What are some big trends in the logistics industry that are not only having an impact today but will continue to shape the future of the logistics industry moving forward?
That was the opening question in a recent LinkedIn Live event produced by SAP titled “The Future of Logistics, NOW.” Andy Hancock from SAP was the host and I was joined on the virtual stage by Till Dengel, Global Head of Digital Logistics & Manufacturing Solution Management at SAP.
“How much time do we have?” I asked Andy because there are so many trends in the industry we could literally talk for hours.
We had an hour total, and in that time, we covered many questions and topics, including AI, robotics, and sustainability. Below I share my response to that first question and I also highlight Till’s response to a question about how robots are being used across the supply chain. I encourage you to watch the replay (which has been viewed over 3,300 times since airing) to get our perspective on the future of logistics. Then post a comment and share your thoughts!
Big Trends Shaping Future of Logistics
Artificial Intelligence (AI)
AI is what everyone is talking about today, especially Generative AI since ChatGPT was made publicly available last November. There is still a lot of confusion in the industry, however, about AI, machine learning, and how they can be used in supply chain and logistics operations.
Back in January, we asked members of our Indago supply chain research community, “How would you characterize your knowledge/understanding of AI?” Almost a third of our member respondents (32%) said they either have “Very Low” or “Low” knowledge of AI and how it can be used in supply chain management. This suggests that many companies and supply chain and logistics professionals are still in the learning stage.
That said, virtually all supply chain and logistics technology companies continue to invest heavily in this area. Many have had machine learning capabilities for some time, but now they’re looking at how to incorporate Generative AI capabilities, for example, into their solutions.
[Later in the conversation, Till and I discuss AI use cases.]
Robotics is another big trend, especially in the warehouse, as companies look to cost-effectively scale their operations. Today we’re seeing the most growth for warehouse robots in industries such as E-commerce, Retail, Third-Party Logistics, and Pharma/Healthcare. For example, in research conducted by Gatepoint Research in February 2023, 52% of the Healthcare companies surveyed said they expect to automate their warehouses within the next three years.
They are the business equivalents of Facebook and LinkedIn — industry networks that connect shippers, carriers, logistics service providers, and other stakeholders with each other, enabling them to communicate, collaborate, and execute business processes in more efficient, scalable, and innovative ways.
Think of Business Networks as the next phase in the evolution of IT — from Mainframes in the 1950s and 60s, to personal computers and networked PCs in the 80s and 90s, to client/server applications and software-as-a-service, and now we’re in the Business Network phase which is creating opportunities to realize “network effects” in logistics, like network-based analytics and collaborative shipping.
I love what Dr. Yossi Sheffi from MIT wrote a few years ago about sustainability — he said, “No self-respecting company is without a sustainability strategy, and at the center of these strategies lies the supply chain.”
The legislature in California recently passed a bill that would require large companies that do business in the state to disclose all greenhouse-gas emissions associated with their operations, including Scope 3 emissions. Assuming the governor signs it, this will effectively become a national requirement for large companies.
And earlier this year, the European Union’s parliament approved legislation to tax imports based on the greenhouse gasses emitted to make them. So, you can say a new type of trade war is beginning, this one based on carbon emissions.
In short, whether it’s driven by regulations, trading partners, shareholders, employees, or consumers, it is abundantly clear that sustainability is becoming a factor in supply chain decision-making.
Shrinking Labor Pool
One final mega trend that all companies will have to deal with is a shrinking labor pool. The fact is that population growth has steadily declined since the 1970s across the world. We’re not having enough children to maintain a steady population. Every generation is smaller than the one before it — Gen Z is smaller than Millenials which is smaller than Gen X.
Besides having more children, there are really only two ways to deal with this growing labor shortage challenge: via immigration policy, which is a political hot potato at the moment, or by leveraging technology to automate processes and reduce reliance on human labor. That is part of what’s driving demand for AI solutions and robots, for example.
Robots in Manufacturing and Warehousing
How are robots being used across the entire Design-to-Operate process spectrum? Till highlighted two areas.
“As manufacturing becomes more and more modular, where products are made on different production lines, we’ve seen the use of Automated Guided Vehicles (AGVs) in those environments, which has been happening for many years. So, you have a process order or product order that triggers a warehouse move. The AGV brings the parts directly and in sequence to the production belt, and then moves them from one production belt to another.”
“One scenario I’ve seen many times is where customers are using warehouse robots in cross-docking operations, where goods come in on one side of the warehouse and go out the other side. So, the warehouse robots pick the goods at the inbound side and drive them over to the outbound side of the warehouse.”
“We also had some interesting use cases during the Covid pandemic where customers wanted to keep warehouse workers in their own pick aisles to avoid contact with others. So, the warehouse robot would go to one aisle where part of the order would get picked, then go to another aisle where a different picker would complete the job.”
“I would say 50% of the customers I talk to at least run a robotics proof of concept, and probably 10-20% are already using robots in their warehouse operations. We definitely see a lot of interest in this area.”
Again, Till and I covered a lot of ground in this LinkedIn Live event, too much to summarize in a single post. So, watch the full episode for all the topics we discussed!