The Evolution & Disruption of the Logistics Industry

As both technology and consumer demands have changed over recent years, the logistics industry has had to adapt. And numerous disruptions have accelerated the industry’s evolution.

We look at the drivers of the logistics industry’s transformation and how these are shaping logistics.

Consumer experience of ecommerce has changed business expectations

Thanks to the consumer revolution in ecommerce over the past decade or more, businesses now also expect a more consumer-like experience. They want fast delivery, flexible delivery options, low prices and order and delivery transparency.

This has changed things in a number of ways. Digital advances have allowed companies to respond much more quickly. Shipping quotes can now be supplied almost immediately and bookings can be made online.

With 24/7 track and trace functionality, there’s better transparency about the status of an order or the location of a shipment.

Together, these sorts of advances have brought about greater efficiency as well as a greater degree of customer-centricity that has produced a better user experience.

Legal and compliance requirements

Over the past few years, we seem to have seen a larger than usual number of changes to all manner of laws that affect logistics.

The pharmaceuticals industry has been radically changed with the introduction of the Falsified Medicines Directive (FMD), for example. And the UK government has ensured that many businesses – whether in logistics or not – upgrade their accountancy practices, with the introduction of the Making Tax Digital initiative.

The threat of Brexit has put gaining AEO status to the fore for many businesses. In turn, this has eased the admin burden for many in the logistics sector.

The requirement for companies supplying NHS Acute Trusts to adhere to GS1 and PEPPOL standards has brought about changes for pharmaceutical and healthcare companies, through the use of 2D barcodes or any GS1-compliant barcodes.

The need to update manual processes

The logistics industry is still largely characterised by manual processes. Orders are often still faxed, and confirmed by phone or email. And spreadsheets and paper reports prevail.

In comparison with many other industries, this has made logistics and the supply chain slow and somewhat prone to errors.

Automation and digitisation are now beginning to change things though and the uptake of systems and software is what is setting apart the successful players. Those that have been able to rapidly adapt to take advantage of cloud-based systems, such as ERP, WMS and TMS have been able to revolutionise their processes. In turn, they are able to speed up their logistics processes, improve aspects of warehousing such as storage and picking and deliver to customers much more quickly and efficiently.

It’s here too that digital innovations are beginning to change the landscape. Employing artificial intelligence (AI), machine learning and data visualisation techniques to study data patterns can help companies to anticipate demand and predict the future needs of their operations.

And the Internet of Things (IoT) has enabled advances within the warehouse, like automatic inventory management, management of storage temperatures and asset tracking.

Blockchain technology in the supply chain can increase security, deliver transparency, and generally just speed everything up. Secure transactional procurement using blockchain is still in its infancy, but its advocates are predicting it will revolutionise the supply chain.

A fragmented and competitive market

The need to deliver quickly at a great price has yielded a market driven by low prices, low margins and extensive competition.

The resultant disruption to the logistics market has been seen in the advent of Uber-style delivery services. Also, to keep control of costs, larger companies have started up their own logistics services and start-ups have been born, having spotted gaps in the market that they see as ripe for exploiting.

To remain competitive, businesses have looked to reduce their labour costs. A number are achieving this with the greater use of automation and robotics in the warehouse. Fully- and partially-automated warehouse examples such as Ocado and Amazon are no longer atypical.

Not every product suits an ecommerce model

For buying many products, people still demand a physical shop. They want to assess the ripeness of their groceries and check the fit of their shoes – which just isn’t possible when buying online.

So the traditional bricks and mortar shopping experience still has a place. But it’s been elevated to new heights.

For example, Amazon introduced its Amazon Go model to much acclaim in the US, and is looking to bring it to the UK too. This speeds up the shopping experience and transforms it into an entirely digital experience.

Meanwhile, Google’s Beacon platform is driving the use of technology for proximity marketing. This has opened up the high street experience to all manner of possibilities. The technology can flag when an app user is near the company’s associated retail store and can deliver a tailored offer that may entice the user in to buy.

All of this could be set to reinvigorate the UK’s ailing high streets and shopping centres, ensuring the need for an omnichannel approach to trade and logistics.

What does digital transformation mean next for the logistics industry?

The UK’s potential exit from the EU will undoubtedly be the main driver for the UK logistics industry in the short term. Distributors and logistics providers will see upheaval and major changes. Documentation for imports and exports will change, and customs duties may impede competitiveness and profitability. With change comes new practices, new technology and new market entrants. So it’s bound to be an interesting time.

Longer term, disruption and transformation of the logistics industry is set to continue. Improvements in software and automation will continue to alter and improve the warehouse environment. And this will ensure ever more efficient and accurate order and fulfilment processes. That’s all good news for customers and businesses alike.