Logistics 4.0: Dare to be more digital

One mouse-click is all it takes, and within a few hours the parcel is at your front door. Food deliveries within ten minutes, products that are more and more individually tailored, or parcels transported in a flash to your home using last-mile solutions – all this is already possible today. In addition, the service connected with deliveries and logistics has improved markedly, as can be seen for instance in free returns, and the constantly-expanding range of items available. This presents the logistics sector, as one of the most important business factors globally, with particular challenges. Billions of tons of goods are moved daily. The logistics market in Europe alone ran to EUR 1.115 bn in 2020, and worldwide it was over EUR 5.5 bn. And the trend is on the up: In Germany itself, logistics sector sales have risen since 1995 by over 250 percent. At the same time, the sector is changing massively, bringing fresh ideas to shape the accelerated, digital world of goods.

That can’t happen without increasing digitalization: The aim is to have the right product, in the right quality and quantity, in the right place at the right time, and at the right price. IT can help with this – it is becoming a key factor in differentiating yourself from the competition in logistics. It is what makes the sought-after collaboration optimal: Using it, you can create a common digital platform that integrates all actors in the process flow.

After all, the processes that sit behind providing something from production through to the end-consumer are becoming ever more complicated and non-transparent. Logistics – in the way it was still able to operate a few years back – is coming up against its limits. That’s because, up till now, all actors acted individually and separately from one another, in a single, rigid, ultra-complex chain involving many stakeholders, including buyers, suppliers, freight forwarders, warehouses, hubs, customs, service providers and the end-recipients. For supply processes to run smoothly and reliably, logistics experts need to connect all these actors with one another.

That means the key questions are: How can processes be made flexible, and information combined together in such a way that goods and merchandise can be tracked in real time (track and trace)? How can digital services be integrated into international networks? In this area, digitalization offers a unique opportunity of being able to operate and communicate more interactively, more quickly, more securely and more reliably.

Describing this, researchers have established the terms Industry 4.0 and Logistics 4.0. Brought on by the numerous changes from digitalization, we consequently find ourselves in the middle of a fourth wave of industrialization – one in which logistics also plays a decisive role. That’s because, unlike earlier procedures, a digitalized logistics creates interfaces enabling all agencies involved in the supply process to communicate. Not just processes, but even objects, suppliers, manufacturers, retailers and customers are connected with one another – at each individual stage.

With the aid of digital platforms, it is possible to create processes and objects that direct and organize themselves – for instance, “smart” containers, smart devices such as virtual reality glasses, drones, picker robots and swarms of self-driving vehicles. To locate their position, they use GPS signals, they identify themselves using bar-codes, RFID and sensors, and they exchange information e.g. via Cloud-based solutions.  Accordingly, systems can communicate with one another, learn from one another, take decisions, and monitor themselves (“smart logistics”). For instance, drones in a warehouse use cameras to check stock levels in high-bay shelving. If something is missing, this is reported and an order process triggered in near time. Automated fork-lifts handle delivery, and restock the shelf. That way, processes become more flexible and more efficient.

The important thing to remember is that digitalization in logistics is not about achieving full automation. It’s a point which has been made by the German Logistics Association (Bundesvereinigung Logistik, BVL) in a position paper: Instead, man and machine should be connected with one another and self-managed “control loops” created – from the sensor systems to the human agents, the operating machinery, the data processing and through to feedback to man or machine. Sensors record changes, such as the empty compartment on the high-bay shelving mentioned earlier, and pass this on to the employees, who check the data and are able to decide on the next steps to take.

In that, they are assisted by AI (artificial intelligence), which is able to draw on e.g., data on previous order processes, and is therefore able to advise on the quantity to be re-ordered. All the information continues to be processed until the desired result is achieved. In a similar way, operations can be reproduced when planning delivery routes for courier services or other logistics agencies. It means that mistakes which lead to delays are avoided – and thus creates greater scope for flexibility. In addition, companies can design agile processes, allowing them to react more quickly to their customer base and market requirements.

Automated processes reduce complexity, create transparency and enable collaboration. They also help in saving resources, for instance through better use of existing transport capacities. Sustainable transport concepts enable rerouting of shipments, later collection, or the use of different modes of transport. Inventories are recorded automatically and demand cycles are predicted, for instance in order to employ more parcel delivery agents, if required. A further contribution comes from connected vehicles, sharing their location and immediately reporting possible changes in the route planning.

All this gives planners a fresh basis for decision-making, thanks to more valid and more complete information. The result? Costs fall. And at the same time, new services (e.g. in analyzing and interpreting data) lead to greater customer satisfaction. New areas of business and sales potential can come about on that basis. That’s because digitalization doesn’t only require data, but generates it too – and that, in turn, can either be evaluated or itself become a product that can be marketed in future.

Digitalization is not some dream for the future: self-operating vehicles are already a reality in intralogistics. Containers record their fill level, using integrated camera technology, and re-order goods in an automated process.

According to the BVL, four things are needed for digitalization to make further successful inroads in logistics: Good data quality, a willingness to share data, consistent implementation of a well-designed digital strategy, and above all the desire to win the battle for hearts and minds. That way, the sector can handle the increasingly complex flows of goods, become more productive and also satisfy customer preferences in the shortest of time-frames, including on an individualized basis.