Digital Tech: How the Game is Changing
A recent Gartner survey about supply chain transformation drivers and best practices revealed that supply chain leaders need to prioritise investments in technologies with 82% of CEOs in industries heavily reliant on supply chains see the need to boost investments in digital capabilities across their entire organization.
The primary reasons behind this strategy are to bolster new business initiatives, enhance the efficiency and productivity of supply chain processes, elevate decision-making capabilities, and fortify resilience and agility in response to persistent disruptions in the supply chain.
This is needed considering the logistics industry holds a prominent position in the priorities of the GCC region despite the slowdown caused by COVID-19, the global logistics sector is expected to experience substantial growth, increasing by over 50% from around USD8 trillion in 2020 to approximately USD12.8 trillion by 2025, as reported by IHS.
In the UAE specifically, recent research conducted by ADQ suggests that the logistics market is anticipated to surpass USD31 billion by 2026.
In today's rapidly evolving global economy, digital technologies play a crucial role in transforming traditional supply chains today and in the future. Here’s why.
Automation in Supply Chain Management
Implementing automation in various business activities can lead to enhanced performance by reducing errors, improving quality, increasing speed, and, in certain instances, achieving results that surpass human capabilities.
Global Digital Transformation in Logistics
Automation has historically contributed to productivity improvements. McKinsey reports that automation could elevate global productivity growth by an estimated 0.8 to 1.4% annually.
Automation in the logistics industry has emerged as a game-changer in supply chain management with the use of robotic process automation, autonomous vehicles, drones, automated warehouse systems, and many more.
This has been prominent at warehouses, a critical component of the supply chain, where the use of automation and robots has assisted in tasks like picking, packing, and sorting, minimizing human intervention and errors.
Take Amazon for example, who currently have over 750,000 working at their fulfillment centers taking on highly repetitive tasks and freeing employees up to better deliver for our customers.
Last-mile delivery as well has seen an increase in automation which has primarily increased the number of deliveries to the end user. Since the pandemic and the evolution of online purchases, both in the B2B and B2C segments, last-mile delivery companies have been pushed to show their competitive advantage.
On-time, same time delivery, and improved routing for fast delivery services have become a priority for end users. The main hurdle for many last-mile delivery companies is the cost of this service.
In 2023, Wise Systems reported that the cost of last-mile delivery accounts for 53% of the total shipping costs, and it also has a significant impact on customer satisfaction.
To counter this, predictive analytics using automation is transforming the final leg of delivery, refining both route optimization and customer experience to a precise art.
By analysing historical delivery routes, businesses can now predict the exact time of a package's arrival with remarkable accuracy, providing timely updates to customers who eagerly await their orders.
Simultaneously, the real-time tracking of deliveries has shifted from being a desirable feature to a standard expectation among consumers, with 80% of customers now anticipating the ability to monitor their orders in real-time.
This functionality equips them with valuable information and control, elevating their overall satisfaction levels as they remain informed about the precise whereabouts and expected arrival times of their eagerly anticipated packages.
AI in Supply Chain
AI has transformed supply chain optimization by automating decision-making processes, improving forecast precision, and facilitating adaptive logistics.
AI algorithms analyse extensive data sets to reveal valuable insights, streamline routes, allocate resources effectively, and enhance supply chain transparency.
Machine learning algorithms, especially adept at demand forecasting, inventory management, and predictive maintenance, are paving the path for increasingly agile and data-centric supply chains in the coming years.
AI augmentation as well has seen an increase in 6.2 billion hours of worker productivity globally, according to Gartner. The economic and business impact of implementing AI in your supply chain services cannot be underestimated.
PwC reports that artificial Intelligence is poised to significantly impact the global economy, presenting a substantial opportunity for value creation. It is projected that AI could add as much as US$15.7 trillion to the global economy by 2030.
In the Middle East it is predicted that the economy would see an increase of US$320 billion with the adoption of AI. Out of US$320 billion 15.2% of that will come from the use of AI in the transport and logistics industry.
Saudi Arabia is anticipated to experience significant economic benefits from AI, with an expected contribution of more than US$135.2 billion to its economy by 2030, equivalent to 12.4% of its GDP.
On the other hand, the UAE is projected to witness the most substantial relative impact, with AI expected to contribute close to 14% of its GDP in 2030.
Digital Twins and IoT
Digital Twins is often associated with construction and infrastructure projects but it can expand beyond that. Digital twins are virtual duplicates of tangible assets, operations, or systems that facilitate immediate monitoring, analysis, and simulation.
Within the logistics sector, digital twins can generate virtual copies of warehouses, distribution centers, and transportation networks and will expand upon the advantages of IoT currently in use.
They will provide a more profound understanding into the planning, design, operation, and improvement of supply chains, covering individual assets, shipments, and entire global supply networks.
Digital twins are expected to grow at a whopping rate of 37%-38% annually, with a market value predicted to soar past the USD26 billion mark by 2025. So how can this be beneficial?
Utilizing digital modeling enables informed decision-making based on data, enabling the identification of patterns and identification of areas for enhancement.
Consider the benefits: increased awareness leads to a more comprehensive grasp of the elements influencing product quality and operational effectiveness. Additionally, you can conduct "what-if" analyses and address potential challenges for smooth implementation.
Transportation challenges frequently cause disruptions in supply chains. Although shortages of drivers contribute to these challenges, implementing more intelligent planning strategies can significantly improve fleet management outcomes.
By leveraging real-time data provided by digital twin models, you can address any transportation issue effectively. This approach aids in strategic decision-making, such as evaluating the pros and cons of faster but costlier air routes versus more economical sea routes.
The days of relying on reactive or preventive maintenance methods, which businesses have historically depended on, are over. Instead of dealing with problems as they come up, leading to unforeseen downtimes and missed maintenance chances, digital twins elevate maintenance practices to a higher standard.
By consistently gathering data from IoT sensors attached to assets, digital twins generate a live digital copy that mirrors the asset's status, performance, and potential issues.
This capability enables precise predictions of maintenance requirements, empowering proactive actions to prevent failures before they happen. Digital twins can anticipate potential faults, analyse maintenance procedures, and simulate different fault scenarios.
Overall, digital technologies are transforming the landscape of supply chain operations by providing unparalleled efficiencies, valuable insights, and advanced capabilities.
The adoption of automation, data analytics, IoT connectivity, AI-driven optimization, and digital twin technologies, can enable organizations to create agile, resilient, and customer-focused supply chains.
Collaboration, investing in talent, and strategically integrating digital tools will be essential elements for organizations seeking success in the digitally-driven evolution of supply chain management. Also, the role of technologies is seeing a boost in economic and business growth as well.
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