Big Opportunities in the Brave New World of Logistics

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With volatile fuel prices, low margins and capacity constraints, the logistics industry is often hard pressed to drive down costs while maintaining good customer service levels. Moreover, there is a mass shift on the customer side towards e-commerce and multi-channel, in turn requiring totally different logistics concepts. To complicate matters, regulations are getting stricter and fewer drivers are entering the market, making staffing a challenge.

Opportunities

This might lead to negative and pessimistic views within the logistics industry, but right now there are a huge number of opportunities supported by the latest innovations in technology and optimization power. Complete new concepts, which you could not foresee ten years ago, are now the reality. Given also the fact that service and reliability have become crucial for logistics as differentiator (on top of efficiency) these opportunities are opening new ways to achieve this.

New concepts in logistics

Here are a few new concepts in logistics:

    • These days, ‘big data’ is where everything is really happening. You’re able to collect and store very large volumes of data; however, all of it only becomes relevant when you’re able to identify and analyze trends, and then actually be able to make use of this knowledge in order to make the right decisions. As we’re rapidly learning to make better solutions that rely on big data, the future will eventually lead to ‘self-learning supply chains’. For example, one typical application today is when big data is used to enable more accurate forecasts of orders/consumption. This then opened up the opportunity to combine transport optimization with inventory management. Optimizing this connection created huge benefits for ‘vendor managed inventory’ processes. By using forecasting, you also know, for example, the most popular time slots for a customer to book an order. You can then choose to make these less attractive by applying price differentiation, which can in turn smooth out your total required logistic capacity.
    • Mathematicians have improved optimization algorithms spectacularly in the last years. Based on the latest insights, solving a certain optimization problem can now be done 80,000 times faster than twenty years ago on the same computer. Given that also computer speed has increased dramatically (thanks to the ‘Moore’s Law’), we can now solve larger data sets, take more restrictions into account, and optimize multiple challenges in an integral way. This applies not only to inventory and routing (mentioned above), but also to loading and routing, routing and dock-scheduling, etc.
    • New technological solutions are finding their way into logistics. New trends in innovation can be seen in the use of 3D-printing, the Internet-of-Things for monitoring purposes, and drones for last-mile delivery in rural areas. Currently, however, the main applied area is in automated warehouses, delivering completely new concepts, for example, just consider the concept of a very smart staging/sequencing buffer that decouples the picking process from the loading process (see above). This is a completely disruptive way of thinking. Result: up to 70% less space and staff required!
    • New mobile solutions lead to a much better and transparent way of thinking. Supply chains are now supported by Control Tower solutions that deliver end-to-end visibility, centralize planning processes, and enable continuous optimization in real-time based on the latest data. This technology also creates new opportunities for sharing resources, like the Uber- and Airbnb related logistics concepts. Collaboration, both horizontal and vertical, are recognized by almost all governmental institutes as the next step in logistics optimization. As a simple example: shared warehousing reduces inventory and increases responsiveness without increasing transportation costs.

Entering a new Era

I’ve only mentioned a few examples here, and hopefully enough to show that we are entering a completely new era – a brave new world! – of disruptive logistics concepts and optimization. These are not futuristic dreams, but up-and-running at the innovators in the logistics industry today.

Further reading

ORTEC is proud to participate actively at the 14th Annual 3PL Summit & Chief Supply Chain Officer Forum (10 – 12 October in Venlo, NL) to share our vision in round table discussions and in our booth.

With volatile fuel prices, low margins and capacity constraints, the logistics industry is often hard pressed to drive down costs while maintaining good customer service levels. Moreover, there is a mass shift on the customer side towards e-commerce and multi-channel, in turn requiring totally different logistics concepts. To complicate matters, regulations are getting stricter and fewer drivers are entering the market, making staffing a challenge. Opportunities This might lead to negative and pessimistic views within the logistics industry, but right now there are a huge number of opportunities supported by the latest innovations in technology and optimization power. Complete new concepts, which you could not foresee ten years ago, are now the reality. Given also the fact that service and reliability have become crucial for logistics as differentiator (on top of efficiency) these opportunities are opening new ways to achieve this. New concepts in logistics Here are a few new concepts in logistics: These days, ‘big data’ is where everything is really happening. You’re able to collect and store very large volumes of data; however, all of it only becomes relevant when you’re able to identify and analyze trends, and then actually be able to make use of this knowledge in order to make the right decisions. As we’re rapidly learning to make better solutions that rely on big data, the future will eventually lead to ‘self-learning supply chains’. For example, one typical application today is when big data is used to enable more accurate forecasts of orders/consumption. This then opened up the opportunity to combine transport optimization with inventory management. Optimizing this connection created huge benefits for ‘vendor managed inventory’ processes. By using forecasting, you also know, for example, the most popular time slots for a customer to book an order. You can then choose to make these less attractive by applying price differentiation, which can in turn smooth out your total required logistic capacity. Mathematicians have improved optimization algorithms spectacularly in the last years. Based on the latest insights, solving a certain optimization problem can now be done 80,000 times faster than twenty years ago on the same computer. Given that also computer speed has increased dramatically (thanks to the ‘Moore's Law’), we can now solve larger data sets, take more restrictions into account, and optimize multiple challenges in an integral way. This applies not only to inventory and routing (mentioned above), but also to loading and routing, routing and dock-scheduling, etc. New technological solutions are finding their way into logistics. New trends in innovation can be seen in the use of 3D-printing, the Internet-of-Things for monitoring purposes, and drones for last-mile delivery in rural areas. Currently, however, the main applied area is in automated warehouses, delivering completely new concepts, for example, just consider the concept of a very smart staging/sequencing buffer that decouples the picking process from the loading process (see above). This is a completely disruptive way of thinking. Result: up to 70% less space and staff required! New mobile solutions lead to a much better and transparent way…

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Goos Kant
Bio: Goos Kant (1967) is a full-time professor of Logistic Optimization at Tilburg University. He is involved in the master program of Business Analytics and Operations Research, as well as in the master program Data Science & Entrepreneurship. He is the project leader of a large R&D project on horizontal collaboration in logistics. Goos is also a managing partner at ORTEC, with global responsibility for all solutions in the logistics industry. His primary area of interest lies in the 3PL-industry in optimizing their planning processes in the end-to-end supply chain. Goos is involved in courses from MBA-schools TIAS and Nyenrode, and member of ORTEC’s supervisory board. He holds both an MSc and a PhD in Computer Science.

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