shipping costs in time. Due to the volatility of the oil market, logistics firms need to work out fallback scenarios in order to always generate profits and avoid potential breakdowns.

  1. Streamline business processes.

Companies are aspiring to optimize supply chain operations:

  • Manage the shipment of their goods promptly and accurately so that no truck leaves half empty.

  • Manage their fleets more efficiently in order to offer profitable routes and save gasoline.

  • Monitor their warehouse inventories in order to place products more compactly and send them for shipment faster.

Digital solutions for logistics - systems for managing orders, vehicles, inventory, and storage - are created for the above purposes. With such solutions, it is easier to reduce fuel and maintenance costs, satisfy client needs, increase profits, and make a business more efficient.

  1. Improve client service.

Speaking about eCommerce, consumer demands are on the rise there. Statistics say that 40% of buyers are okay with receiving their orders within two days, 18% want their products in a day, and the rest of the clients are willing to wait for three or four days.

An enterprise can quickly deliver products if their working mechanisms go like clockwork and there are no delays in the delivery of goods to the warehouse, in sending them to the client, and so on. This can be achieved through business digitalization, where every element of the supply chain is controlled.

  1. Solve the driver shortage issue.

A lack of professional drivers hinders the advancement of the sector. Usually, young candidates are unwilling to put up with the working conditions. The International Road Transport Union predicts that the deficit of specialists in the member countries will grow by 25%. Continuous travel and a lack of sleep are only some of the reasons why young people are reluctant to become truck drivers. The industry mainly hinges on men who are 45 years old or older.

The mentioned problems can be partially solved through custom logistics software development.

Digital development areas in logistics

Digital transformation in logistics means the introduction of programs, robots, and devices (drones, sensors, etc.) into the activities of a company. Enterprises develop internal operations in the following three areas:

  1. Hyper automation.

Firms combine multiple technologies to improve their processes and interactions between suppliers, customers, the purchasing department, drivers, and others. For example, Artificial Intelligence and Optical Character Recognition handle unstructured sales orders. To achieve greater efficiency, Robotic Process Automation is connected to this model so that an operation is carried out without human intervention.

  1. Elastic logistics.

Flexibility allows organizations to adapt to the market demands and either reduce or expand their supply chains. It solves the problems of slack loads, small storage areas, goods lying for too long, and other inefficiency issues. Elastic logistics is based on Big Data analysis and AI and ML algorithms.

  1. Green logistics.

The aim of eco-friendly logistics is to reduce the negative impact on the environment during transportation, warehousing goods, and other processes. This area seeks to organize the activities of cargo companies in such a way that they benefit the economy, nature, and people. Green supporters want to:

  • improve fleet management in order to plan the route and loading of goods more efficiently;

  • automate warehouse management to save energy and resources;

  • optimize inventory control through robotization.

How are these areas implemented in real life?

Digital technologies in logistics

In order to solve the industry problems through hyper automation, elastic, or green logistics, digital transformation requires the right technologies. Among the participants of a survey by Logistics Viewpoints, 80% noted that they need innovations as never before to enhance transparency and reliability.

Digitalization is determined by the following innovations:

1. Internet of Things (IoT)

Data exchange via IoT sensors provides 100% real-time visibility of the supply chain. With this technology, carriers are able to more efficiently control their fleets and technical condition of vehicles, as well as track shipments and cargo deliveries.

Also, the IoT allows cargo shippers have better control over the storage conditions of their cargo, its placement on the site, and transportation. Internal processes enhanced with the help of the IoT save both